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Scam-Hit Ricoh India Runs Into Audit Trouble Again
By Soumeet Sarkar.
The falsification of accounts at Ricoh India Ltd. cost the company Rs 1,118 crore in the financial year-ended March 31, 2016 (FY16). The company had earlier estimated the loss at Rs 1,123 crore.
In financial year 2015-16, the company recorded an exceptional loss of Rs 683 crore, which included bad and doubtful debts, unsupported adjustments and incorrect profit recognition resulting into higher profit and inadequate accounting of balance sheet items.
According to Ricoh India’s stock exchange filing, of the total exceptional item, a loss of Rs 313 crore pertains to financial year 2015-16, while Rs 174 crore was recorded in the prior years. It could not allocate a loss of Rs 196 crore, 28 percent of the total exceptional loss, and hence adjusted the same in 2016.
Of the Rs 1,118 crore loss recorded in FY16, a normalised loss of Rs 435 crore was on account of a 40 percent fall in total income, a 4.5 times jump in other expenses, and a 61 percent rise in interest expense.Post the the audits conducted by BSR & Co., the statutory auditors of Ricoh India, it was concluded that the revenue and cost were overstated by Rs 1,304.8 crore and Rs 1,105.4 crore respectively since the inception of business with identified suspected parties.
Exactly six months ago, the company had made a delayed disclosure of its quarterly earnings for the quarter-ended September 30, 2015 and the company’s auditor said its books and financial statements did not reflect the true state of affairs.
The audit uncertainties persist as audit firm BSR has issued, in its audit report for FY16, a ‘disclaimer opinion’ on the financials – indicating that it was unable to obtain sufficient evidence during the audit due to improper and incomplete documentation.
For most of the documents, originals were not available and hence we had to carry out audit procedures on photo copies of those documents, to the extent made available to us. In relation to items of financial results, we were not able to complete our audit procedures due to non-availability of required information / documentation / satisfactory explanations.
BSR audit report
During the audit, BSR was not provided documentation for inventories worth Rs 133.7 crore, similarly the auditor was not provided any documentation related to receivables for machines given on lease. The auditor was also not able to complete balance confirmation of the debtors and creditors.The financials for year ended 2016 are considered as true and fair by the current directors of the company and not the statutory auditors. The directors of the company also believe that no further cost or liability is expected to arise pertaining to the fraud as they have put in place various mechanisms to prevent any recurrence of any such incidents or falsification.
Over the last one year Ricoh India has delayed quarterly filings and its auditors have red-flagged several accounting irregularities, leading to a forensic audit, the suspension of top officials and a police complaint lodged by Ricoh India against its own officials.
Ricoh India had failed to file its financial results for three quarters starting October 2015 to June 2016. The lack of financial results resulted in the company’s stock being moved to the ‘Z’ category on the Bombay Stock Exchange – a category in which settlement takes place on a trade-to-trade basis.
In October 2016, the company received a much-needed capital infusion of Rs 1,123 crore from its Japanese promoter, NRG Group, that helped wipe out losses incurred due to the fraud. This capital infusion could not be incorporated into the earnings for the year-ended March and will now appear in the earnings for the quarter-ended June 2016 or September 2016.
Ricoh India in its media statement said that the promoter won’t be infusing any more capital in the company and capital infusion of Rs 1,123 crore will be used repay debt and reduce the interest burden which will support in the recovery and business stability of the company. Further the company is also in process to complete its other quarterly filings.
Ricoh India statement
Currently the company is working to complete all its necessary filings to resume trading. Ricoh India is now working to file the financial results for the quarter ended June 30, 2016 and September 30, 2016, expeditiously. This will enable the company to meet the remaining reporting obligations to BSE and all stakeholders. As soon as these are completed, the company will initiate the process to enable share trading to resume .
http://www.bloombergquint.com/business/2016/11/18/fraud-costs-ricoh-india-rs-1118-crore-in-last-financial-year
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