Fixing Auditors' Accountability

Fixing Auditors' Accountability www.infralive.com 46 InfraLIVE September 15, 2022 Section 17 of the RERA man- dates the promoters of the real estate projects to facilitate the formation of association of allottees within three months of booking of majority (51 per cent) of flats/ plots and execute the registered conveyance deeds of common areas in f a vou r o f a s s o c i a t i on o f allottees and handover the possession of the common areas to them. There is no disclosure in the notes to the accounts of the promoter companies in this respect and no qualification or comments in the Auditors Reports of the statutory auditors on the financial statements of the promoter companies. 12. There is no reference either in the Auditor's report or in the notes to accounts that the company has conformed to the mandatory provisions of the RERA Act as required under the SA 250 & SA 315 prescribed by the ICAI as mandated under Section 143 (10) of the Compa- nies Act, 2013. There is therefore an urgent need for issuing a direction to the statutory auditors conducting the audit of real estate companies under the Companies Act 2013 for submission, of a detailed compli- ance certificate of RERA Act, to RERA of the state every year, after completion of the audit of the annual accounts of such compa- nies. In response to the reference made, National Financial Report- ing Authority (NFRA) constituted under section 132 of the Companies Act and mandated with the respon- sibility of ensuring compliance with the auditing standards, had suggested (August 2021) that RERA may consider obtaining separat e RERA compl i ances certifications from the statutory auditors of real estate c omp a n i e s a s i s t h e practice of certain sectoral regulators like RBI etc. In Sep t embe r 2022 , t he c h a i r m a n N F R A announced that NFRA would issue audit adviso- ries to help accounting and auditing firms understand the industry's require- ments better. It would bring more awareness among companies and chartered accountants a bou t t h e r e gu l a t o r y requirements of audits. This is a step in right direction and may ensure c omp l i a n c e w i t h t h e regulatory framework. However, as each state has a separate RERA, i t would be appropriate if the Ministry of Urban Development (MoUD), Government of India may pre- scribe necessary guidelines to statutory auditors to keep the provisions of the RERA Act in view and submit a compliance report to RERA of the concerned state directly while conducting the annual statutory audit of the financial statements of the real estate companies so as to protect the interests of homebuyers and other stakeholders like banks etc. The Author is an Ex-DG of the C&AG of India. He was a Member, RERA, Bihar during April 2018 to December 2021. in the each of the real estate projects. Even in those compa- n i e s wh i c h ha v e book ed revenues in the financial statements for the years 2018- 19 & 2019-20, the project-wise details have not been given . The statutory auditors have also not commented in this respect. Completion Certificate (CC)/Occupancy Certifi- cate (OC) 10. Section 17 of the RERA Act mandates promoters to obtain CC/OC of the real es tate projects from the competent authority before registering the conveyance deeds of flats/ plots and common areas in favour of allottees/ association of allottees and handing over the possession of the flats/ plots and common areas to a l l o t t ee s / a s soc i a t i on o f allottees. There is no disclosure in this respect on completion of the project in the notes to accounts of the companies. There is no qualification or comments in the Auditors Repor t s o f t he s t a t u t or y Auditors on the financial statements of the promoter companies. Associationof allottees 11. Section 11 (4)(e) read with