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Deloitte flags concerns, may quit as Adani Ports auditor

In the recently announced first quarter results, Deloitte highlighted some transactions flagged by Hindenburg as related party transactions.

NEW DELHI:  Deloitte & Haskins LLP is likely to resign as the auditor of Adani Ports and SEZ (APSEZ) over concerns about the quality of accounts of the company, sources said. Deloitte, which has been auditing the books of APSEZ since FY18, has raised serious concerns over the allegations made by US-based Hindenburg in its report.

The transactions flagged by Deloitte included engineering, procurement and construction (PEC) purchase contracts with a subsidiary of a party identified in the Hindenburg report.

When contacted, the Adani Group ruled out such a possibility. A company spokesperson said there is a process to be followed for resignation, adding that they are not aware of any such process being initiated. Deloitte declined to comment.

In the recently announced first quarter results, Deloitte highlighted some transactions flagged by Hindenburg as related party transactions. It said the company did not consider it necessary to have an independent external examination of these allegations. But, in the absence of an independent evaluation, it is not able to make a conclusive statement on such transactions.

“The evaluation performed by the Group does not constitute sufficient appropriate audit evidence for the purposes of our audit,” Deloitte had said in notes to APSEZ’s financial statement.

Hindenburg Research in its January 24 report that levelled allegations of fraud, stock manipulation, and money laundering against the Adani group, had also flagged inadequate disclosures of related party transactions. Adani group has denied all allegations.

Two fishy deals

In May, Deloitte had flagged three transactions, including recoveries from a contractor identified in the Hindenburg report, as it issued a qualified opinion on the accounts of Adani Ports & Special Economic Zone. In the auditors’ report on the audit of the fourth quarter and 2022-23 financials, Deloitte highlighted transactions with three entities, which the company said were unrelated parties.

Deloitte however said it could not attest to the company’s statement as no independent external examination has been done to prove the claims.

Deloitte also flagged two transactions in its report – an EPC purchase contract with an entity that Hindenburg identified as a related party, and the renegotiated terms of sale of its container terminal under construction in Myanmar to Anguilla-incorporated  Solar Energy Ltd

The sale consideration was revised from Rs 2,015 crore to Rs 246.51 crore and an impairment charge was taken. The group told the auditor these are not related parties.

(With additional inputs from PTI)

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