Mumbai, July 7 (IANS) The National Financial Reporting Authority (NFRA) has initiated its investigation into the alleged financial misstatement case involving Rajesh Exports, with Chairman Nitin Gupta confirming that the audit regulator has begun its process following a referral from the Securities and Exchange Board of India (SEBI).

Speaking on the sidelines of a conference organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in Mumbai on Tuesday, Gupta said the regulator had already started examining the matter but declined to specify a timeline for its completion.

“We are working on it. We have started our process,” Gupta said.

The case relates to Sebi’s action against the gold refiner over alleged discrepancies in its financial statements amounting to Rs 15.15 trillion over an extended period. In June, the market regulator referred the matter to the NFRA for appropriate action against the company’s statutory auditors.

Gupta also provided an update on the NFRA’s ongoing investigation into accounting irregularities in the derivatives portfolio of IndusInd Bank, indicating that the exercise could take considerable time because of its complexity.

“The investigation may take longer also. It has multiple years involved, multiple auditors are involved. So, it is not a thing which you put an axe and it is done. It has to be in a systemic manner and we are doing that,” he said.

He added that the NFRA’s role extends beyond investigations and includes putting in place guardrails to curb accounting and auditing malpractices. Gupta said the authority has already approached the Ministry of Corporate Affairs (MCA) seeking changes to auditing standards, adding that the proposals are currently under the ministry’s consideration.

Addressing the conference on “Agile Governance: Navigating Artificial Intelligence (AI) & Regulatory Landscape”, Gupta cautioned that while AI has the potential to significantly strengthen governance and compliance, it also introduces new risks that organisations must address carefully.

He said AI systems often produce fast, fluent and confident responses that can easily be mistaken for accurate information.

“The same system that can flag an anomaly can also manufacture a plausible sounding but entirely hallucinated explanation for it,” Gupta said.

He also warned against the tendency to deploy AI rapidly with the assumption that governance and oversight mechanisms can be added later.

“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 (CFOs) and financial functions must resist the temptation to let efficiency substitute for ownership of professional judgment,” he said.

–IANS

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