US regulator probes Wipro's audits [India Business] [Times of India]
(Times of India Via Acquire Media NewsEdge) BANGALORE: The US Securities and Exchange Commission (SEC) has launched a private investigation against Wipro to ascertain the independence of its auditor -- KPMG India -- and the appropriateness of certain accounting entries pertaining to exchange rate fluctuation and outstanding liability accounts.
The investigation is part of an enquiry that has been going on since 2010, when a junior level employee of Wipro was found to be embezzling company funds, engaging in a number of personal financial transactions of relatively small value (the 26-year-old employee committed suicide when the crime was discovered). It was also alleged that a junior member of KPMG India's audit team was assigned to the Wipro audit engagement.
"In January 2014, the staff of the SEC advised us that the SEC has issued a formal order directing private investigation in connection with this matter, which we believe to be a common step in the process in such matters. We continue to fully cooperate with the SEC's investigation. The outcome of the SEC's review of this matter is uncertain," Wipro said in an SEC filing on Tuesday.
Wipro, which is listed on the New York Stock Exchange (NYSE), said if the outcome of the investigation was adverse, it could have a material impact on the company. It could also face the risk of its financial statements being re-audited by a new independent public accounting firm, and a restatement of its accounts for some years.
The US market regulator's division of enforcement, which has issued the investigation order, conducts investigations into possible violations of the federal securities laws, and prosecutes the Commission's civil suits in the federal courts as well as its administrative proceedings.
The Wipro employee involved in embezzling funds was working in the finance department and was given powers to authorize payments. The embezzlement, disclosed in March 2010, happened between November 2006 and December 2009. Wipro's audit committee launched a probe following which there was an overhaul of the finance controller division.
A 2013 filing with the SEC said Wipro's audit committee and KPMG India conducted an investigation to ascertain if there were financial relationships, business transactions or loans that existed between any members of KPMG India's audit engagement team and had dealings with any Wipro employees that would compromise KPMG India's independence from Wipro. "KPMG India concluded that it did not lack independence with respect to Wipro. Based on its review of the facts from KMPG India's investigation and discussions with its external advisors, our audit committee concurred with KPMG India's conclusion," the filing said.
When TOI contacted KPMG, the company's spokesperson said, "We are not in a position to comment on issues pertaining to clients due to confidentiality obligations."
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