Amidst investigations launched by US Securities and Exchange Commission and Sebi, Infosys received yet another jolt after the Indian government asked the National Financial Reporting Authority (NFRA) to look into the alleged accounting irregularities in the wake of whistle-blower complaints.
NFRA is an independent regulator for the auditing profession and comes under the Ministry of Corporate Affairs.
On October 21, a whistle-blower group named “ethical employees” shot off letters to Infosys’ board and the SEC alleging that CEO Salil Parekh and CFO Nilanjan Roy were indulging in malpractices to boost company’s profits.
The whistle-blowers alleged that Parekh and Roy had asked executives not to disclose full details of US visa costs in an attempt to boost profits. Indian IT outsourcing firms have struggled in recent years following US President Donald Trump’s threats to cap H-1B visas, largely issued to IT professionals from South-Asian nations.
They also alleged that critical information was hidden from the auditors and the Infosys board. The whistle-blowers also claimed that revenue recognition of large contracts like Verizon and Intel and joint ventures in Japan, ABN Amro acquisition, were not done as per accounting standards.
Some reports also claim that the board was aware of these allegations, but did not act on them immediately.
On its part, Infosys on October 22, swung into action and asked its hired law firm Shardul Amarchand Mangaldas to conduct an independent investigation into the complaints.
To ensure an independent probe, chief executive Salil Parekh and chief financial officer Nilanjan Roy have been recused from this matter.
Infosys, in a statement said, the company is also facing a securities class action lawsuit filed against it in an US federal court based on the allegations in the anonymous complaints.
Sebi has already started its investigation into the matter and is also is trying to ascertain any insider trading happened.
Yesterday the Indian regulators had questioned the company’s delay in informing them about the irregularities.
In response, Infosys, in a statement today, said the disclosure was not made because the probe being conducted by its audit committee into the “generalised allegations” were in progress.
Of late, the company has the dubious distinction of facing maximum number of whistleblowers’ complaints. In 2016, they alleged that the $200-million acquisition of Israeli automation company Panaya in February 2015 was bought at an overvalued price and top executives including the then CEO Vishal Sikka had personal interests in the acquisition.
Sikka and some board members resigned following a prolonged fight with company’s founders including NR Narayana Murthy.
The Co-Founder had raised doubts about large financial payouts given to exiting senior employees, including Sikka and the then CFO Rajiv Bansal, which were being used as hush money to hide something.
Parekh was brought in as the chief in January 2018.