Non-disclosure of required details in audit report: ROC penalized auditor
ROC penalized Deloitte Haskins & Sells, Statutory Auditor of the Company, for failing to provide any adverse remarks / qualifications in its report, as required u/s 143 of the Companies Act, 2013. However, there are significant compliance issues, namely:
– Non-disclosure of MSME interest details.
– Non-disclosure of related entities in AS-18.
– Related party transactions carried out without proper Board approval.
In the Matter of M/s Stanly OEM Sofas Limited–Compliance Issues.
1. Company had ₹57.05 lakhs payable to MSMEs as at 31/03/2020 and ₹52.04 lakhs as at 31/03/2021. However, details of interest due, accrued interest, etc., were not disclosed in the financial statements for 2019-20 and 2020-21.
2. Mr. Sunil Suresh and Shubha Sunil are the directors and have a controlling stake in the multiple companies. However, the names of the entities have not been disclosed in the AS-18 statements for the year 2018-19, 2019-20 and 2020-21.
3. As per AOC-2 and AS-18 for 2018-19, 2019-20, and 2020-21, the company had huge, related party transactions. Company claims that transactions were at arm’s length based on a Board resolution passed about five years ago. However, AOC-2 does not include key contract terms, and Board has not given omnibus approval. Referring to an old resolution for such transactions violates Sections 188 and 184 of the Companies Act, 2013. Despite all this, Auditor gave the company a clean chit, saying it complied with Section 188.
ROC Karnataka imposed a penalty of ₹30,000 on Ms. Monisha Parikh, partner at Deloitte Haskins & Sells, who signed the audit report.
The order copy is attached herewith for reference.
The copy of the order is as under:
