Deloitte quit the role on Saturday following differences with the company management over several transactions. Deloitte had been reappointed by the APSEZ audit committee in July 2022 for a five-year period.
Its exit was reported by ET on Saturday.
APSEZ said Deloitte had asked for audit roles at other Adani firms. This wouldn’t be feasible, the auditor had been told, it said.
“Deloitte indicated a lack of a wider audit role as auditors of other listed Adani portfolio companies,” according to the Adani Ports statement citing Gopal Krishna Pillai, chairman of its audit committee. “Deloitte was not willing to continue as APSEZ’s statutory auditor and, therefore, it was agreed to amicably end the client-auditor contractual relationship between APSEZ and Deloitte.” MSKA & Associates has been hired till the date of the next Adani Ports annual general meeting, to be held in 2024. Deloitte told the company that the scope of its audit wouldn’t cover group units.Deloitte said in a statement issued late on Saturday that they were tendering the resignation with immediate effect as they were not statutory auditors to a substantial number of Adani Group companies. The firm said that since it was not an auditor to other group companies, “the scope of the audit didn’t extend to transactions or balances which may have occurred between these group companies and their suppliers, customers or any other parties.”
The auditor said it wouldn’t be able to form a true and fair opinion without going into details of various inter-group transactions. It had been raising concerns on various related party transactions in its reports.
The audit committee was of the view that the grounds advanced by Deloitte for resignation as statutory auditor were not “convincing” or “sufficient,” as per the Adani Ports & SEZ statement.
Stung by IL&FS and other frauds, Deloitte and the other Big Four firms have been taking a tough stand, experts said.
The auditors have been sticking to strict interpretations of auditing standards, experts said. The earlier practice of getting a management representation or legal view on a contentious issue is increasingly being shunned, they said.
Commenting on the issue, Congress general secretary Jairam Ramesh said on social media site X, “When statutory auditors repeatedly quit, you know that things are not as they are projected.”
This marks the third audit change at Adani Group companies in recent months. In May, Shah Dhandharia & Co LLP resigned as auditor of Adani Total Gas and was replaced by Walker Chandiok & Co LLP. The latter had also assumed audit responsibilities for Adani Energy Solutions after Deloitte’s term ended in FY23.
APSEZ said the auditor had been furnished with all the relevant information. “It is important to mention that, in response to a query by the audit committee, Deloitte confirmed they have received all the APSEZ information from the management of the company,” it said. It “has been confirmed by Deloitte in their resignation letter dated August 12.”
Adani Ports said the “other matters” highlighted in the auditor’s resignation had been adequately disclosed and addressed in the FY23 financial statement. “We are fully confident these matters will be appropriately resolved in our September filing,” the company said.
In a statement released on August 8 through the stock exchanges, Deloitte referred to issues within the audit review report that had been incorporated into Adani Ports’ earnings statement for the June quarter.
First, there was a net balance of ₹3,871 crore recoverable from a contractor that provided engineering, procurement and construction services. The company said it was not a related party. However, the contractor had been identified as a related party in the Hindenburg Research report published in January. The net balance with the contractor increased by ₹122 crore on a sequential basis in the June quarter.
Hindenburg had alleged share manipulation and accounting fraud at the group, which rejected the findings. In the Adani Ports FY23 annual report issued in June, Deloitte flagged some transactions and issued a qualified opinion on the company’s accounts over a lack of disclosure.