Auditors suspect fraud in 8K Miles
In Sudden Exit, Two Directors Resign From Board
Sindhu.Hariharan@timesgroup.com
Chennai:4.11.2019
Deloitte Haskins & Sells, auditors of 8K Miles Software, said on Saturday it has informed the central government about suspected fraud in the affairs of the cloud computing company.
Also, in a sudden exit, two directors, promoter director R S Ramani, (who has been indicted by the auditors) and Gurumurthy Jayaraman resigned from the company’s board with immediate effect on Saturday. Though the resignations were accepted, reasons for their exit could not be known.
8K Miles is a cloud computing company and has been under regulatory radar and legal knots as the company claimed a broker forged promoter’s signature to offload pledged shares triggering a police complaint and cases in various judicial fora.
Transactions between 8K Miles Media, in which Ramani holds 80% stake, and 8K Miles Software have also been rebuked by the auditors.
As it faced suspension from trading in bourses from today, for non-completion of audit for FY19, the company’s board met on Saturday to approve the previous fiscal’s accounts.
In a filing to the BSE after the board meeting, the company said its auditors have qualified 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 ₹378 crore of revenue recognised during the fiscal year, and could not check for the veracity of a consultancy charge of ₹17 crore paid to a vendor.
8K Miles has also not assessed and paid GST on such services. Further, during the year, the group capitalised around ₹323 crore in costs towards intangible assets, for which no appropriate documentation was provided. “The management has not provided us with their assessment of any impairment to the carrying value of such goodwill and other intangible assets,” Deloitte added.
Queries sent to Suresh Venkatachari, founder and CEO of 8K Miles, Software for comments did not elicit response till the time of going to press.
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 company’s scrip has crashed almost 90% in value in the past two years. From trading at almost 1,000 in December 2017, the shares were valued at 43.50 on Sunday.
The 8K Miles stock has been in focus for all the wrong reasons in the past year. 8K Miles Media Private Limited, a privately held company where 8K Miles Software’s former CFO R S Ramani holds over 80% stake, has been accused of forgery by its audit firm.
The management clarified that a forensic audit has cleared all allegations and there is no relationship between 8K Miles Media and itself, except for common promoter.
In Sudden Exit, Two Directors Resign From Board
Sindhu.Hariharan@timesgroup.com
Chennai:4.11.2019
Deloitte Haskins & Sells, auditors of 8K Miles Software, said on Saturday it has informed the central government about suspected fraud in the affairs of the cloud computing company.
Also, in a sudden exit, two directors, promoter director R S Ramani, (who has been indicted by the auditors) and Gurumurthy Jayaraman resigned from the company’s board with immediate effect on Saturday. Though the resignations were accepted, reasons for their exit could not be known.
8K Miles is a cloud computing company and has been under regulatory radar and legal knots as the company claimed a broker forged promoter’s signature to offload pledged shares triggering a police complaint and cases in various judicial fora.
Transactions between 8K Miles Media, in which Ramani holds 80% stake, and 8K Miles Software have also been rebuked by the auditors.
As it faced suspension from trading in bourses from today, for non-completion of audit for FY19, the company’s board met on Saturday to approve the previous fiscal’s accounts.
In a filing to the BSE after the board meeting, the company said its auditors have qualified 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 ₹378 crore of revenue recognised during the fiscal year, and could not check for the veracity of a consultancy charge of ₹17 crore paid to a vendor.
8K Miles has also not assessed and paid GST on such services. Further, during the year, the group capitalised around ₹323 crore in costs towards intangible assets, for which no appropriate documentation was provided. “The management has not provided us with their assessment of any impairment to the carrying value of such goodwill and other intangible assets,” Deloitte added.
Queries sent to Suresh Venkatachari, founder and CEO of 8K Miles, Software for comments did not elicit response till the time of going to press.
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 company’s scrip has crashed almost 90% in value in the past two years. From trading at almost 1,000 in December 2017, the shares were valued at 43.50 on Sunday.
The 8K Miles stock has been in focus for all the wrong reasons in the past year. 8K Miles Media Private Limited, a privately held company where 8K Miles Software’s former CFO R S Ramani holds over 80% stake, has been accused of forgery by its audit firm.
The management 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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