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Just when there looked to be some calm after the Vishal Sikka-Narayana Murthy storm, Infosys has been hit by turbulence again.
Just when there looked to be some calm after the Vishal Sikka-Narayana Murthy storm, Infosys has been hit by turbulence again.
An anonymous group of Infoscions calling themselves 'ethical employees' has alleged that the firm has been dressing up its books to show better revenue and profit numbers.
In a letter to the Infosys board and the US Securities Exchange Commission (SEC), they targetted CEO Salil Parekh with forcing the finance team to take a number of steps that go against standard accounting practices.
“We are Infosys employees and we have emails and voice recordings on these matters. We hope the board will conduct immediate investigation and take action,” they said.
They alleged irregularities in large deals like Verizon, ABN Amro and a joint venture in Japan, saying revenue recognition was not as per accounting standards. “Large deals have irregularities.
CEO is bypassing reviews and approvals and instructing sales not to send mails for approval… Several billion-dollar deals of last few quarters have nil margins. Please ask auditors to check deal proposals, margins and undisclosed upfront commitments made and revenue recognition. All information is not shared with auditors,” the employees wrote.
The letter also alleged that in the last quarter, they were asked not to fully recognise costs like visa costs, to improve profits. “We have voice recordings of these conversations. When auditor opposed, the issue was postponed.”
The letter also alleged how important metrics on large deals and other financial information is supressed as it will get the board’s attention. “CEO and CFO are asking us to show more profits in treasury by taking up risks and make changes to policies.
This will provide short term profits. They ask us not to make any key disclosures in 20F and annual reports and to share good and incomplete information with investors and analysts.
This is a regulatory issue. We have email and voice recordings and will share during investigation. Whoever disagrees is sidelined …In large finance team, important employees have left due to pressure to make deal look good,” they said.
When TOI reached out to Infosys, the company said the whistleblower complaint has been placed before the audit committee as per the company’s practice and will be dealt with in accordance with the company’s whistleblowers’ policy.
The letter from the anonymous employees to the board was dated September 20.
The letter also accused Parekh of making light of the board, saying some of the members understood little about operations.
Infosys has been under pressure to improve growth rates, without allowing margins to drop too much. It looked to be succeeding under Parekh, but the latest controversy will raise questions about that.
More recently, Infosys executive vice-president and deputy CFO Jayesh Sanghrajka resigned from the firm after a long innings.
Sanghrajka, who had been made interim CFO following CFO MD Ranganath's exit in November last year, has spent around 14 years in Infosys over two stints.