Deloitte hit with Rs 2 crore fine for audit lapses on Zee Entertainment, Partners Barred

New Delhi (The Uttam Hindu): The National Financial Reporting Authority (NFRA) has imposed a penalty of Rs 2 crore on Deloitte Haskins & Sells LLP, along with two chartered accountants, for alleged lapses in the auditing of Zee Entertainment Enterprises Ltd (ZEEL) for the 2018-19 and 2019-20 financial years. Besides the fine on the firm, chartered accountant AB Jani, the Engagement Partner (EP) for the audit, has been banned from taking up audit work for five years, while Rakesh Sharma, the Engagement Quality Control Review (EQCR) Partner, has been fined Rs 5 lakh and debarred for three years.

The NFRA found that the auditors had failed to fulfill their professional duties under the Companies Act and the Standards on Auditing (SA). The financial regulator highlighted that the auditors were grossly negligent, lacked professional skepticism, and did not sufficiently challenge management's assertions or assess the reporting of suspected fraud. Deloitte, in its response to the NFRA’s order, confirmed receiving the penalty notice and stated it was reviewing the order to determine its next course of action.

The investigation revealed that the auditors did not apply due diligence in their work. It also noted that ZEEL, along with its associated companies, Culver Max Entertainment Pvt. Ltd. (CMEPL), operating as Sony Pictures Networks India (SPNI), and Bangla Entertainment Pvt. Ltd. (BEPL), had resolved disputes concerning a merger cooperation agreement and scheme of arrangement through a non-cash settlement in August 2024. Earlier this year, in January, Sony Pictures Networks India (SPNI) canceled a $10 billion merger deal with ZEEL, citing violations of the agreement and demanded a termination fee of Rs 660 crore. Similarly, ZEEL sought a termination fee of Rs 660 crore from SPNI and BEPL for backing out of the merger agreement.