NFRA fines Deloitte Haskins Rs 2 crore over alleged lapses in ZEEL audit, firm reviewing order

Delhi, Dec 25: The National Financial Reporting Authority (NFRA) has slapped a penalty of Rs 2 crore on Deloitte Haskins & Sells LLP, along with two chartered accountants, for alleged lapses in the auditing of Zee Entertainment Enterprises Ltd (ZEEL). The Rs 2 crore fine pertained to the lapses in auditing for 2018-19 and 2019-20 financial years.

Along with slapping a fine of Rs 10 lakh, chartered accountant AB Jani who was the Engagement Partner (EP) for the audit has reportedly been barred from taking up any audit work for 5 years and Rakesh Sharma, who was the Engagement Quality Control Review (EQCR) Partner, has reportedly been fined Rs 5 lakh and debarred for 3 years.

According to the financial watchdog, prima facie, auditors had not discharged their professional duties under the Companies Act as well as the Standards on Auditing (SA). A Deloitte spokesperson said in a statement that they received the NFRA order against the firm and two retired partners, and “We are currently reviewing the order to determine our next course of action”.

NFRA’s examination revealed that the auditors were grossly negligent and failed to apply professional scepticism and due diligence. They did not adequately challenge the management's assertions, and failed to evaluate the reporting of suspected fraud, found the NFRA.

In August this year, ZEEL, and Culver Max Entertainment Pvt. Ltd. (CMEPL) operating as Sony Pictures Networks India (SPNI), together with its group company Bangla Entertainment Pvt. Ltd. (BEPL), arrived at a comprehensive non-cash settlement, amicably resolving all disputes related to the merger cooperation agreement and the composite scheme of arrangement.

In January this year, Sony Pictures Networks India (SPNI) terminated a proposed $10 billion merger deal with Zee Entertainment, calling off a December 2021 agreement. Sony also sought a $90 million termination fee for alleged violations by Zee Entertainment of the terms of the merger agreement. Zee had also sought a termination fee of $90 million from SPNI and its entity Bangla Entertainment Pvt. Ltd. (BEPL) on May 23 for withdrawing from the $10 billion merger.