What happened at Adani Ports in August 2023?
Deloitte Haskins & Sells LLP resigned as statutory auditor of Adani Ports and SEZ (APSEZ) on 12 Aug 2023. A statutory auditor is the outside accounting firm that the law requires to check a company's accounts.[S4]
That evening, the board accepted the resignation and appointed MSKA & Associates in its place, subject to shareholders' approval. Deloitte also stepped down at six "material" subsidiaries, those big enough for extra SEBI rules to apply.[S4]
Deloitte had been reappointed at the AGM of 26 Jul 2022 for five years, covering FY23 to FY27.[S5][S4] It had audited the company since May 2017, the audit committee chairman's statement said.[S4]
The filings appeared in this order.
FY23 results filed with qualified audit reports[S2]
Deloitte's reports on the standalone and consolidated accounts for the year to 31 Mar 2023 carried a modified opinion. The company filed a Statement on Impact of Audit Qualifications with them.
June-quarter results filed with a qualified review report[S3]
Deloitte's limited review report repeated the qualification. A separate paragraph set out the limits of its role in the wider group.
Deloitte resigns; the board appoints MSKA & Associates[S4][S5]
The company filed Deloitte's letters, SEBI's disclosure format as Deloitte filled it in, and the audit committee chairman's statement. The board met from 6.30 pm to 8.15 pm.
Postal ballot notice filed[S6]
Shareholders were asked to approve MSKA until the 2024 AGM. Electronic voting ran from 24 Aug to 22 Sep 2023.
Shareholders approve MSKA's appointment[S7]
The results said about 99.26% of the votes cast on the resolution were in favour.
MSKA's first review report filed[S8]
MSKA's report on the September-quarter results was also qualified, on the matters behind Deloitte's qualification.
Shareholders vote on a five-year term for MSKA[S9][S10]
The 25th AGM voted on appointing MSKA until the 30th AGM, in 2029. The voting results, filed on 25 Jun 2024, list the item as passed.
What did the FY23 audit report say?
A "qualified" opinion means a problem affects certain items, but not the accounts as a whole. The problem can be a material misstatement or a lack of enough audit evidence.
Our guide to audit qualifications and resignations explains each kind of opinion.
Deloitte's report on the FY23 standalone accounts was dated 30 May 2023. Its "Basis for Qualified Opinion" covered three matters, and the company said none involved a related party:[S2]
- Money recoverable from a construction (EPC) contractor.
- Earlier financing deals with certain other parties, settled by 31 Mar 2023.
- The renegotiated sale of a container terminal being built in Myanmar.
It called the contractor a fellow subsidiary of "a party identified in the allegations made in the Short Seller Report".[S2]
Deloitte said it could not comment on whether related-party adjustments or disclosures might be needed. Nor could it say whether the company should have complied with the applicable laws.[S2]
It gave two reasons: the company had no independent outside examination, and SEBI's investigation was not finished.[S2]
The report also had an "emphasis of matter", which does not change the opinion. It pointed to the delayed start of the Vizhinjam port in Kerala, a dispute in arbitration.[S2]
What did the June-quarter review report add?
A limited review is the lighter check an auditor does on quarterly results. Deloitte's review of the June 2023 quarter repeated the qualification.[S3]
A separate paragraph began: "We are not statutory auditors of majority of the other Adani group companies".[S3] So, it said, its review did not reach dealings between those companies and the group's suppliers, customers or partners.[S3]
Deloitte stated that this paragraph did not modify its conclusion.[S3]
What did Deloitte's resignation letter say?
Deloitte wrote to the audit committee on 12 Aug 2023. It resigned at once because "we are not statutory auditors of a substantial number of Other Adani Group of companies".[S5]
The letter linked this to the "Other Matters" paragraphs in the May and August reports. The letter said this included an Adani Group company and its subsidiaries, after completion of Deloitte's five-year term.[S5]
What did SEBI's rules require the auditor to disclose?
SEBI's circular of 18 Oct 2019 sets the steps when a listed company's auditor, or a material subsidiary's, resigns.[S1] Three parts of it show up in this case.
- Reports before leaving. An auditor resigning within 45 days of a quarter's end first issues that quarter's report.[S1]
- A fixed format. The company gets the auditor's answers in the circular's Annexure A and discloses them to the exchanges.[S1]
- The audit committee's view. The committee discusses the auditor's concerns. Its views reach the exchanges within 24 hours of its meeting.[S1]
The auditor's detailed reasons must also reach the exchanges within 24 hours of the company receiving them.[S1]
Deloitte resigned 43 days after the June quarter ended. It had issued that quarter's review report on 8 Aug 2023.[S5]
The postal ballot notice said this report was submitted under the circular's conditions.[S6]
In Annexure A, Deloitte answered None on concerns raised before resigning, on information not provided and on other relevant facts.[S5]
What did the audit committee say?
The filing of 12 Aug 2023 included a statement by the audit committee's chairman. It said the committee was made up of independent directors only.[S4]
The statement said Deloitte had pointed to the lack of a wider audit role across other listed Adani companies. It said the committee found "the grounds advanced by Deloitte for resignation as Statutory Auditor were not convincing or sufficient".[S4]
According to the statement, the committee said group-wide appointments were not for APSEZ's board, as those companies had separate boards. Deloitte was then not willing to continue, and both sides agreed to end the engagement.[S4]
The statement also said Deloitte confirmed, when the committee asked, that it had received all of APSEZ's information from management.[S4] The board noted no reasons other than those in Deloitte's letter.[S4]
How was the new auditor appointed?
An auditor who leaves mid-term creates a "casual vacancy". Under the Companies Act, the board fills it within 30 days.[S11]
When the vacancy follows a resignation, shareholders must approve the new auditor within three months of the board's recommendation. That auditor holds office until the next AGM.[S11]
APSEZ's board appointed MSKA & Associates from 12 Aug 2023. The filing described it as an independent member firm of BDO International.[S4]
In this postal ballot, shareholders voted electronically, without a meeting.[S7] Under the Act, a resolution passed by postal ballot counts as passed at a general meeting.[S11]
The results, filed on 22 Sep 2023, said about 99.26% of votes cast were in favour.[S7]
The 2024 AGM notice then proposed a full term, from that AGM to the 30th AGM in 2029.[S9] The AGM was held on 24 Jun 2024, and its voting results list the item as passed.[S10]
What did the new auditor's first report say?
MSKA's review of the September 2023 consolidated results was filed on 9 Nov 2023. Its conclusion came "with the exception of the matter described in the paragraph 5".[S8]
That paragraph covered the EPC-contract balances and the Myanmar terminal sale. Pending regulatory proceedings, MSKA said it could not comment on their possible effect.[S8]
MSKA also noted that the earlier auditor had qualified its reports on the same matters.[S8]
Where do these kinds of filings appear?
Every step above is a filing on the NSE and BSE announcement pages. Our guide to finding NSE and BSE announcements shows how to search them by company and date.
- Audit opinions are in the auditor's report filed with the annual results. A modified opinion comes with a Statement on Impact of Audit Qualifications.[S2]
- Quarterly review reports come with each quarter's results.[S3]
- An auditor's resignation is a Regulation 30 filing, with the auditor's letter and Annexure A attached.[S1]
- Shareholder votes appear first as a notice, then as voting results with the scrutinizer's report.[S7]
- Deals with related parties have their own approval and disclosure rules, explained in our guide to related-party transactions.
What does this case file leave out?
It records what the filings above said, and when. It does not judge the reasons given, the audit opinions or the company.
The FY23 audit reports said SEBI's investigation, directed by the Supreme Court, was ongoing when they were signed.[S2] MSKA's report of Nov 2023 referred to pending regulatory proceedings.[S8]
This case does not report on those proceedings or how they ended.