For the first time, the Reserve Bank of India (RBI) has banned an audit firm. Chartered accountant firm Haribhakti & Co LLP will not be able to audit any regulated company from April 1, 2022 for the next two years. The RBI imposed this restriction on the company on Tuesday.
In a statement issued by the central bank, it has been said that the regulator of the banking sector has failed to comply with a specific direction issued by the RBI in the Statutory Audit of a Systematicly Important Non-Banking Financial Company (NBFC).
Notably, this is the first time when RBI has taken this action against an auditor of a systematically important NBFC. The Bank has said, "The Reserve Bank of India (RBI) in the exercise of the powers vested under section 45MAA of the Reserve Bank of India Act, 1934, has, by an order dated September 23, 2021, debarred M/s Haribhakti & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 103523W / W100048), from undertaking any type of audit assignment/s in any of the entities regulated by RBI for a period of two years with effect from April 1, 2022".
The RBI further said that this action has been taken on account of the failure on the part of the audit firm to comply with a specific direction issued by RBI with respect to its statutory audit of a Systemically Important Non-Banking Financial Company. "This will not impact audit assignment/s of M/s Haribhakti & Co. LLP in RBI regulated entities for the financial year 2021-22," it said.
This restriction has been imposed for the first time against a company under these provisions of the RBI Act. It has also been said in this order that Haribhakti & Co LLP can take audit assignments of entities regulated by RBI during the financial year 2021-22. Earlier in 2019, RBI had imposed a one-year ban on SR Batliboi & Co, an affiliate company of global auditing firm EY. The central bank took this step after finding many flaws in the audit report of a bank.
