Skip to content
Search

Latest Stories

India alleges 22 audit violations by Deloitte, KPMG arm in fraud case

INDIA detected at least 22 violations of auditing standards by Deloitte Haskins & Sells and a KPMG affiliate while investigating a fraud at a financial company, leading it to seek a five-year ban on the auditors, according to government legal filings.

The failures were detected as part of a wide-ranging probe into alleged fraud and mismanagement at Leasing & Financial Services (IL&FS), which defaulted on its debt obligations last year and sparked fears of financial contagion.


Both auditors have denied wrongdoing.

After the government took over IL&FS, federal investigators began looking into one of its key financial units, IFIN, which was audited by Deloitte between 2008-09 and 2017-18, and by a KPMG affiliate, BSR & Associates, from 2017-18.

The auditing firms gave clean audit reports and "deliberately" failed to report fraudulent activities at IFIN, said a 214-page tribunal filing submitted on Monday (10) by the corporate affairs ministry.

Citing an investigation by the Serious Fraud Investigation Office (SFIO), the filing said auditors had "miserably failed to fulfil the duty entrusted to them", adding they colluded with a group of IFIN officials to conceal facts.

"Simply put, the fraud committed at IFIN is nothing short of organised crime, actively aided and abetted by the statutory auditors," said the ministry filing.

In response to an e-mail from Reuters detailing the allegations made in the filing, a Deloitte spokesman said it was confident "it has been thorough and diligent" in its duties as an auditor and looked forward to presenting its position to the courts and relevant authorities.

"The firm stands fully for its audit work which has been conducted in full compliance with the professional standards in India," Deloitte said.

KPMG affiliate BSR said it was studying the government's tribunal filing and would "defend our position in accordance with the law", adding: "BSR's audit of IFIN was performed in accordance with the applicable auditing standards and legal framework."

IL&FS did not respond to a request for comment.

The National Company Law Tribunal on Monday asked Deloitte and the KPMG affiliate to file their responses on the allegations, setting June 21 as the next hearing date, said Sanjay Shorey, director for legal prosecution at the corporate affairs ministry.

The government has urged the tribunal to impose a five-year ban on the two auditors. It has also sought to bar the accounting firms from selling any of their properties while the case is heard, legal filings showed.

Part of the IL&FS group, IFIN was one of the thousands of shadow banking companies in India, whose primary business is to raise funds for lending from banks and the public.

The SFIO probe found IFIN extended loans to companies that did not service their debt. Then, to avoid classifying them as bad loans, it lent funds to the defaulters' group companies that were used to repay the earlier loans, the filing said.

There were 88 instances of loan disbursals and repayments with an amount totalling Rs 92.8 billion.

"The auditors, despite being aware of this modus operandi of fraudulently funding of principal and interest to the defaulting borrowers, had not reported the same in the audit report," the government alleged in the court filing.

IFIN also raised funds through debentures: its 2017-18 financial statements showed it had borrowed around Rs 51bn over the years. The government alleged Deloitte made no reference to auditing how those funds were used in recent years, and BSR too did not do so in 2017-18.

Other alleged violations that the government filing said were detected by the SFIO included a lack of verification through analytical tools, non-compliance with company law provisions and lack of auditing based on central bank inspections of the company.

The probe, which included a review of internal e-mails, also found that a Deloitte partner in 2017 had been offering an accounting service of Deloitte's consulting arm to IL&FS. In another instance in 2016, a Deloitte partner was providing management consultancy on a transaction.

Deloitte did not respond to a request for comment on these allegations, which the government alleges were breaches of company law rules in India that prohibit auditors from rendering certain other services.

The IL&FS crisis has since last year spooked stock markets and cast a pall over on India's shadow banking sector, which comprises of more than 10,000 firms with a combined balance-sheet of about $304bn.

"IFIN may only (be) the tip of the iceberg, as the rest of the IL&FS Group companies are still under investigation," the government filing said.

(Reuters)

More For You

India jewellery

The US accounts for nearly £7.6 billion, or 30.4 per cent, of India’s annual gems and jewellery exports.(Photo: Reuters)

Reuters

India’s jewellery exports face decline as US tariffs hit

INDIA’s £24 billion gems and jewellery industry is preparing for a sharp decline in exports as the US imposes a 26 per cent tariff on Indian goods.

Industry officials said this would significantly affect sales to the US, India’s largest jewellery market.

Keep ReadingShow less
ronnie screwvala

Ronnie Screwvala’s rise to billionaire status is an inspiring story of vision

Getty

Ronnie Screwvala: From toothbrush seller to Bollywood's lone billionaire

The 2025 edition of the Forbes Billionaire List was released on Wednesday morning, showcasing the world's wealthiest individuals. The list features 3,028 billionaires globally, including 205 from India. Among these is Bollywood's only billionaire, Ronnie Screwvala, a media mogul whose journey from manufacturing toothbrushes to becoming a leading entrepreneur is nothing short of remarkable. With a net worth of $1.5 billion, Screwvala has surpassed the combined fortunes of Bollywood’s biggest stars, including Shah Rukh Khan, Salman Khan, and Aamir Khan.

Bollywood’s wealthiest man

Ronnie Screwvala stands as the richest person from the Hindi film industry, with a fortune exceeding that of its biggest icons. According to Forbes, his net worth of $1.5 billion surpasses the combined wealth of Shah Rukh Khan ($770 million), Salman Khan ($390 million), and Aamir Khan ($220 million), whose total stands at $1.38 billion. Additionally, he eclipses other notable figures such as Gulshan Kumar (approximately $900 million) and Aditya Chopra ($800 million). His financial success is a testament to his entrepreneurial acumen and strategic investments in both entertainment and education sectors.

Keep ReadingShow less
Donald Trump

Trump announced a series of tariff increases targeting various nations, including key US allies such as the UK and the European Union.

Getty Images

Trump’s tariffs hit global markets, Starmer warns of 'economic impact'

The UK and other global economies reacted on Thursday to US president Donald Trump's newly imposed tariffs, with prime minister Keir Starmer warning of an “economic impact” from the 10 per cent levy on British exports.

Trump announced a series of tariff increases targeting various nations, including key US allies such as the UK and the European Union.

Keep ReadingShow less
Airbus bets on Indian supply
base to scale up production

Guillaume Faury

Airbus bets on Indian supply base to scale up production

AIRCRAFT maker Airbus plans to significantly ramp up its annual sourcing of components and services from India to reach $2 billion (£1.54bn) by 2030, its CEO Guillaume Faury has said.

Describing India as one of the most important markets for Airbus in terms of growth, Faury said the challenge for the aircraft maker is to support the speed of the growth of the aviation industry in India.

Keep ReadingShow less
nintendo switch 2

The new console aims to build upon the success of its predecessor while introducing fresh innovations

Getty

Nintendo unveils Switch 2 - A new era for hybrid gaming begins

After months of speculation and cryptic teaser campaigns, Nintendo has officially announced the highly anticipated successor to its bestselling hybrid console. The Nintendo Switch 2 is set to launch on 5 June, with a price tag of £395.99 for the base package and £429.99 for a bundle including Mario Kart World. With a range of hardware improvements, redesigned controllers, and an exciting lineup of games, the new console aims to build upon the success of its predecessor while introducing fresh innovations.

A Bigger, Sharper Display and 4K Support

One of the most noticeable upgrades in the Nintendo Switch 2 is its display. The console now features a larger 7.9-inch screen, boasting twice the pixel count of the original Switch and supporting full 1080p resolution. Additionally, the display is capable of up to 120 frames per second, ensuring smoother animations, while high dynamic range (HDR) enhances colour contrast for a richer visual experience. Despite these improvements, the Switch 2 maintains the same thickness as the original model, preserving its signature portable form factor.

Keep ReadingShow less