Reliance Capital today opened with a loss of almost 5.5% at Rs.88.90 and went on to hit an intra day low at Rs.87.55, going down 6.8%. It is just one rupee away from its 52-week low of Rs.86.75.
The market is not happy that Price Waterhouse & Co Chartered Accountants LLP (PwC), one of the big four audit firms, has resigned as statutory auditor of Reliance Capital Ltd and Reliance Home Finance.
The audit firm had said that as part of the ongoing audit for FY2018-19, it noted certain observations or transactions which in its assessment, if not resolved satisfactorily, might be significant or material to the financial statements, and that it did not receive satisfactory response to its queries.
The audit firm said, “PWC has further stated that though it sent a letter dated 24 April 2019 under relevant provisions of the Companies Act, Reliance Capital disputed the same to be in accordance with the provisions of law, notwithstanding a subsequent letter issued by PWC on 14 May 2019 to reiterate the intent of letter issued on 24 April 2019, and the Company did not convene an audit committee meeting within the expected time. Reliance Capital also stated that it might initiate appropriate legal proceedings against the firm. According to PWC, these actions by the Company have prevented it from performing its duties as statutory auditors and exercising independent judgment in making a report to the members of the Company, and impaired its independence, and hence, it is no longer in a position to complete the audit and instead feels compelled to withdraw from the audit engagement and resign."
Reliance Capital reverted, saying, “The company does not agree with the reasons given by PWC for the resignation. The Company has duly responded to the various queries and letters of PWC and has also duly and validly convened a meeting of the Audit Committee on June 12, 2019 to further respond to the letter dated May 14, 2019 from PWC. The Company expected PWC to have participated in the meeting of the Audit Committee and not resigned on the eve thereof. The company has also duly furnished all requisite and satisfactory details as required by PWC, especially including certification and confirmation of the transactions in question on multiple occasions by PWC themselves. As regards legal proceedings, the company had clearly stated that the same would be initiated only if so legally advised, that too if required to protect the interests of all stakeholders, and it is hard to see how PWC has taken exception to this approach.”
Reliance Capital said that following this resignation, the other duly appointed auditor, M/s. Pathak H.D. & Associates, whose term is valid until conclusion of the AGM for the year ended March 31 , 2021 will continue as the sole Statutory Auditor.