The National Financial Reporting Authority (NFRA) has initiated an investigation into the alleged revenue misstatement case involving Rajesh Exports Ltd., following findings by the Securities and Exchange Board of India (SEBI). However, the regulator has said it is too early to specify a timeline for completion of the probe.
Speaking on the sidelines of a FICCI event in Mumbai, NFRA Chairperson Nitin Gupta confirmed that the authority had begun its investigative process but declined to comment on the ongoing proceedings or indicate when the investigation would be concluded.
The development follows a SEBI order issued last month, which alleged that Rajesh Exports had misstated its revenues over an extended period. The market regulator estimated the total discrepancies at approximately ₹15.5 lakh crore and subsequently requested NFRA to examine the role of the company’s statutory auditors in the matter.
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Addressing broader issues of corporate governance, Gupta said promoter-driven companies in India require genuine board independence rather than merely fulfilling formal compliance requirements. He noted that independent directors must be willing and able to challenge management decisions whenever necessary.
Gupta also highlighted the growing role of artificial intelligence in finance and auditing, cautioning that AI-generated outputs can appear highly convincing despite not always being accurate. He said boards and auditors should critically evaluate AI-generated information instead of accepting it at face value because of its apparent authority.
According to Gupta, every material judgement involved in financial reporting—including estimates, assumptions and accounting decisions—must remain the responsibility of qualified human professionals, even when AI tools are used to improve efficiency.
He further advised boards and audit committees to assess several factors before approving AI deployment, including the quality of data used, ownership and validation of AI models, potential biases, the extent of human oversight, and the availability of audit trails and cybersecurity safeguards.
Gupta emphasised that effective corporate governance depends not only on the existence of regulations but also on the manner, rigour and integrity with which they are implemented. He said meaningful governance is achieved through genuine institutional accountability rather than procedural compliance alone.
The NFRA investigation into Rajesh Exports remains at a preliminary stage, and no findings have been announced. The outcome of the probe will depend on the examination of evidence and applicable regulatory provisions.
