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DCA to probe Tata Finance for irregularity

The controversy over the audit report on Tata Finance Ltd has taken a new turn with the Department of Company Affairs indicating that it may probe TFL to determine if there were any financial irregularities.

Meanwhile, A F Ferguson, on Thursday, formally announced the resignation of senior partner Y M Kale.

Three other employees, who were associated with Kale in writing the report on TFL that had some critical observations, are also believed to have quit, apparently joining their senior partner in disassociating from Ferguson's action on Tuesday to withdraw the "confidential report."

The report had spoken of irregularities in some of the dealings of TFL.

Kale's resignation came amid reports that he took the step after refusing to modify the audit report. Ferguson has decided to prepare a fresh report by a new team.

Taking note of the developments surrounding TFL, top DCA officials said: "We may launch an inspection of TFL's books of accounts to determine whether there were any financial irregularities. A decision on this issue will be taken early next week."

The DCA move comes close on the heels of market watchdog Securities and Exchange Board of India saying it was examining allegations of insider trading against the erstwhile managing director of Tata Finance Dilip Pendse.

TFL had asked Ferguson to prepare a detailed report on its operations between April 2000 and March 2001 after financial irregularities to the tune of Rs 5 billion were detected.

Ferguson announced the withdrawal of the report on Tuesday after the Tatas reportedly objected to several observations in it. The withdrawal triggered a controversy and raised the hackles of the accounting fraternity.

Meanwhile, Investors' Grievances Forum's president and Bharatiya Janata Party MP Kirit Somaiya has demanded a special audit of TFL by the DCA to probe the alleged financial irregularities.

He said the role of former TFL managing director Dilip Pendse, objections raised by Tatas to the Ferguson audit report and resignation of the audit firm's senior partner Y M Kale have created an "atmosphere of suspicion".

Meanwhile, Institute of Chartered Accountants of India, the apex accounting body, asked DCA to recall the report Ferguson had prepared on some "irregularigties" in TFL's corporate affairs.

"Today, we have requested DCA to call for the report. DCA can look into the matter and if there is any prima facie evidence that there is a fault of the auditor, we can probe the matter and take action against the auditor," ICAI president Ashok Chandok said.

Terming Ferguson's action of withdrawing the report on TFL as "unprecendented", ICAI Chandok said: "An already issued report can be revised as provided in ICAI guidelines. The auditor must comment on new evidence and reason for revision."

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