Mumbai: The Securities and Exchange Board of India (SEBI) examined Deloitte Haskins & Sells LLP over its role as the statutory auditor of Zee Entertainment Enterprises Ltd (ZEEL) in connection with transactions allegedly carried out without board approval. However, the regulator has effectively given the audit firm a clean chit in its final order, concluding that Deloitte was not aware of the complete facts surrounding the disputed transaction.
According to people familiar with the matter, SEBI examined Deloitte in 2024 as part of its investigation into ZEEL’s transactions. In its final order dated 31 July, the regulator reportedly held that the full circumstances surrounding the unauthorized transaction were not known to the auditor. It also concluded that the responsibility for making necessary disclosures cannot be shifted from the company’s management to its statutory auditor.
Case dates back to 2018 property pledge
The matter dates back to December 2018, when ZEEL promoter Subhash Chandra signed a declaration and acknowledgement on behalf of the company to deposit the title deeds of a Hyderabad property with Indiabulls Housing Finance Ltd (IHFL).
The property, spread across approximately 17,639.64 square metres, was allegedly pledged without the required approval of the company’s board.
The transaction later became a subject of regulatory scrutiny, with questions raised over whether the company’s auditors were aware of the pledge and whether adequate disclosures had been made.
Deloitte stepped down as ZEEL auditor in 2022
Deloitte had served as ZEEL’s statutory auditor before stepping down from the role in 2022. Its involvement subsequently came under regulatory examination as SEBI investigated the circumstances surrounding the unauthorized transaction.
The regulator’s findings reportedly distinguish the responsibilities of company management from those of an external auditor. According to the final order, Deloitte did not have knowledge of the complete facts relating to the transaction and therefore could not be held responsible for information that had not been brought to its attention.
The order also emphasizes that the primary responsibility for ensuring accurate corporate disclosures lies with the company’s management.
Regulatory scrutiny of corporate transactions
The SEBI proceedings form part of wider regulatory scrutiny of transactions involving listed companies, particularly those undertaken without appropriate board authorization or disclosure.
For auditors, the case also highlights the distinction between their statutory responsibilities and the obligations of a company’s management to provide complete and accurate information. Auditors rely substantially on information and representations provided by company officials while conducting statutory audits.
In Deloitte’s case, SEBI’s findings indicate that the regulator did not find sufficient grounds to hold the audit firm responsible for the disputed transaction based on the information and circumstances examined.
The development comes four years after Deloitte stepped down as ZEEL’s statutory auditor and nearly eight years after the disputed property pledge was executed.
SEBI’s 31 July order has therefore effectively cleared Deloitte of liability in connection with the transaction, while the regulatory findings continue to place emphasis on the responsibility of company management for unauthorized actions and related disclosures.
