As the investigation by multiple agencies continues into the affairs and accounts of the scammy ILFS, shocking details of misreporting and manipulation of the audited financial statements are being revealed with each passing day. It starts with the fact, that while at the very inception it was reported that the total loans of ILFS are Rs.91000 crores, it is now reported that its total borrowings are estimated at Rs.136000 crores, with no guarantee of what the real figure of the loans is. We are not even sure of the exact number of subsidiaries and joint ventures under the ILFS umbrella, since it is very clear that what is being revealed is not what it is and that what has been concealed by the management, is the actual reality. It is also now known that ILFS raised huge loans through the subsidiary/JV route, since that helped it to divert funds and to keep the balance sheet of the parent company, looking clean and healthy.
But as the debt ballooned out of control, ILFS could no longer hide the misrepresented reality and its profit of Rs.142 crores in FY 2017, swung into a loss of Rs.1887 crores in FY 2018. With the accounts of ILFS and its subsidiaries under investigation by the likes of SFIO/RBI, the preliminary reports indicate large scale manipulation of financial statements. Its audited balance sheet as well as its profit and loss account, did not disclose the true state of its affairs and financial position. Since the investigation into ILFS is far from complete, all kinds of conflicting, but disturbing reports have been emerging about the state of its finances and affairs. While one report says that ILFS strangely under reported its assets by Rs.50000 crores, yet another says that its liabilities were under-reported by Rs.26000 crores. Its losses have certainly not been reported over the years. Its reported subsidiaries have shot up from 169 to 348 and there are chances that many more will emerge. In all this melee, the intergroup balances and investments remain a mystery.
While, the fraud word has not been used so far, in describing the scandal at ILFS, it is very likely that it soon will be. When you under report assets and liabilities, as also subsidiaries
and JVs and conceal the total figure of loans raised, that amounts to a fraudulent conduct and it is very likely that soon instances of misappropriation of funds and siphoning of resources will be revealed by the ongoing investigation, to call it a conventional crime of fraud and criminal breach of trust.
The manipulation of financial statements of ILFS and its subsidiaries has been rampant and extensively across the board. While the directors are clearly the interested parties who directly benefit from such cooking up of books of accounts, it raises very disturbing questions about the role of auditors in this giant story of misreporting and misrepresentation. Thus while due to such scammy financial statements, the directors were paid a remuneration of Rs.47 crores, even the auditors were sufficiently looked after and were paid a fees or
Rs.15.90 crores in FY 2017. The collusion between the two viz. directors and the auditors cannot be denied, and so is the reward for such misconduct and malpractices.
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