SEC asks Wipro to prove its auditor KPMG India's independence
May, 23rd 2011
US market regulator SEC has asked IT major Wipro to prove independence of its auditor KPMG India, failing which the company may have to appoint new auditors or get its business books audited again.
"We have received a voluntary document request from the SEC's Division of Enforcement. The document request includes, among other things, issues relating to auditor independence," Wipro said in a regulatory filing with the SEC.
In its filing dated April 20, Wipro said that it was cooperating with SEC's request.
When contacted, Wipro did not reply to queries related to latest status in the matter.
If the Securities and Exchange Commission (SEC) differs with the conclusions reached by KPMG and Wipro's Audit Committee about the independence of the auditor, it might require the company to "retain new auditors and have our financial statements for one or more years re-audited," the filing added.
The issue of KPMG's independence in auditing Wipro accounts came up after it was detected last year that a junior level employee of the company had indulged in embezzlement of the company's funds and the said staff member had engaged in personal financial transactions with a junior member of KPMG India's audit team, working on Wipro audit engagement.
However, the investigations by Wipro as well as KPMG India concluded that that issue did not impair the auditing major's independence with regard to its engagement with the IT firm, the company said.
The embezzlement, disclosed in March, 2010 for a period from November 2006 to December 2009, pursuant to which Wipro's Audit Committee conducted a probe.
"During the course of our investigation of this matter, our Audit Committee learned that this employee had engaged in a number of personal financial transactions, of relatively small value, with a junior member of KPMG India's audit team assigned to the Wipro audit engagement," Wipro said.
The auditing firm also conducted an internal probe to determine the scope of the problem and to determine whether its independence with respect to Wipro had been impaired.
"KPMG India subsequently determined that neither the audit engagement team member or any other member of the KPMG India audit team assigned to the Wipro audit engagement were involved in the acts of embezzlement," Wipro said.
"KPMG India concluded that it did not lack independence with respect to Wipro," the IT firm said, while adding that its Audit Committee also concurred with this conclusion.
The Wipro staffer found to have indulged in embezzlement was employed with its 'controllership' division in the finance department, which is responsible for maintaining financial books and has powers to authorise payments whenever needed.
The employee, who committed suicide, is believed to have embezzled about Rs 32 crore.