Deloitte Penalized ₹2 Crore by NFRA Over Gross Negligence in Zee Entertainment Audit

In a damning indictment, the National Financial Reporting Authority (NFRA) has slapped a penalty of ₹2 crore on audit firm Deloitte for gross negligence and lackadaisistic approach during the auditing of Zee Entertainment Enterprises Ltd (Zee) for the financial years 2018-19 and 2019-20.

Conducted suo motu against Deloitte, the investigation revealed appalling lapses in the audit process, including gross negligence in auditing Zee's financial statements, flagrant violation of provisions under the Companies Act regarding related-party transactions, and failure to exercise professional scepticism and due diligence. Notably, management claims were challenged inadequately by Deloitte.

Moreover, the firm was accused of failing to properly assess audit reports on suspected fraud, which compounds its non-compliance with auditing norms. Inspectors also spotted unauthorized guarantees and early closure of fixed deposit accounts by a bank, misuse of Zee funds for repayment of loans used by promoter group companies, all led by Zee's Chairman.

Other auditors have faced penalties as well – CA AB Jani, Engagement Partner, has been fined ₹10 lakh with five-year debarred status from auditing roles. Similarly, CA Rakesh Sharma was fined ₹5 lakh and disqualified for three years to serve as an auditor or internal audit officer by companies.