EY Under Investigation by Indian Accounting Regulator Over Adani Auditing

India’s accounting regulator, the National Financial Reporting Authority (NFRA), has launched an inquiry into one of EY’s member firms, S.R. Batliboi, a long-standing auditor for the Adani Group. This development was reported by Bloomberg on October 25, with inside sources revealing the initiation of the inquiry in recent weeks. NFRA is seeking access to files and communication related to audits performed on companies controlled by billionaire Gautam Adani dating back to 2014. The report does not specify the duration of NFRA’s inquiry or the potential consequences for both the auditor and Adani Group companies.

S.R. Batliboi, notably, serves as the statutory auditor for five listed Adani companies, contributing approximately half of the group’s total revenues. This inquiry, as per the report, highlights persisting concerns regarding accounting and disclosures within the sprawling Adani conglomerate, which previously came under intense scrutiny from short sellers in January.

Adani Group, staunchly refuting allegations of corporate wrongdoing by Hindenburg Research, remains subject to a court-ordered investigation by the Securities and Exchange Board of India (SEBI).

In addition to their role as current auditors for Adani Power Ltd., Adani Green Energy Ltd., Adani Wilmar Ltd. (a consumer goods firm), and the two cement manufacturers acquired from Holcim Ltd. last year, S.R. Batliboi also provided audit approval for Adani Ports & Special Economic Zone Ltd., considered the conglomerate’s flagship entity, over a decade leading up to 2017.

It’s worth noting that Indian law prohibits foreign accounting firms from registering as auditors within the country. Consequently, major players like EY operate through independently managed affiliates.

Hindenburg Research cast doubts on Adani’s accounting and audit practices in a January report, resulting in a substantial drop in market capitalization for the conglomerate’s listed companies, exceeding $150 billion at one point. In response, Adani Group defended its practices by asserting that its firms are audited by duly certified and qualified professionals.

[Source: Based on Bloomberg reports]