MCA Imposes Penalty on Big4 Auditor for Non-Disclosure of Key Violation
The Ministry of Corporate Affairs (MCA) has imposed a penalty on the statutory auditor of Stanley OEM Sofas Limited for not disclosing some major violations in the audit report.
The company, Stanley OEM Sofas Limited, was audited by Deloitte Haskins & Sells, with Ms Monisha Parikh as the statutory auditor for the financial year 2020-21. During the inquiry under section 206(4) of the Companies Act, it was found that the auditor had failed to point out or report some problems or violations noticed during the year 2020-21 in the reports. These were as follows:
- The company had an amount payable to Micro, Small and Medium Enterprises (MSMEs) of Rs 57.05 Lakh as at 31/03/2020 and Rs 52.04 lakh as at 31.03.2021. These details were not reported in the financial statement for the years 2019-2020 and 2020-2021.
- The company’s directors, Mr Sunil Suresh and Shubha Sunil, had a controlling stake in some companies, but the entities’ names were not reported in the AS-18 statements.
- In 2019-20 and 2020-21, the company had many transactions with related parties. They said this was an arm’s length basis using an old Board resolution, but did not provide details of the contract. As no approval was given, this violated the Companies Act. Still, the auditor gave a clean report.
Since the Auditor did not report the violations, the Registrar of Companies (ROC) Karnataka imposed a penalty of Rs 30,000 under Section 450 of the Companies Act against Ms Monisha Parikh.
