New Delhi, Dec 13 (IANS): In a major blow to audit major Deloitte Haskins and Sells LLP, the National Financial Reporting Authority (NFRA) said on Thursday that the company did not comply with the standards of auditing in the crisis-ridden IL&FS Financial Services (IFIN).

In its audit quality review (AQR), NFRA said that the quality control systems and processes of Deloitte were found to be "severely inadequate and ineffective".

"The AQR has disclosed that DHS (Deloitte) has failed to comply with the requirement of the SAs (standards of auditing). The instances of failure noticed are of such significance that it appears to NFRA that DHS did not have adequate justification for issuing the audit report asserting that the audit was conducted in accordance with the SAs," the report said.

The AQR process started on February 25, 2019. The report further said that Deloitte did not display the required professional skepticism, and did not challenge the management on important issues and it also did not adequately question the going concern assumption on the basis of which the management had prepared the financial statements.

Separately, NFRA will examine whether disciplinary proceedings under Section 132(4) of the Companies Act, 2013, needs to be initiated in connection with the AQR report.