IL&FS is the engineering company responsible for some of India’s largest infrastructure projects. Its government-appointed board has issued notices to Deloitte, and to KPMG’s audit partner BSR & Co.
The show-cause notice asks Deloitte to prove why the firm should not be removed as auditors, after allegedly failing to highlight irregularities that ultimately led to the company defaulting on loan repayments.
According to the Economic Times, a person familiar with the case said that the board decided to show-cause Deloitte after evidence suggested that auditors had misled shareholders over loans.
Deloitte has been dropped as the company’s tax auditor, having been with IL&FS for more than 10 years.
BSR & Co had jointly audited the company for fiscal year 2018, before the company first defaulted on loans in July 2018.
The company’s long-term ratings were downgraded as a result.
Since the allegations of malpractice at Deloitte came to light, the Ministry of Corporate Affairs has conducted a probe into the audit.
The ministry has considered serious punitive action against the firm, including a five-year ban from practising in India.
While the ministry continues its probe into the firm, the IL&FS board expects Deloitte to respond to its show-cause notice by May 24.
A hearing is scheduled to take place on May 29.