The National Financial Reporting Authority (NFRA) on Friday slapped a fine of Rs 5 lakh and a five-year ban on Rakesh Puri for alleged professional misconduct in connection with the audit of Sun and Shine Worldwide Ltd (SSWL) for the financial years 2012-13 and 2013-14.
SSWL, now known as Johnson Pharmacare Ltd, is a BSE-listed company and was dealing in commodity futures trading during period of audit assessed by the regulator.
In its order, NFRA levied a fine of Rs 5 lakh on the auditor Rakesh Puri, a partner of Y.D. & Company.
Besides, Puri has been debarred for a period of five years from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate during the ban period.
The regulator received information from Sebi pertaining to overstatement in reporting of sales and purchase figures to the tune of Rs 1,417 crore in the financial statements of SSWL for 2012-13 and 2013-14.
Accordingly, an investigation was initiated by NFRA for professional misconduct by Puri in the audit of SSWL.
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The audit files were called for from the auditor who had performed the statutory audit of the firm for five years from 2010-11 to 2014-15.
The regulator found that financial statements of SSWL were materially mis-stated and there was a sharp rise (1,026 per cent) in the reported revenue of the company from Rs 159.07 crore in FY 2012-13 to Rs 1,791.01 crore in FY 2013-14.
Further, this erroneous accounting and misleading presentation also affected the corresponding 'expenses' i.e purchase of derivative contracts, in the profit and loss statement, giving a false and inflated impression of SSWL's scale of operation.
The auditor failed to perform audit procedures to identify these manipulations in the accounts showing his gross negligence to the standards of auditing and failure in questioning the management on such erroneous reporting, which resulted in giving a misleading picture to the investors and stakeholders of SSWL, NFRA said in the order.
In September 2021, Sebi passed an order where it imposed fines as well as restrained SSWL and its directors from securities markets for flouting the Securities Contracts (Regulations) Act, the regulator added.
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