Audit Farce – I: How Companies Can Cook Their Books
Auditors are suddenly in the news. They are either being investigated or, scared of such actions, they are jumping the ship even from well-known companies. In reality, what is an audit? An auditor goes through the books and other supporting records I present to him about a narrative of all financial transactions during the period. So, his work is primarily based on what I show him. I could...
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  • Nifty, Sensex Headed Lower – Weekly closing report
    We had mentioned in last week’s closing report that Nifty, Sensex were still under pressure. The major indices of the Indian stock markets were volatile and ended with losses over previous Friday’s close. The trends of the major indices in the course of the week’s trading are given in the table below:
     
     
    On Monday, the major indices of the Indian stock markets were volatile and closed with gains over Friday’s close. On the NSE, there were 590 advances, 1,187 declines and 326 unchanged. Sensex opened above the 39,000 mark on Monday, advancing on the back of gain made by Infosys over its strong quarterly earnings. The IT major posted better-than-expected 5.3% rise in its June quarter net profit, and raised revenue growth forecast for the current fiscal. 
     
    Lower prices of key transportation fuels along with manufactured items eased India's annual rate of inflation based on wholesale prices to 2.02% in June from 2.45% in May, official data showed on Monday. 
     
    After the Punjab National Bank, Allahabad Bank on Saturday informed the stock exchanges that it has been defrauded by Bhushan Power & Steel Ltd (BPSL) to the tune of Rs1,774.82 crore. The Allahabad Bank has already made provisions amounting to Rs900.20 crore against the exposure in BPSL. Dewan Housing Finance Limited reported a net loss of Rs2,223 crore for the fourth quarter (Q4) of 2018-19 over the weekend. Besides, DHFL said it had defaulted on interest payments to the tune of Rs48 crore on non-convertible debentures (NCDs), which were due on July 6 and 8. 
     
    On Tuesday, the major indices opened in the green. On the NSE, there were 853 advances, 912 declines and 329 unchanged. Gross written premium collection of General insurance companies grew 9.91% year-on-year (YoY) in the June quarter.
     
    Data from Insurance Regulatory and Development Authority of India (IRDAI) showed that the standalone health insurance companies had a higher rate of growth at 41.57% YoY growth. Life insurers first year premiums grew 65% YoY of Rs60,637 crore for the quarter ended June 30. 
     
    Hero Electric plans to expand its capacity from 100,000 units per annum at present to 500,000 units as the demand for electric two-wheelers is expected to rise significantly in the coming years. The company will also invest in increasing localization of components and establish an ecosystem for manufacturing its e-scooters, enthused by the push towards electric mobility by the Union government. Drug maker Cipla entered into an agreement with Shanghai-based Jiangsu Acebright Pharmaceuticals to set-up a joint venture company in the People’s Republic of China for local manufacture of respiratory products. As per the agreement, the JV will become a subsidiary of Cipla. Cipla's wholly-owned subsidiary Cipla EU will hold 80% stake and Acebright will retain the balance for a combined investment of $30 million. The stock price rose 0.63%.
     
    On Wednesday, the major indices closed with gains. On the NSE, there were 849 advances, 897 declines and 352 unchanged. Larsen & Toubro Infotech (LTI), the IT services arm of engineering and construction conglomerate Larsen & Toubro (L&T) Ltd., has signed a definitive agreement to acquire Bengaluru-based Artificial Intelligence (AI) and advanced analytics firm Lymbyc for an enterprise value of Rs38 crore.
     
    Multi Commodity Exchange of India (MCX) reported a 496% increase in its net profit to Rs43.70 crore for the first quarter (Q1) of 2019-20. Besides, MCX's total income increased by 30% to Rs110.84 crore. Larsen & Toubro (L&T) said its arm L&T Construction-led joint venture has bagged contract for desalination plant from Gujarat Industrial Development Corporation (GIDC). DCB Bank reported a disastrous June quarter performance. It reported a net profit growth of 15.7%, which missed the analyst’s estimates. USFDA issued a warning letter against Strides Pharma’s Puducherry formulation plant pointing out significant violations of current good manufacturing practice (CGMP), including data integrity lapses.
     
    On Thursday, the major indices suffered a correction. On the NSE, there were 453 advances, 1,301 declines and 341 unchanged. Reliance Brands completed acquisition of 100% stake in British toy retailer Hamleys for GBP67.96 million (about Rs620 crore) in an all-cash deal from Hong Kong-based C.banner International.
     
    Private-lender Yes Bank hit its lowest level in 52 weeks after it fell 12.8% on Thursday. Investors distanced themselves from Yes Bank counter after the bank reported a 91% fall in its profit at Rs113.76 crore, down from Rs1,260.36 in the comparable period last year. The amount that a company sets aside for a known liability or “provisioning” in banking parlance surged to Rs1,784.11 crore from Rs625.65 crore in the June quarter last year. Allahabad Bank has reported about being defrauded for the second time in just a week. After Bhushan Power and Steel, SEL Manufacturing Ltd. (SELM) has defrauded the bank of Rs688.27 crore. IT consulting firm Mindtree reported Rs93 crore net profit for the first quarter of fiscal 2019-20 against Rs158 crore in the same period a year ago, which is a 41% annual decline. 
     
    On Friday, the major indices suffered a deep correction. On the NSE, there were 425 advances, 1,347 declines and 323 unchanged. As the government swept aside any scope of revoking or tweaking the tax on "super-rich" adversely affecting a chunk of FPIs, a major driver of Indian stock market, Sensex on Friday slumped over 560 points. FPIs have pulled out over Rs5,000 crore in the month of July till date, the highest outflow markets have seen in 2019, in reaction to the Budget tabled on July 5.
     
    General insurer ICICI Lombard General Insurance reported a 7.10% year-on-year (YoY) rise in its net profit for the quarter ended June 2019 (Q1FY20). Gross Direct Premium Income (GDPI) of the company declined 7.60% YoY to Rs3,487 crore in Q1FY20. 
     
    Shares of Biocon dropped 8.17% on the BSE after rival Amgen and Allergan launched a biosimilar to cancer drug Herceptin in the US. Amgen-Allergan duo's Kanjinti was approved by USFDA in June this year for all indications of Herceptin such as the treatment of HER2-overexpressing adjuvant and metastatic breast cancer and HER2-overexpressing metastatic gastric cancer.
     
    Prestige Group is close to signing a joint development agreement for two office projects in Mumbai, spanning 4 million sq. ft, to mark its entry into the city’s lucrative commercial real estate market, according to three people with direct knowledge of the matter.
     
    The Competition Commission of India (CCI) has given its approval to Nippon Life Insurance to acquire up to 75% stake in Reliance Nippon Asset Management. Reliance Capital also added that it will receive the proceeds of about Rs6,000 crore through sale of its shareholding to Nippon Life Insurance at Rs230 a share, and the simultaneous Offer For Sale (OFS) to other financial investors.
     
    An independent review of embattled IndiGo’s (InterGlobe Aviation) transactions has found the airlines’ dealing to be compliant with all necessary norms and practices, Business Standard reported. The report notes that all related-party transactions were ‘placed before the audit committee for review and approved’ and that none of the transactions was in ‘conflict with the interest of the company’.
     
    The review concluded that ‘all such transactions since its public listing were done at arm’s length, approved by the audit committee’, but also noted that permission from the audit committee in some instances was granted after the transactions were already executed, the paper added.
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