Auditors suspect fraud in 8K Miles; Exit board of 2 directors
CHENNAI: Deloitte Haskins&Sells, auditors 8K Miles Software said on Saturday it has informed the central government about suspicions 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 since the company claimed that a broker forged the promoter's signature to download promised actions that trigger a police report and cases in various judicial forums.
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 the suspension of the negotiation of the courses as of today, due to the breach of the audit for fiscal year 19, the company's board met on Saturday to approve the previous fiscal 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 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.
8K Miles has not evaluated or paid GST for such services either. In addition, during the year, the group capitalized around Rs 323 crore in costs towards intangible assets, for which adequate documentation was not provided. Management has not provided us with its assessment of any impairment of the carrying amount of said goodwill and other intangible assets, Deloitte added.
Inquiries sent to Suresh Venkatachari, founder and CEO of 8K Miles, Software for comments were not answered until the time of publication.
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.
Revenue of 8K Miles Soft recorded Rs 13 million in the quarter ended March 2019, increasing 4% compared to the December quarter. Revenue fell 20% compared to Rs 16. Rs.3 million obtained in the same period last year. The quarterly profit stood at 1.5 million rupees compared to 2 million rupees in March 2018.
The company's scrip has fallen almost 90% in value in the last two years. By trading at almost 1,000 in December 2017, the shares were valued at 43.50 on Sunday.
The actions of 8K Miles have been in focus for all the wrong reasons in the last year. 8K Miles Media Private Limited, a private company where former 8K financial director Miles Software R S Ramani has more than 80% stake, has been charged with forgery by his audit firm.
Management clarified that a forensic audit has cleared all accusations and that there is no relationship between 8K Miles Media and itself, except the common promoter.