Deloitte flags sourcing from inappropriately approved vendors at BharatPe

Deloitte’s auditor flagged improperly authorized vendors and overpayments at BharatPe, with former managing director and co-founder Ashneer Grover accused of fraud and misappropriation of funds.

In its latest annual report, BharatPe provided the opinion of its statutory auditor who said that the company’s internal control system for selecting vendors as well as for approving invoices for purchases of goods and services was not working effectively, resulting in purchases at improperly approved prices.

Dedicating a page to the statutory auditors’ report, BharatPe’s annual report states in the next section that “there have been no cases of fraud reported by the auditors to the Board of Directors”.

Grover used this to attack the reportage, saying that no journalist had read BharatPe’s annual report which did not clearly write about any fraud.

“Ek bhi Journalist nebharatpeindia ki annual report for fiscal year 22 nahi padi – auditor ne likha hua hai “There are no cases of fraud reported by the auditors to the board.” @Deloitte is the auditor who paid Rs 4 crore audit fee (higher) than Rs 40 lakh I paid them as a doctor) and obviously got nothing,” Grover wrote on Twitter.

But when alerted to the previous page of the annual report, he launched a personal attack, adding that the auditor’s role should be Google.

Doosri baat – Jin forensic Audit ki aap baat kar rahe hoalvarezmarsal and PwC – unpebharatpeindia 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”. Forensic audit report [into allegations against Grover and his family] By Alvarez, Marsal and PwC, on which BharatPe had spent Rs 9 crore, it was disposed of and not brought to court or police. And the question about it is asked about them, not against him).

It then moved to an “innocent until proven guilty” law site but did not respond to the concerns Deloitte cited in the report.

BharatPe alleged in police and court complaints that Grover, his wife Madhuri Jain, and other family members created fake invoices, recruited bogus vendors to provide services to the company, and overcharged the company for employment. It is seeking damages of Rs 88.67 crore.

A review of corporate governance by Alvarez, Marsal, Shardul Amirchand Mangaldas and PricewaterhouseCoopers led to the ouster of Jain, who was the head of controls at Bharatby. Grover resigned from the company and its board of directors in March last year.

“The company’s internal control system for selecting vendors was not operating effectively, which led to the purchase of goods and services from authorized vendors at improperly and/or at improperly approved prices,” said the annual report, citing the report of the statutory auditors.

BharatPe’s “Internal Control System for Approval of Invoices for the Purchase of Goods and Services” was not functioning effectively, which led to other expenditures being recorded without receipt of goods and services and/or an increase in the actual quantity received, resulting in overpayments for such expenditures.

“The Company did not have a proper internal control system in place to record GST input reverse credit and penalty payment to GST authorities, which resulted in GST input reverse credit registration and penalty payment without proper approvals,” he said.

She added that the company “did not have adequate controls over period-end adjustments including relevant presentation and disclosure requirements,” adding that the auditors stated that they considered that these material weaknesses do not affect our opinion on the company’s aforementioned financial statements.

Responding to the auditor’s memorandum, BharatPe said in the annual report that the board’s governance review had found that “there are instances of override of internal controls by some ex-employees (in collusion with known and unknown third parties) in the selection and preparation of vendors, procurement, and invoicing Payment, charging of personal expenses to the company and transactions with related parties.

It said it had filed a civil case in the Delhi High Court against these former employees, Grover and third parties, seeking “recovery of sums embezzled”.

“The claims of Rs 88.7 crore relate to dishonest and fake transactions; payments of personal expenses, reversal of GST input tax credit and payment of fine to GST authorities in order to conceal the said dishonest transactions; loss and injury to the brand, reputation and goodwill of the parent company,” adding that The company has also filed a criminal complaint with the Delhi Economic Crimes Wing against these former employees and third parties in connection with the case.