It is uncommon for auditors in India to resign halfway through an audit. Even more uncommon for them to quit just before the finalisation of annual accounts. But it’s happened thrice now in two months.
- On Apr. 27, Price Waterhouse & Co resigned as auditor of Vakrangee Ltd.
- On May 26, Deloitte Haskins & Sells resigned as auditor of Manpasand Beverages Ltd.
- On May 30, Price Waterhouse Chartered Accountants LLP as auditor of Atlanta Ltd
In all these cases the auditors resigned just days before signing off on annual accounts.
In all these cases the reason for resignation was inadequate information.
In all these cases the companies’ statements sidestep the auditors’ concerns.
The surprising feature is that the auditors had given clean unqualified report in limited review of earlier quarter and that Deloitte has been auditor of this company in the preceding years as well and its reports have been unqualified, both on financial matters as well as on internal financial control reporting. So one definitely would like to know as to what provoked it to resign. It is pointed out that since PW had been the auditor for Vakrangee for less than one year, its resignation may not be very surprising if it found certain things which were not desirable.
What PW Said, What Vakrangee Heard
In its resignation letter Price Waterhouse said:- it asked the management for “information on several matters pertaining to election books, bullion and jewellery businesses”.
- the management’s responses were inadequate or contradicted earlier explanations.
- in the absence of adequate and relevant information and explanations, the fundamental objective of an audit...cannot be achieved.
- the company has provided all the information with respect to business and affairs of the company to the auditor and the audit committee.
- the company is fully compliant with the Ind-AS accounting standards
- the audit committee has also reviewed the financial statements and has been fully satisfied with all the information and explanations provided by the company.
PW makes no mention of Ind-AS in its letter, yet Vakrangee asserts its compliance with the Indian accounting standards and the satisfaction of the audit committee.
What Deloitte Said, What Manpasand Heard
In its resignation letter Deloitte said:- “significant information” requested by it at various points in time was not provided.
- there has been no further progress with respect to the pending information, evidences and explanations.
- therefore, it is unable to complete the statutory audit for the year ended March 31, 2018.
- “It is very unfortunate that we had to part ways with our long-term associate.”
- that the decision was “taken by the management after due consultations” and is in the best interests of shareholders.
- that “the timing of this event is purely coincidental and has no direct correlation”.
- that “this is just a minor hiccup” and doesn't represent any long-term business impact.
Manpasand’s statement makes no mention of the “significant information” that Deloitte had requested and not received. Instead the company claims it took the decision to part with its auditor, whereas Deloitte’s letter clearly states it resigned as auditor.
Manpasand lost the auditor it had since it did an IPO in 2015, and yet it described the event as a “minor hiccup”. The resignation came just days before the announcement of the financial earnings and Manpasand says the“timing of this event is purely coincidental”.
What PW Said, What Atlanta Heard
In its resignation letter Price Waterhouse said:- “significant information”, including significant observations made by the tax authorities, was not given to them.
- That the company had not informed in a timely manner about the resignation of one of the independent directors who was also part of the Audit Committee.
- both these reasons of withholding significant information, the statutory auditor has withdrawn from the audit engagement.
However,
the company denied these allegations in a notice and said it had made a timely
disclosure about the matters to Price Waterhouse. According to Atlanta,
independent director Shankar Vishwanath had quit on account of “personal
commitments”. Atlanta’s
response to Price Waterhouse and the statutory auditor’s resignation letter
were disclosed to the stock exchanges on Wednesday.
It is again a time to think, Assurance is becoming a serious job, and it will not be a easy cake walk.
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