ED finds gaps in SBI audit of Jet Airways
The Enforcement Directorate (ED) has raised objections against the State Bank of India-commissioned audit of Jet Airways books because its own probe findings in the case are significantly different.
SBI, which led the lenders’ consortium for Jet, had appointed accounting firm EY last year to do an audit of the airline amid fund diversion allegations. The bank closed the forensic audit in April because it found the cash-strapped airline’s response adequate on the findings.
The ED is of the view that the EY findings did not talk about money trails, fund diversion, incorporation of multiple shell firms which were used to divert funds, variance in lease rentals and high selling and distribution expenses by Jet. Also, the response furnished by the airline was found to be evasive, according to sources in the know.
The probe agency is now planning to conduct an independent audit on Jet. “We have observed certain deficiencies in the findings and even in the responses submitted by Jet on various issues to the auditors,’’ said an ED official. He added that the matter was taken up with the lender last week.
EY had sought Jet Airways’ reply on 28 queries based on their findings. Of that, ED is not satisfied with the airline reply to at least half a dozen queries. Business Standard has reviewed the audit findings and the Jet submission on the queries.
The loan provisioning of Jetlite, a wholly owned subsidiary, is among the contentious issues under scrutiny. Jetlite was given a loan of ~3,353 crore over four years in spite of Jet recording losses during FY2014.
Jet’s response was that the provisions were mainly due to the continued losses of Jetlite and its ability to turn around given the size of its operations.
Such provisions have been audited by the statutory auditors of the company and placed before the audit committee and the board for approval.
On fraudulent billing to the tune of ~140.4 crore for JP Miles, Jet had said it was observed by the internal audit team and rectified through a credit note.
The audit report also found that invoices raised on Jet Privilege were not verified, resulting in an excess billing. Even on this , Jet said that necessary action had been initiated by the audit committee.