Economic
Offences Wing (EOW) of Mumbai Police had arrested Shrawan Jalan and Amit Kabra,
partners of SV Ghatalia & Co (An affiliate of Ernst & Young India LLP)
who are statutory auditors of National Spot Exchange Ltd (NSEL).
National
Spot Exchange Limited (NSEL), was incorporated in May 2005 as a spot exchange
for trading in commodities. In October 2008, NSEL commenced operations
providing an electronic trading platform to willing participants for spot
trading of commodities, such as bullion, agricultural produce, metals, etc.
According
to EOW, SV Ghatalia, which audited NSEL’s accounts for FY10, FY11 and FY12, was
allegedly responsible for verification, auditing, reporting and certifying that
the financial statements revealed a true and fair view.
“Investigation
revealed that the accused did not verify and report about accreditation of
warehouses, control mechanism, use of settlement guarantee fund (SGF), position
of commodities as on March 31 and physical movement of goods,” the EOW said in
its remand application before a local court in Mumbai.
The EOW
also said that as per the byelaws of NSEL, it was necessary to make provision
of Rs 1 crore before commencement of trading.
1. They have allegedly failed to flag lack of internal control mechanism in the exchange and projecting a healthy picture.
2. They have failed to check internal controls over whether there were sufficient underlying stock during the period from when the commodity was tendered by the seller towards the commodity pay-in till the payout to the buyer.
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