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November 05, 2019

8K Miles Software Auditors Deloitte Informs Government Of Possible Fraud At Company As Two Directors Exit Its Board


[ By Bobby Anthony ]

fraud

Deloitte Haskins & Sells, the auditors of 8K Miles Software, has announced that it has informed the central government about suspected fraud in the affairs of the cloud computing company.

The announcement came after a sudden and unexplained exit of two of the company’s directors, namely R S Ramani who has been indicted by the auditors as well as another director Gurumurthy Jayaraman, who resigned from the company’s board recently.

Incidentally, it may be recalled that 8K Miles is a cloud computing company and has been under regulatory radar and legal knots after it claimed that a broker forged the promoter’s signature to offload pledged shares, which triggered a police complaint as well as cases in various judicial fora.

Meanwhile, the auditors have also flagged alleged transactions between 8K Miles Media in which Ramani holds a 80% stake and 8K Miles Software.

The company’s board met, as it faced suspension from trading in stock exchanges recently, for non-completion of audit for FY19, to approve the previous fiscal’s accounts.

After the board meeting, the company made a filing to the stock exchanges that its auditors have flagged several transactions, right from inconsistencies between initial and subsequent bank statements provided for subsidiaries, inadequate details on receivables and payables balances, existence of probable related parties not disclosed previously, and lack of access to books of some subsidiaries.

However, auditors were unable to conclude on the validity of around Rs 378 crore of revenue recognised during the fiscal year, and could not check for the veracity of a consultancy charge of Rs 17 crore paid to a vendor.

It has emerged that 8K Miles has also not assessed and paid GST on such services. Also, during the year, the group capitalized around Rs 323 crore in costs towards intangible assets, for which no appropriate documentation was provided, its auditors Deloitte stated.

Responding to Deloitte’s qualifications in the audit report, 8K Miles Software said it has provided all information and resolutions to auditors with respect to the financial statements. “The management has made full inquiry into affairs of the business as a result of which, they firmly believe that there is a going concern assumption as there are requisite business, operations, customers, and employees,” the management noted.

The 8K Miles management also clarified that a forensic audit has cleared all allegations and there is no relationship between 8K Miles Media and itself, except for common promoter.

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