The National Financial Reporting Authority (NFRA) has imposed a substantial penalty of ₹10 crores on BSR & Associates LLP (a KPMG firm) in connection with the Coffee Day Enterprises Ltd (CDEL) case. This severe action comes after the auditors failed to identify and report significant financial irregularities during the fiscal year 2018-19.
In addition to the hefty fine, the NFRA has also imposed penalties of ₹50 lakhs and ₹25 lakhs on the Engagement Partner and the Engagement Quality Control Reviewer, respectively. Both auditors have been debarred from practice for 10 years and 5 years, respectively.
The NFRA’s order, issued by Chairman Ajay Bhushan Prasad Pandey and two full-time members, outlined multiple audit lapses, legal violations, and failures to adhere to audit standards, Quality Control Standards, and the Code of Ethics by the auditors of Coffee Day Enterprises Ltd.
The case involved CDEL extending loans to a related party under the guise of advances for purchases. Despite the loan amount being over five times the actual purchase value, the auditors did not question the business rationale, relying instead on the management’s explanations without sufficient scrutiny.
This ruling underscores the NFRA’s commitment to enforcing stringent audit practices and holding auditors accountable for lapses that compromise the integrity of financial reporting.
