Auditor and financial advisory Deloitte has flagged sourcing from inappropriately approved vendors at fintech firm BharatPe. BharatPe presented the opinion of its statutory auditor in its latest annual report. BharatPe’s statutory auditor said the company’s internal control system for vendor selection was faulty. The auditor further said approval of invoices for the purchase of goods and services was not operating effectively, leading to procurements at inappropriately approved rates, news agency PTI reported.
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“The company’s internal control system for vendor selection was 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 a statutory auditors’ report. It added the company did not have an appropriate internal control system for recording the reversal of GST input credit and for penalty payment to GST authorities, which led to recording reversal of GST input credit and penalty payment without appropriate approvals.
BharatPe’s annual report stated, “there were no instances of fraud reported by auditors to the board of directors.” 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.
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BharatPe said in its response to the auditor’s note that there were incidents of “override of internal controls by certain erstwhile employees (in collusion with known and unknown third parties)” in vendor selection and onboarding, procurements, processing of bills of payment, charging personal expenses to the company and related party transactions.
BharatPe’s former MD and co-founder Ashneer Grover cited this report and traded guns at the media. He said BharatPe’s annual report clearly says there is no fraud. The former BharatPe MD and co-founder also said Deloitte was paid Rs 4 crore as audit fees, of which Rs 40 lakh were paid by him.
When users pointed out the preceding page of the recent BharatPe annual report, Grover said the role of the auditor should be checked on Google. He wrote: “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 neither presented to court or police. And question on it should be asked to them and not to him.”
He cited the “innocent until proven guilty” tenet of law but sidestepped concerns flagged by Deloitte. The corporate governance review by Alvarez and Marsal, Shardul Amarchand Mangaldas, and PwC led to Madhuri Jain Grover’s ouster. Madhuri Jain Grover served as the head of controls at BharatPe. Following Madhuri Jain Grover’s ouster, Grover resigned from the company and its board in March last year.
Grover has been accused of cheating and embezzlement of funds.
The former BharatPe MD, his wife Madhuri Jain Grover, and other family members created fake bills, enlisted fictitious vendors to provide services to the company, and overcharged the firm for recruitment, according to BharatPe’s police and court complaints.
The fintech firm has sought up to Rs 88.67 crore in damages relating to “dishonest and fake transactions; payments for personal expenditure, reversal of GST input tax credit and payment of GST authorities in order to conceal the said dishonest transactions, loss, and injury caused to the brand, reputation, and goodwill of the parent company”.
BharatPe has also filed a criminal complaint with the Delhi Economic Offences Wing (EOW) against the erstwhile employees in question and third parties on the issue.
(With PTI inputs)
