New Delhi: Ahmedabad-based chartered accountancy firm Shah Dhandharia & Co. – which was named in Hindenburg Research’s report – has resigned as statutory auditor of Adani Total Gas, the Telegraph reported.
In October 2022, the Morning Context had reported that two accountancy firms – Shah Dhandharia & Co. and Dharmesh Parikh & Co. – that audit most of Adani Group companies have links to each other, and therefore, raise concerns over the group’s corporate governance.
It further said that Adani Group paid them a little over Rs 7 crore, as compared to Rs 84 crore paid by Mukesh Ambani’s Reliance Industries.
US-based short seller Hindenburg Research, in its January 24 report, had also raised the issue of the size and capability of the firms auditing the Adani Group.
It noted that the independent auditor for Adani Enterprises and Adani Total Gas is a “tiny firm” called Shah Dhandharia.
“Shah Dhandharia seems to have no current website. Historical archives of its website show that it had only 4 partners and 11 employees. Records show it pays INR 32,000 (US $435 in 2021) in monthly office rent. The only other listed entity we found that it audits has a market capitalization of about INR 640 million (US $7.8 million),” the Hindenburg report added.
“The audit partners at Shah Dhandharia who respectively signed off on Adani Enterprises and Adani Total Gas’ annual audits were as young as 24 and 23 years old when they began approving the audits. They were essentially fresh out of school, hardly in a position to scrutinize and hold to account the financials of some of the largest companies in the country, run by one of its most powerful individuals,” it said.
Responding to Hindenburg’s charges, the Adani group had said that all the auditors engaged by the conglomerate were duly certified and qualified by the relevant statutory bodies. It had added that all the appointments were in compliance with applicable laws.a
“Our resignation does not result from an inability to obtain sufficient appropriate audit evidence,” the Telegraph reported Shah Dhandharia as saying in its resignation letter on Tuesday, May 2.
“There are no other circumstances connected with our resignation which we consider should be brought to the notice of the board.”
Shah Dhandharia & Co. told the newspaper it had decided to resign “due to increased professional preoccupation in other assignments”.
The decision was announced at the board meeting where the company approved the financial results of the January-March quarter and the full year ended March 31, the daily reported.
The audit firm was replaced by Walter Chandiok & Co.
However, it’s not clear whether Shah Dhandharia & Co. will step down from auditing Adani Enterprises as well.