Warning to Investors: TMC’s Mahua Moitra Reacts as Deloitte, Auditor for Adani Ports, Announces Resignation

Warning to Investors: TMC’s Mahua Moitra Reacts as Deloitte, Auditor for Adani Ports, Announces Resignation

Mahua Moitra, a prominent member of the Trinamool Congress, has issued a warning to investors in response to reports indicating that Deloitte Haskins & Sells LLP, the auditing firm responsible for billionaire Gautam Adani’s ports business, is considering resigning from its position.

In a post on X (formerly Twitter), Moitra expressed a somewhat sarcastic sentiment, suggesting that the possibility of enforcement agencies like the Enforcement Directorate (ED), Central Bureau of Investigation (CBI), and Serious Fraud Investigation Office (SFIO) conducting raids on Deloitte could be anticipated. She also added a more serious caution to investors, urging them to be vigilant.

The Bloomberg report, drawing on information from sources familiar with the situation, detailed that Deloitte Haskins & Sells LLP has informed Adani Ports & Special Economic Zone Ltd. about its intentions to resign as auditor. A formal announcement of this decision is anticipated to be made in the near future.

The potential resignation of Deloitte Haskins & Sells LLP as the auditor for Gautam Adani’s ports business has raised concerns about the integrity of accounting practices within the Indian conglomerate. This development comes in the wake of allegations made by short seller Hindenburg Research, further fueling worries about the accuracy and transparency of financial reporting.

In May, the Indian arm of the global accounting giant, Deloitte Haskins & Sells LLP, expressed apprehensions regarding certain transactions involving Adani Ports and three entities that Adani claimed were independent parties. The auditing firm stated its inability to verify Adani’s assertions and its inability to ascertain whether the business was in full compliance with local regulations at that time.

The possibility of Deloitte’s resignation adds to the broader debate about corporate governance, financial reporting, and transparency in major corporations. The developments underscore the significance of independent auditors in ensuring the accuracy and reliability of financial statements and the potential implications when these relationships come under scrutiny.

Deloitte Haskins & Sells LLP has indicated that it cannot verify the claims made by Adani regarding certain transactions, as there has been no independent external examination conducted to substantiate these assertions. This statement highlights the need for a thorough and impartial examination of the financial transactions in question.

The timing of Deloitte’s planned resignation draws attention to the governance practices within the Adani Group, particularly in the context of ongoing scrutiny. The Securities and Exchange Board of India (SEBI) is in the process of investigating the allegations made by Hindenburg Research regarding accounting fraud and market manipulation. Adani has consistently denied any wrongdoing, and an investigation panel appointed by the Supreme Court found no evidence of regulatory failure or stock price manipulation.

The situation underscores the importance of robust governance structures, transparent financial reporting, and independent audits to maintain investor confidence and ensure the credibility of corporate entities. It remains to be seen how these developments will impact the broader perception of the Adani Group and its corporate practices.

Hindenburg Research report on Adani group

Hindenburg Research’s report from January 24 made serious allegations against the Adani Group, including accusations of fraud, stock manipulation, and money laundering. One of the concerns raised by Hindenburg was the inadequacy of disclosures related to party transactions within the group.

In response to these allegations, Deloitte indicated that the Adani Group did not see the need for an independent external examination of the claims. This decision was reportedly based on the Adani Group’s own evaluation of the situation as well as the ongoing investigation being conducted by the Securities and Exchange Board of India (SEBI).

This context further emphasizes the complexity of the situation, where allegations of financial impropriety are being addressed through various means, including internal evaluations and regulatory investigations. The planned resignation of Deloitte adds a new layer of scrutiny and attention to the situation, as the external audit firm’s role is crucial in validating the accuracy and transparency of financial disclosures made by the Adani Group.

In its notes to the financial statements of Adani Ports and Special Economic Zone Ltd. (APSEZ), Deloitte stated that the evaluation conducted by the Adani Group did not provide enough appropriate audit evidence to meet the requirements of their audit. This suggests that Deloitte did not consider the Group’s evaluation to be sufficient to support their own audit process.

The situation surrounding the Adani Group has attracted significant attention and scrutiny. An expert panel, consisting of six members and appointed by the Supreme Court of India, conducted an investigation into the Adani Group stocks. The panel’s interim report, released in May, concluded that there were no signs of regulatory failure or price manipulation in the Adani Group’s stocks. This report seemingly contradicts some of the allegations raised by external parties like Hindenburg Research.

The complexity of the situation lies in the differing assessments and conclusions from various entities, including external research firms, regulatory bodies, and auditing firms. This multifaceted response underscores the seriousness of the allegations and the broader implications for the transparency and credibility of financial reporting within the Adani Group.

The transactions that Deloitte flagged included certain engineering, procurement, and construction (EPC) purchase contracts that Adani Ports and Special Economic Zone Ltd. (APSEZ) had with a subsidiary of a party that was mentioned in the Hindenburg Research report. The Hindenburg report had raised concerns about potential fraud, stock manipulation, and money laundering within the Adani Group. Deloitte’s scrutiny of the EPC purchase contracts and its subsequent concerns reflect the complexity and significance of the allegations made by external parties, as well as the auditor’s commitment to ensuring transparency and accuracy in financial reporting.