Audit Committee of Infosys Finds No Proof of Financial Impropriety

Infosys Ltd, India’s No. 2 IT services exporter, announced on Friday that its audit committee observed no proof of financial error or executive wrongdoing.

A letter claimed to have been addressed by some employees of the firm in October, stated Chief Executive Officer Salil Parekh, asked them and others to avoid approvals for great deals fearing an adverse impact on shares from decreased profit.

The Audit Committee led thorough research with the help of independent legal adviser Shardul Amarchand Mangaldas & Co. and PricewaterhouseCoopers Private Ltd. The judgments of the investigation were approved by the Board of Directors of the Company.

The investigation team accompanied 128 discussions with 77 persons, including important company personnel related to the charges, and analyzed over 2.1 lakh documents from automated sources and imaged devices, Infosys told in a regulatory filing. The team also explained that previous financial statements or business information issued by Infosys do not have to be adjusted.

The Audit Committee decided that no restatement of earlier announced financial statements or other issued financial information is approved. 

Infosys’ Audit Committee Chairperson, D. Sundaram, said, “The Audit Committee took the unnamed whistleblower accusations very seriously and ordered a thorough investigation with the help of an independent legal adviser. The Audit Committee concluded that there was no sign of any financial blunder or executive mischief.”

The research team conducted a comprehensive and far-reaching analysis which included:

1. 128 interviews with 77 personalities including appropriate Company personnel involved with or named in the allegations
2. Recognizing 46 custodians for the collection of important documents and electronic data
3. Analyzing over 210,000 documents from automated sources and imaged media, with over 8 terabytes of automated data being concocted.

The research team’s review of data about the allegations contained the period January 1, 2018, to September 30, 2019. No boundaries or restrictions were placed on the research team’s access to data, and the Company, its managers and employees participated fully.

Additionally, Infosys discussed with its independent internal accountants Ernst & Young on the matter of great deals and treasury related means. Their conclusions were also shared with the investigation unit.

Key Verdicts on Company matters:

Based on the interviews carried and forensics analysis was undertaken, the investigation concludes:

1. The charges regarding treasury policy are false. The Company rigorously complied with its treasury method, without any resistance or stress from either the CEO or CFO.
2. The accusations regarding the visa prices are unsubstantiated. The costs acquired towards visas by the Company are properly accounted for.
3. The charges regarding large deal permissions are unsubstantiated. Large deals under the research team’s review were signed by important stakeholders. In the case of one big deal, a post-facto consent was sought. The joint ventures were authorized by the Board and the Audit Committee. No proof was found advising the CEO’s involvement in avoiding the deal approval process or publishing any instructions in this regard.
4. The charges regarding revenue realization of three large deals/ JVs are unsupported.
5. In the case of one large deal: In connection to the recognition of maintenance means, the investigation team has not come across any proof to suggest that the judgment to reflect a Percentage of Completion (or”POC”) cost process for recognition of application sustaining revenue was forced. The company used its judgment in choosing to follow a POC cost way. The selection of this process and the reasons for accepting the same were neither talked with the Audit Committee nor disclosed in the financial records of the Company. Having studied the investigation found, the Company records that it has historically used the straight-line method (“SLM”) of revenue appreciation for a substantial majority of its fixed-price subsistence contracts.

Essential verdicts on personal matters concerning the CEO

1. The CEO has escorted a majority of the council and board meetings during the time of review. The company perceives that page 110 of the Annual Report for the year completed March 31, 2019 sets forth the number of conferences attended.
2. The CEO’s kids attended two tennis competitions when the CEO was part of the firm delegation. These two extra tickets were paid for by the CEO personally. No customers were refused seats at the event due to their appearance.
3. There is no proof to imply that the CEO proposed funding to any international universities or used the company’s contacts for securing his child’s selection. The academic relations organization had planned to schedule meetings for the CEO, which were withdrawn on the CEO’s request.

Former CEO Vishal Sikka resigned from Infosys in 2017 after a whistleblower accusation. Parekh, who held the controls as CEO last January, had set out a roadmap to improve the fortunes of Infosys as the IT sector battled a slowdown in spending from important clients.