PROBE COMMITTEE TO SUBMIT REPORT BY MONTH-END
EARLY investigations into the embezzlement reported at Wipro, earlier this year, hint at the involvement of multiple officials and units within the company’s financial department, people familiar with the ongoing probe told ET. Last week, Wipro said it will file its annual report with the US Securities and Exchange Commission for the yearended March 2010 more than a month after the scheduled September 30 deadline, as it awaits the investigations to be completed.
Audit firm Ernst & Young, apart from an internal probe committee led by Narayanan Vaghul, former chairman of ICICI and an independent director with the country’s third-biggest software exporter will submit their reports to the company’s board later this month, according to persons with knowledge of the developments.
“The embezzlement has been happening over three years. It cannot be carried out in isolation. The objective of investigations is to identify the process improvements and even fix accountability,” one of the persons told ET, requesting anonymity. He added that it was still too early to draw conclusions, since the investigation is expected to be completed by October-end only.
The fraud came to light in December last year after a banker to the firm alerted Wipro about an overdraft. An employee working with Wipro’s ‘controllership’ division, within the finance department, had embezzled about $4 million by exploiting the exclusivity of access to the company’s banking accounts. Wipro declined to offer any comments, as the company is in a silent period ahead of its second quarter results later this month. An Ernst & Young spokeswoman did not respond to a query sent by ET.
As reported by ET in February this year, a Wipro staff embezzled crores of rupees over the past three years, sending the country’s thirdlargest software exporter scrambling to tighten internal controls in the finance division, where the incident took place. The employee had been working with the company for the past three years in the ‘controllership’ division, within the finance department. This cell is responsible for keeping the company’s financial books and also has powers to authorise payments whenever needed. The employee siphoned off the company’s money to his personal savings accounts in multiple transactions, worth anywhere between 1 lakh and 1.2 crore, and used the money to acquire jewellery, apart from making other investments, including buying land.
Apart from investigating how the processes were tweaked to carry out the embezzlement, E&Y, along with the internal auditors, is also examining if there were more departments and people involved in the incident. For instance, while the controller ship unit, where the embezzlement happened, is responsible for authorising payments, such requests are processed by Wipro’s payments-processing department called Wividus.
However, Suresh C Senapaty, CFO of Wipro, had denied involvement of more than one Wipro staffer in this embezzlement. “Our investigations have revealed that only this employee was involved, and nobody else in the team had any clue,” Mr Senapaty had said. Wipro has since disbanded the controllership unit and even introduced several changes.
“Already, no cheque payments are being made by Wipro to any vendor, especially after the embezzlement was reported. There could be more changes after the recommendations are accepted,” another person familiar with the developments told ET.
Among other changes being examined is the rotation of staff handling sensitive functions within the finance department.
In a statement issued last week, Wipro said it has already recovered all of the embezzled money.
“Wipro, together with its audit committee, conducted an investigation to determine, among other things, the materiality of the amounts embezzled and to assess the design and implementation of internal control processes. Based on its review of the facts discovered during its investigation, Wipro believes that the amounts embezzled were not material,” the company said in a statement issued on October 2.
Wipro brought Ernst & Young to minutely verify the audited accounts that were earlier certified by the company’s statutory auditor BSR — an audit arm of KPMG. Both E&Y and KPMG are part of the Big Four accounting firms that typically audit large companies such as Wipro.
Among other measures being considered, employees working in sensitive functions within the finance department may be rotated more frequently. Currently, employees in such functions spend around three years before a transfer. Going forward, Wipro also plans to make it mandatory for employees working in the finance division and elsewhere to sign an undertaking about sharing of passwords and any unauthorised transactions.
CHECKS & BALANCES
Wipro said last week, it has already recovered all of the embezzled money
As a precautionary measure, employees working in sensitive functions within finance dept may be rotated more frequently
Wipro also plans to make it mandatory for staff working in finance dept to sign an undertaking about sharing of passwords and any unauthorised transactions.
Source: The Economic Times; dt. 05.10.10
