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The National Financial Reporting Authority (NFRA) on Thursday slapped a penalty of Rs 2 crore on the statutory auditor and Rs 15 lakh on two chartered accountants for professional misconduct in the audit of Coffee Day Enterprises Limited (CDEL) in FY2019-20.
NFRA found that the auditors deliberately chose to shy away from their statutory duty to report the fraud and protect the public interest.
NFRA was suo moto examining the matter after an investigation report regarding the diversion of funds worth Rs 3,535 crore from seven subsidiary companies of Coffee Day Enterprises Limited to Mysore Amalgamated Coffee Estate Limited (MACEL) was shared with them by the Securities and Exchange Board of India (Sebi).
NFRA had started an investigation into CDEL based on the information from Sebi in 2022.
The regulator found that MACEL, which is the promoter entity, was used as a conduit to transfer funds from CDEL subsidiaries to the personal account of V G Siddhartha, the then chairman of CDEL, his relatives, and entities controlled by him.
In August, the regulator had slapped a penalty of Rs 10 crore on the audit firm BSR & Associates LLP and barred two chartered accountants with a Rs 75 lakh penalty for lapses in the audit of CDEL, which runs the Cafe Coffee Day chain.
In its latest order, NFRA said that Venkatesh & Co. accepted the audit engagement as statutory auditor of CDEL for FY2019-20 without first performing mandatory procedures and started audit activities even before obtaining a no-objection certificate from the resigning auditor, BSR & Associates.