The National Financial Reporting Authority (NFRA) has imposed a Rs 2 crore fine on Deloitte for failing to comply with auditing standards during its tenure as the statutory auditor for Zee Entertainment Enterprises Ltd (Zee) in the financial years 2018-19 and 2019-20.

The NFRA initiated a suo motu review of Deloitte’s statutory audit for these periods, uncovering significant lapses and professional misconduct. 

The investigation revealed gross negligence, including violations of the Companies Act related to related-party transactions. Deloitte was also criticized for lacking professional scepticism, failing to challenge management’s assertions, and inadequately evaluating reports of suspected fraud.

The order cited serious issues, including unauthorized guarantees and securities, premature closure of fixed deposits, and the misappropriation of Zee funds to settle loans for promoter group companies, actions allegedly carried out with the knowledge of Zee’s Chairman and management.

In addition to the penalty on Deloitte, individual auditors involved in the case were also sanctioned. CA AB Jani, who served as the Engagement Partner (EP), was fined Rs 10 lakh and debarred for five years from serving as an auditor or internal auditor. CA Rakesh Sharma, the Engagement Quality Control Review (EQCR) Partner, received a Rs 5 lakh fine and a three-year ban.

NFRA stated that both auditors are prohibited from “being appointed as an auditor or internal auditor or from undertaking any audit related to the financial statements or internal functions of any company or corporate body” for the duration of their respective bans.

A Deloitte spokesperson confirmed receipt of the NFRA order against the firm and two retired partners.

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