NFRA Penalizes Audit Firm with Rs 50 Lakh Fine and 2-Year Ban

The National Financial Reporting Authority imposed a penalty on PCN & Associates and auditor Gopala Krishna Kandula for audit lapses related to Brightcom Group. The firm and Kandula were fined Rs 50 lakh and Rs 30 lakh, respectively, and banned from auditing for varying periods. The watchdog found them guilty of professional misconduct for failing to comply with regulations. The action was taken based on information from Sebi about financial irregularities.

The National Financial Reporting Authority (NFRA) on Friday imposed a penalty of Rs 50 lakh on PCN & Associates and Rs 30 lakh on an auditor for auditing lapses.

Besides, the audit firm and the individual -- engagement partner Gopala Krishna Kandula -- have been barred from taking up audit works for two years and ten years, respectively.

The order has been passed against them for lapses in relation to the audit of Brightcom Group for the period 2019-20 to 2021-22.

A fine of Rs 50 lakh has been imposed on PCN & Associates and Rs 30 lakh on the engagement partner Kandula, the NFRA said in a 12-page order.

They have been barred for varying periods from ''being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate'', it said.

The watchdog said the firm and engagement partner have been found guilty of professional misconduct in their failure to comply with provisions of the Companies Act, 2013 and Code of Ethics.

The matter was taken up by the NFRA following information received from markets regulator Sebi about financial irregularities by Brightcom Group and its auditors.

''The non-cooperation displayed by the auditors is troubling since it hinders the investigation of any possible professional misconduct on their side.

''This substantially impedes NFRA's ability to fulfil its statutory duty of providing effective oversight. If such auditors are allowed to do statutory audits of any company or body corporate, the public interest is probably going to be jeopardised,'' the order said.