NFRA debars auditor for lapses in books of Maharashtra-based Bilcare

The National Financial Reporting Authority (NFRA) on Thursday debarred an auditor of Maharashtra-based listed company Bilcare for two years and slapped a penalty of Rs 3 lakh on him for alleged professional misconduct.

The regulator said Ratan Laxminarayan Rathi, proprietor of RL Rathi & Co, can’t undertake any audit work for two years after 30 days of the passing of the order. Rathi was the engagement partner for the statutory audit of Bilcare for three straight years through 2016-17.

This is the latest of the dozens of orders passed by the NFRA in recent months, cracking down on alleged professional lapses by auditors, including of IL&FS and erstwhile DHFL.


The financial statements of Bilcare, a listed firm, were “materially misstated due to partial recognition of interest cost on borrowings classified as non-performing assets by the banks in 2014-15 and 2015-16 and non-recognition of interest cost in 2016-17”, the NFRA said in its order. It resulted in the under-statement of losses ranging from Rs 56.5 crore to Rs 114.32 crore, which were roughly 30% to 173% of the reported losses, it added.

The probe came after capital markets regulator Sebi informed the NFRA that the financial statements of Bilcare for 2014-15 to 2016-17 did not present a true and fair view.


“The EP instead of issuing modified opinion, issued unmodified opinion for the financial years 2014-15 to 2016-17, and referred the matter in an Emphasis of Matter paragraph in the Auditor's report for 2016-17,” the NFRA said in the order, calling it a contravention of the accounting standards.

Rathi also “failed to obtain sufficient appropriate audit evidence to verify revenue, which is an item fraught with risk of fraud”, the regulator said. In addition, he didn’t carry out proper audit of related party transactions of Bilcare, including loans and advances which were as high as 106.87% of the revenue.

“Moreover, with respect to granting of loans and advances to the related parties, the EP (Rathi) issued a false Companies (Auditor's Report) Order report,” it said.