Deloitte Raises Concerns About Inappropriately Approved Vendor Sourcing at BharatPe
Auditor Deloitte has raised concerns over the approval of vendors and excessive payments at BharatPe, where its former MD and co-founder Ashneer Grover faces allegations of cheating and embezzlement.
According to BharatPe's latest annual report, the company's statutory auditor stated that its internal control system for vendor selection and invoice approval was not operating effectively, leading to procurements at inappropriately approved prices.
In response, Grover used this information to criticise media coverage, claiming that journalists had not read BharatPe's annual report, which clearly stated the absence of fraud.
He took to Twitter and wrote (translated in English), “India's business journalists are not just sold out - they are also lazy. They sell gossip. To get paid with WhatsApp, they will print anything. Not even a single journalist read @bharatpeindia’s annual FY22 report – the auditor clearly wrote ‘NO instances of FRAUD reported by Auditors to the Board of Directors. @Deloitte is the auditor who was paid Rs 4 crore audit fees (up from Rs 40 lakh I paid them as MD) and clearly found NOTHING."
Grover also launched a personal attack when it was pointed out that the preceding page of the annual report contradicted his claims. He suggested that people should research the role of the auditor themselves.
"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 the question on it should be asked to them and not to him).
While he referred to the presumption of innocence, Grover did not address the concerns raised by Deloitte in their report.
BharatPe, in its police and court complaints, alleged that Grover, his wife Madhuri Jain, and other family members engaged in fraudulent activities, including creating fake bills, enlisting fictitious vendors, and overcharging the company. The company is seeking damages of up to Rs 88.67 crore.
The corporate governance review conducted by Alvarez and Marsal, Shardul Amerchand Mangaldas, and PwC resulted in Jain's removal as head of controls at BharatPe. Grover resigned from the company and its board in March of the previous year.
The annual report of BharatPe acknowledged the auditor's findings, stating, "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 report also mentioned that the company lacked adequate controls over the reversal of Goods and Services Tax (GST) input credit and the payment of penalties to GST authorities. It further noted deficiencies in period-end adjustments and related presentation and disclosure requirements. However, the auditors clarified that these material weaknesses did not affect their opinion on the financial statements of the company.
BharatPe, in its annual report, responded to the auditor's note by stating that their governance review had uncovered instances of former employees overriding internal controls in vendor selection, onboarding, procurement, bill processing, personal expense charging, and related party transactions.
The company filed a civil suit against these individuals, Grover, and third parties, seeking the recovery of misappropriated sums. Additionally, they lodged a criminal complaint with the Economic Offences Wing against the former employees and third parties involved in the matter, claiming damages related to dishonest and fake transactions, reversal of GST input tax credit, penalty payments, and harm to the company's brand, reputation, and goodwill.
