Will Deloitte get 5-year ban in India?
Deloitte’s India arm is expected to be banned from trading for 5 years over its role in the scandal at Infrastructure Leasing and Financial Services (IL&FS), according to reports by news agency IANS this week.
The Indian government is considering banning Deloitte under Section 140 (5) of the Companies Act, IANS reported. The order allows the Indian government to ban auditors suspected of fraudulent activities.
IL&FS Financial Services scandal began in September 2018 as they defaulted on servicing bank loans, causing huge panic among investors and placing lots of associated companies in danger. As a result, the Indian government began its investigations into IL&FS, and that included Deloitte’s role in the scandal. Deloitte was the sole auditor for IL&FS until 2015-16.
IANS reported that a letter from a whistle-blower is at the centre of the government’s investigation and that letter places Deloitte’s actions in a questionable light. The whistle-blower’s explosive letter reportedly alleges that senior Deloitte staff knew about the financial problems facing IL&FS but did not act. It also makes claims of malpractice against Deloitte auditors.
Deloitte would not respond directly to the allegations, but a spokesperson told Accountancy Age: “The investigations on the company IFIN are in progress and we are cooperating fully. We reaffirm that we have conducted our audits in accordance with the Standards on Auditing and applicable laws and regulations.”
Deloitte would not be the first of the Big Four to feel the wrath of the Indian government. In January 2018, PwC were banned from providing audit services to listed companies for two years for their involvement in the Satyam fraud case.