NFRA Fines Deloitte ₹2 Crore for Audit Lapses in Zee Entertainment Case

3 Jan 2025 , 09:45 AM

The National Financial Reporting Authority (NFRA) has penalized Deloitte ₹2 crore for not adhering to auditing standards while auditing Zee Entertainment Enterprises Ltd (Zee) for the financial years 2018-19 and 2019-20.

NFRA conducted a suo motu examination of Deloitte’s audit files for these years to determine if professional misconduct occurred. The investigation revealed that Deloitte was grossly negligent in auditing Zee’s financial statements and violated several provisions of the Companies Act regarding related-party transactions.

Deloitte was accused of failing to exercise professional scepticism and due diligence and not challenging management’s claims adequately.

The audit firm also failed to properly assess reports of suspected fraud, adding to its lapses. NFRA highlighted instances such as unauthorized guarantees, early closure of fixed deposits by the bank, and the misuse of Zee funds to repay loans of promoter group companies, all with the involvement of Zee’s Chairman and management.

Apart from Deloitte, individual auditors were also penalized. CA AB Jani, the Engagement Partner, received a fine of ₹10 lakh and was barred from auditing roles for five years.

CA Rakesh Sharma, the Engagement Quality Control Review Partner, was fined ₹5 lakh and debarred from auditing roles for three years. Both individuals were prohibited from serving as auditors or internal auditors for companies or other corporate entities during their debarment periods. Deloitte acknowledged the NFRA order and stated it is reviewing the decision to decide its next steps.