New Delhi: Auditors of debt-laden IL&FS not only connived with the top management in their fraudulent activities, but also sought to sell them certain products and services, according to findings of the SFIO probe that show large-scale violations in their auditing activities.
The Serious Fraud Investigation Office (SFIO) probe into IL&FS group firm -- IL&FS Financial Services Ltd (IFIN) -- has revealed serious lapses at the level of auditors, auditing committee and the then top brass of the group.
While the government has appointed a new board at IL&FS as part of its efforts to revive the sprawling group, the SFIO has filed its first chargesheet after taking into consideration details about 400 entities and data collected from various sources, including computers and laptops, among other sources.
Citing the investigation report, officials said the engagement team and engagement partners of Deloitte, Haskins & Sells (which served as auditor earlier) were aware about the company's modus operandi of funding defaulting borrowers when it comes to payment of interest and principal amount.
There was window-dressing of the asset book, ever-greening of loans and delayed recoveries for several years in connivance with the top brass. According to the probe agency, an e-mail from June 2017 revealed that an auditor had been offering a product of Deloitte Touche Tohmastu India LLP, the consulting arm of Deloitte group, to IL&FS. Despite an end-use policy being in place, the investigation found that loans were not monitored for their proper end-use.
The SFIO has recommended necessary action against the guilty auditors and also a detailed internal investigation by the RBI to identify reasons for the delay in detecting the lapses. Why the excessive delay Also, it is learnt that long-running fraudulent activities at IL&FS could have come to light much earlier in 2017, but for a cover-up job done by the top management in connivance with the independent directors on a whistleblower complaint, an SFIO investigation has revealed.
The earlier audit committee of IFIN has been found at fault on multiple occasions. Analysis of e-mails as also information collected from personnel and other sources have revealed that a whistleblower complaint was received in early 2017, according to officials.
The charge sheet clearly articulates that IL&FS kept functioning despite RBI's strictures and SFIO now maintains that the rot could have been prevented had the central bank acted with haste to cauterise the wound, knowing fully well the extent of the malaise.
