PTC India Financial Services (PFS), an infrastructure project lender embroiled in governance issues, has criticized its forensic auditors, CNK & Associates, for failing to timely present draft findings. The company claims CNK did not engage in necessary discussions with PFS's management about these findings. PFS had hired CNK in April 2022 to investigate governance concerns raised by its former three independent directors, who had collectively resigned in January 2022. These directors had alleged that PFS management unilaterally suspended the appointment of the Director-Finance and concealed a forensic audit report in one troubled loan account. Despite repeated prompts, PFS only received the draft findings from CNK in September and October 2022. These findings were shared without discussions with the management or inquiries about company processes. According to PFS, this violates the agreed-upon audit timeline of 4-6 weeks, which included weekly discussions on draft reports.
Why PFS Needed a Forensic Audit
The company's statutory auditors had initially pushed for a forensic audit. They threatened to issue a Disclaimer Opinion in the absence of such a report, forcing PFS and its board to agree to the audit. The aim was to examine the allegations leveled by the former Independent Directors. However, CNK has not reported any fraudulent or malicious activity by PFS's management. The forensic auditor also did not indicate any fund misappropriation or diversion within the company. PFS is currently responding to the draft report in a bid to conclude the forensic audit as swiftly as possible.
EY's Role in the Investigation
To validate the management's response to CNK's observations, PFS employed an external consultant, E&Y, to conduct an independent assessment. E&Y found no signs of suspected fraud and concluded that CNK's findings would not impact PFS's accounts. Delay in FY22 Financial Results Meanwhile, PFS's audit committee meeting on October 15, declined to review the financial statements for the year ended 31st March 2022, pending completion of the forensic audit. This refusal could negatively affect the broader interests of stakeholders, lenders, and shareholders. The board convened on October 22 to discuss the status of the forensic audit and planned to meet on October 25 to discuss the FY22 financial statements. However, this meeting was deferred, and the outcome was shared with NSE and BSE. Due to this delay, PFS's stock was moved to the "Z" Category by NSE/ BSE, reserved for companies that fail to meet listing requirements. PFS, a public entity, is primarily owned by promoter PTC India, which holds a 65% stake. PTC India's promoters, including state-run NTPC, National Hydro Electric Power Corporation, Powergrid Corporation of India, and Power Finance Corporation, collectively own a 16% shareholding.
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