Chennai: Overloading of trucks by individual operators is common in India. But overloading of company''s account books with fishy numbers?
At SembCorp Logistics India, under the watchful eyes of PricewaterhouseCoopers India and KPMG Consulting, Singapore, the company''s external and internal auditors, respectively, accounts have been cooked up Enron-like fashion.
The city-based SembCorp Logistics India is a wholly owned subsidiary of Singapore company SembCorp Logistics (SembLog). Another group company is Fracht Forwarding & Travels, a freight forwarding company. SembCorp Logistics has also promoted a logistics joint venture Ceylinco SembCorp Integrated Logistics, Sri Lanka.
The Singapore company has uncovered accounting anomalies after internal checks on its own and has decided to take legal recourse against the accounting firms as they failed to detect this for several years.
In India the company has hired Ernst & Young in the place of PricewaterhouseCoopers India while dispensing with the internal audit services of KPMG Consulting. KPMG Consulting audits the parent company. Sources say KPMG Consulting became the internal auditors after SembLog acquired full control of the company from Shriram group the erstwhile joint venture partner.
In 2001, after the exit of the management team at SembCorp Logistics India, the Singapore company sent Cheng Kong Meng as the Indian company''s managing director. The hole in the number game came out when another Singaporean was sent as deputy managing director in 2003. It was he who found out some irregularities and sounded out the parent company SembLog.
Consequently, SembLog hired Deloitte & Touche, accountants and lawyers from Drew & Napier LLC, to conduct an independent investigation. According to the Deloitte & Touche report, the Indian company''s books show inflated revenue and profit figures for 2000 to 2002 as well as 1Q 2003.
Deloitte & Touche has found profit overstatements amounting to Rs 388 million (S$15.5 million) resulting from the creation of fictitious revenues and expenses for FY2000 to FY2002. Of this, Rs 270 million (S$10.8 million) was overstated in 2002, Rs 87 million (S$3.5 million) in 2001 and Rs 31 million (S$1.2 million) for 2000. For 1Q 2003 the figure is Rs.32.5 million (S$1.3 million).
In addition, the investigation also revealed that certain expenses estimated to be about Rs 75 million (S$3 million) might have been incorrectly classified as fixed assets prior to 2002. This has forced SembLog to revise its 2002 turnover figure S$428.9 million from S$447.6 million.
The investigating accountants ruled out misappropriation of cash by the officials of the Indian arm. While contemplating legal action against six officials of the Indian company, SembLog is silent on the possible reason for dismissed officials resorting to such overloading of figures. The parent company did not respond to a questionnaire sent asking for clarifications and comments.
Today SembCorp Logistics, the Indian company, is managed by an eight member team from Singapore headed by Nelson Cho, managing director and assisted by Edwin See, deputy managing director. According to the company a new web-based financial reporting system is being implemented there for better control and visibility.
The new team has also taken steps to streamline operations and consolidate distribution centres to reduce operating costs. The company serves around 50 multinational companies in the country connecting around 550 cities.