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PNB fraud: ICAI to look into probable lapses by auditors

The Institute of Chartered Accountants of India will likely look at the role of auditors in these cases to ascertain whether there have been any violation at their end.

business Updated: Feb 16, 2018 16:43 IST
Press Trust of India, New Delhi
The Punjab National Bank (PNB) branch where fraudulent transcations worth USD 1.77 bn were detected, in Mumbai.
The Punjab National Bank (PNB) branch where fraudulent transcations worth USD 1.77 bn were detected, in Mumbai.(PTI File Photo)

The Institute of Chartered Accountants of India (ICAI) will review the $1.77 billion fraud at Punjab National Bank to check if there have been lapses on the part of auditors. It has also sought information from investigation agencies and markets regulator Sebi.

ICAI president Naveen ND Gupta said it has taken suo motu cognisance of the fraud at Punjab National Bank.

“The Financial Reporting Review Board (FRRB) has been advised to “initiate suo motu review” of Punjab National Bank and Gitanjali Gems (matter),” he told PTI.

The board, set up by the institute, reviews the compliance with various accounting and auditing standards. The institute has written to Punjab National Bank, Sebi, Enforcement Directorate (ED), and CBI, seeking information on the matter, Gupta, who took over as the President of the Institute of Chartered Accountants of India (ICAI) last week, said.

According to an official, the institute would be looking at the role of auditors in these cases to ascertain whether there have been any violation at their end.

The FRRB restricts reviews to the published general-purpose financial statements only, and its work would not be to verify the entire audit (re-audit) or review working papers of the auditors concerned, as per the ICAI website.

In one of the biggest scams in the Indian banking industry, the public sector lender has disclosed $1.77 billion (nearly Rs 11,400 crore) fraud perpetrated by way of fraudulently acquiring Letter of Undertakings (LoUs) of the Punjab National Bank.

A multi-agency probe is underway against diamantarie Nirav Modi and his relative and close associate Mehul Choksi. Choksi is the Managing Director of Gitanjali Gems.

On Thursday, Punjab National Bank Chairman Sunil Mehta said the bank has the capability to recover dues from Modi, and promised to take action against all wrongdoers. In the wake of the fraud, the lender has suspended at least ten officers.

The bank detected the fraud in which Modi allegedly acquired fraudulent LoUs from one its branches for overseas credit from other Indian lenders.