CA firm Haribhakti barred from auditing RBI-regulated entities for two years

The Reserve Bank of India has barred Haribhakti & Co LLP, Chartered Accountants, from undertaking any type of audit assignments in any of the entities regulated by the RBI for two years with effect from April 1, 2022.

Although the RBI did not specify the exact reason for its action, Haribhakti was the auditor for Srei Infrastructure Finance (SIFL) for 2019-20. On October 4, the RBI superseded the boards of SIFL and Srei Equipment Finance (SEFL) over governance concerns and payment defaults.

This is the first case of debarment of a CA firm under Section 45MAA of the Reserve Bank of India Act, 1934, dealing with the central bank’s powers to take action against auditors.

“This action has been taken on account of the failure 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,” the RBI said in a statement

But the central bank said its action will not impact audit assignment(s) of Haribhakti in RBI-regulated entities for 2021-22. A central statutory auditor of a public sector bank said Haribhakti can challenge the RBI order in a High Court just as Price Waterhouse & Co opposed SEBI’s two-year ban in the Satyam Computers case. Since the RBI’s is not a “speaking order”, it is difficult to assess why the action was taken, he added.

Meanwhile, Shailesh Haribhakti dissociated himself from the firm founded by his father. “I ceased to be a partner of Haribhakti & Co LLP with effect from March 31, 2018 and from all responsibilities associated with it.”