Deloitte flags BharatPe's vendor approval process

Deloitte, the auditor and financial advisory firm, has raised concerns about BharatPe, a fintech company, regarding its sourcing practices from improperly approved vendors. In its annual report, BharatPe's statutory auditor stated that the company's internal control system for vendor selection was flawed, resulting in the procurement of goods and services from vendors who were not appropriately approved or at approved rates. The auditor also noted deficiencies in the company's internal control system for recording the reversal of GST input credit and penalty payments to GST authorities, which were made without proper approvals.

While the annual report stated that no instances of fraud were reported by the auditors to the board of directors, it acknowledged that there were material weaknesses in the company's controls over period end adjustments and related presentation and disclosure requirements. The auditors, however, stated that these weaknesses did not affect their opinion on the financial statements of the company.

In response to the auditor's note, BharatPe acknowledged incidents of internal control override by former employees, who colluded with third parties. These incidents involved vendor selection and onboarding, procurement, bill processing, personal expenses charged to the company, and related party transactions.

Former MD and co-founder of BharatPe, Ashneer Grover, defended the company by referring to the annual report's statement that no fraud had been reported. Grover also criticized Deloitte, suggesting that the role of the auditor should be researched on Google. He mentioned that a forensic audit conducted by Alvarez and Marsal and PwC, which cost BharatPe Rs 9 crore, was disregarded and not presented to the court or police. Grover argued that questions regarding the forensic audit should be directed to those firms rather than to him.

Although Grover cited the principle of "innocent until proven guilty" in his defense, he avoided addressing the concerns raised by Deloitte. The corporate governance review conducted by Alvarez and Marsal, Shardul Amarchand Mangaldas, and PwC led to the removal of Madhuri Jain Grover, who served as the head of controls at BharatPe. Following her ouster, Ashneer Grover resigned from the company and its board.

Grover and his wife, Madhuri Jain Grover, along with other family members, have been accused of cheating and embezzlement of funds. BharatPe has filed a criminal complaint with the Delhi Economic Offences Wing against the former employees and third parties involved, seeking damages of up to Rs 88.67 crore for dishonest transactions, fake transactions, misuse of funds, and damage to the company's brand, reputation, and goodwill.