An internal audit committee of Infosys Ltd has concluded that whistleblower allegations about financial irregularities at the Bengaluru-based information technology company were substantially without merit.
The report of the audit committee comes at a time when the matter is still being investigated by the US Securities and Exchange Commission (SEC). Infosys maintained it continues to cooperate with SEC and Indian regulatory authorities.
The company's chairman Nandan Nilekani said on Friday: "We are comfortable that we have had a very thorough and comprehensive investigation, which will put us in good stead when we engage with them (SEC)."
The whistleblower allegations, which first became public on 22 October, revolve around anomalies in visa costs, large deals, reversal of certain provisions, and non-disclosure of key information, among others.
"The allegations regarding the visa costs are unsubstantiated. The costs incurred towards visas by the company are appropriately accounted for. The allegations regarding large deal approvals are unsubstantiated. Large deals under the investigation team's review were approved by the necessary stakeholders. In the case of one large deal, a post-facto approval was sought. The joint ventures were approved by the Board and the Audit Committee. No evidence was found suggesting CEO's involvement in bypassing the deal approval process or issuing any instructions in this concluded that no restatement of previously announced financial statements or other published financial information is warranted," the audit committee stated, according to excerpts made available by Infosys.
Infosys said in a statement the committee conducted a thorough investigation with the assistance of independent legal counsel Shardul Amarchand Mangaldas and Co., and PricewaterhouseCoopers Pvt. Ltd.
Audit committee chairperson D. Sundaram said: "The audit committee took the anonymous whistleblower complaints very seriously and commissioned a thorough investigation with the assistance of independent legal counsel. The audit committee determined that there was no evidence of any financial impropriety or executive misconduct."
"…CEO Salil Parekh and CFO Nilanjan Roy are strong custodians of the company's proud heritage. Salil has played a key role in reinvigorating the organization and driving momentum and the board is confident that he will continue to execute on the company's new strategic direction successfully," Nilekani added.
The allegations regarding revenue recognition of three large deals/joint ventures were also unsubstantiated, the report stated.
In the case of one large deal in relation to recognition of maintenance revenue, the investigation team has found that the decision to follow a percentage of completion cost method was neither discussed with the committee nor disclosed in the financial statements of the company.
To this, Infosys said it selected this method based on the nature of the contract and it was "in accordance with prescribed accounting standards and consistent with the company's accounting policy. Therefore, no specific disclosure was required to be made to the audit committee."
With reference to the non-accounting of certain provisions, it said: "They are insignificant and are neither qualitatively nor quantitatively material to the reported revenues or operating margin guidance for the three quarters ended September 30. The effect of this would have impacted revenue and operating margins for both FY19 and for half year ended September 30 by 0.02%-0.03%."