The National Financial Reporting Authority has officially launched an investigation into Rajesh Exports concerning a massive Rs 15.15 trillion financial misstatement, acting on a referral from market regulator Sebi.
Key Points
- The National Financial Reporting Authority (NFRA) has initiated a probe into Rajesh Exports regarding financial misstatements amounting to Rs 15.15 trillion.
- The investigation follows a referral from market regulator Sebi, which had previously taken action against the gold refiner for discrepancies.
- NFRA Chairman Nitin Gupta indicated that the investigation into IndusInd Bank's accounting irregularities is more complex, involving multiple years and auditors.
- Gupta highlighted the NFRA's efforts to implement 'guardrails' against malpractices, including requesting changes to auditing standards from the Ministry of Corporate Affairs.
- He also cautioned against the risks of Artificial Intelligence in governance, noting that AI's confident output can be mistaken for correctness and urging robust oversight.
The National Financial Reporting Authority (NFRA) has initiated its probe into the financial misstatement matter related to Rajesh Exports, the authority"s chairman Nitin Gupta said on the sidelines of a conference organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) in Mumbai on Tuesday.
"We are working on it. We have started our process," said Gupta, while declining to specify any timeline on the matter.
Sebi's Referral and Ongoing Investigations
The case pertains to market regulator Securities and Exchange Board of India (Sebi) action against the gold refiner for discrepancies in financial statements to the tune of Rs 15.15 trillion over a long period.
In June, Sebi referred the matter to the NFRA for appropriate action against the firm's statutory auditors.
On queries on the NFRA"s probe into the accounting irregularities in the derivatives book of IndusInd Bank, the chairman said, "The investigation may take longer.
"It has multiple years, multiple auditors involved. So, it is not a thing that you put an axe and it is done.
"It has to be in a systemic manner and we are doing that."
Strengthening Auditing Standards and AI Risks
Gupta further said that the NFRA can put guardrails to check any malpractices.
It has already requested the Ministry of Corporate Affairs for changes to the auditing standards — which he said are under the consideration of the ministry.
In his address at the conference on Agile Governance: Navigating artificial intelligence (AI) & regulatory landscape, Gupta highlighted that while AI tools can be powerful enablers for better governance and compliance, it may also bring some risks with it.
He further stated that the fast, fluent, and confident output by AI tools can be mistaken for correctness.
"The same system that can flag an anomaly can also manufacture a plausible sounding but entirely hallucinated explanation for it," he added.
He also noted that as AI tools move fast, they may lead to the temptation to assume that oversight can be simply retrofitted later — which he urged the industry to resist.
"The board and audit committees must build the internal courage and internal mechanism to challenge the management, including challenging the deployment of AI, its data, the assumptions, the control systems, the failure modes etc and not simply accept the outputs as presented.
The chief financial officers and financial functions must resist the temptation to let efficiency substitute for ownership of professional judgment," he said.
