NFRA mulls next move after HC junks notices to auditors

HC endorses NFRA's powers to review audits done before the regulator's creation in 2018

- Gireesh Chandra Prasad

The National Financial Reporting Authority (NFRA) is weighing its options after the Delhi High Court last week quashed notices that the regulator had issued to Deloitte Haskins & Sells LLP and SRBC & Co. LLP—the auditors of two IL&FS group entities—on "technical grounds," according to two persons aware of the development.

IL&FS, a non-banking financial company or NBFC, defaulted on its loans in 2018, prompting the Union government to replace its board of directors. This happened at the same time as the NFRA was set up as the nation's audit regulator.

A subsequent NFRA probe on the directions of the government revealed alleged audit lapses in the two group companies—IL&FS Transportation Networks Ltd (ITNL) and IL&FS Financial Services Ltd (IFIN). These findings faced multiple challenges in the Delhi High Court.

The episode occurred amid a wider problem with liquidity faced by NBFCs, prompting the NFRA to look into how audit is practiced in the sector.