In an incredibly significant development, that would cast its shadow on financial circles across India – RBI has banned M/s Haribhakti & Co, LLP auditors from auditing regulated companies for a period of two years with effect from April 1, 2022.
In what could be termed as the ultimate slur for a company of the stature and importance of Haribhakti’s , the ban is the first after the RBI put in place a framework to initiate action against erring auditors for lapses during audits in 2018. It dents the credibility of the Audit company incredibly.
The Haribhaktis are a respected Gujaratis family whose members have been respected and prominent professionals since generations. The founder of the Audit firm Vishnu Haribhakti’s two brothers Dr Jayant Haribhakti and Dr Pravin Haribhakti were also well known Gujaratis.
The RBI is said to have acted due to 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 NBFC. RBI has not divulged name of the NBFC.
However, the ban would not affect the ongoing audits for the FY 21-22, it was clarified.
Haribhakti & Co, LLP is considered one of the most important audit companies in India and at one time touted to be capable of taking on the global “big four” -PricewaterhouseCoopers, Ernst & Young, Deloitte Touche Tohmatsu and KPMG.
The Firm Haribhakti are auditors of several financial institutions in India like Axis Bank Ltd, IndusInd Bank Ltd. From a 20-member team in the sixties, the firm under leadership of Shailesh Haribhakti, the firm has grown to 1000 strong after a well-documented merger with M/s DB Desai & Co in 2013
The CA firm was also the auditor for Srei Infrastructure Finance Ltd & Srei Equipment Leasing. RBI has recently superseded the boards of these two companies owing to governance concerns and defaults by the companies in meeting payment obligations.
India has trouble with a shadow lending crisis since 2018 after a leading infrastructure financier went bankrupt, sending ripples across financial institutions leading eventually to rescues of at least half a dozen lenders.