Auditor Deloitte has flagged inappropriately approved vendors and excess payments at BharatPe, where its former MD and co-founder Ashneer Grover has been accused of cheating and embezzlement of funds.
In its latest annual report, BharatPe presented opinion of its statutory auditor that said the company's internal control system for vendor selection as well as for approval of invoices for purchase of goods and services were not operating effectively, resulting in procurements at inappropriately approved prices.
After devoting a page on the statutory auditors' report, BharatPe's annual report in the following section stated that "there were no instances of fraud reported by auditors to the board of directors".
This was used by Grover to attack reportage, saying no journalist has read the annual report of BharatPe which has clearly writes of no fraud.
"Ek bhi journalist ne @bharatpeindia ki annual FY22 report nahi padi - auditor ne clearly likha hua hai 'NO instances of FRAUD reported by Auditors to the Board of Directors'. @Deloitte is the auditor who were paid Rs 4 crore audit fees (up from Rs 40 lakh I paid them as MD) and clearly found NOTHING," Grover wrote on Twitter.
But when the preceding page of the annual report was pointed out to him, he launched personal attack, adding the role of auditor should be googled.
"Doosri baat - Jin forensic audit ki aap baat kar rahe ho @alvarezmarsal and @PwC - unpe @bharatpeindia ne Rs 9 crore kharche ke baad unki report ko junk kar diya - woh usko na to Court mein pesh kar rahe hai na police ko - to sawaal aapko apne Maliko se poochna chahiye mujh se nahi." (The report of forensic audit [into allegations against Grover and his family] by Alvarez and Marsal and PwC, on whom Rs 9 crore was spent by BharatPe, was junked and was neither presented to court or police. And question on it should be asked to them and not to him).
He then went on to site 'innocent till proven guilty' law but did not reply to concerns Deloitte flagged in the report.
BharatPe in police and court complaints has alleged that Grover, his wife Madhuri Jain and other family members created fake bills, enlisted fictitious vendors to provide services to the company, and overcharged the firm for recruitment. It is seeking up to Rs 88.67 crore in damages.
The corporate governance review by Alvarez and Marsal, Shardul Amerchand Mangaldas and PwC led to the ouster of Jain, who was head of controls at BharatPe. Grover resigned from the company and its board in March last year.
"The company's internal control system for vendor selection were not operating effectively which resulted in procurement of goods and services from inappropriately approved vendors and/or at inappropriately approved prices," the annual report said, citing statutory auditors' report.
BharatPe's "internal control system for approval of invoices for purchase of goods and services were not operating effectively, which resulted in other expenses being recorded without receipt of goods and services and/or in excess of actual quantity received, resulting in excess payments being made towards such expenses," it said.
"The company did not have an appropriate internal control system for recording reversal of Goods and Services Tax (GST) input credit and for payment of penalty to GST authorities, resulting in recording reversal of GST input credit and payment of penalty without appropriate approvals," it said.
Also, the firm "did not have adequate controls over period end adjustments including related presentation and disclosure requirements," it said, adding the auditors stated that they considered these material weaknesses do not affect our opinion on the said financial statements of the company.
Responding to the auditor's note, BharatPe in the annual report said the governance review by the board had found that "there were instances of override of internal controls by certain erstwhile employees (in collusion with known and unknown third parties) in the vendor selection and onboarding, procurements, processing of bills for payment, charging personal expenses to the company and related party transactions."
It said it has filed a civil suit before the Delhi High Court against such erstwhile employees, Grover and third parties, seeking "the recovery of sums which were misappropriated".
The "claims amounting to Rs 88.7 crore relates to dishonest and fake transactions; payments for personal expenditure, reversal of GST Input Tax Credit and payment of penalty to GST Authorities in order to conceal the said Dishonest Transactions; Loss and injury caused to the brand, reputation and goodwill of the parent company," it said, adding the firm has also filed a criminal complaint with the Economic Offences Wing, Delhi against such erstwhile employees and third parties on the issue.