NEW DELHI: The government and the country's accounting regulator
will initiate separate probes into the role of Reebok India's auditors,
widening the scope of investigation in the alleged Rs 870-crore fraud.
"The
Serious Fraud Investigation Office (SFIO) will look into the role of
auditors as it probes all angles of the case,'' said corporate affairs
minister Veerappa Moily.
The corporate affairs ministry has
already tasked SFIO, the country's fraud detection agency, with the
responsibility of scrutinising Reebok India's accounts and probing the
alleged irregularities in its books.
Institute of Chartered
Accountants of India (ICAI), the body that regulates auditors and
accountants in the country, said it will independently probe whether
there were instances of professional negligence by chartered
accountants.
Audit firm N Narasimhan & Co is the auditor of
Reebok India. A senior official of the firm did not respond to ET's
SMSes and phone calls on the issue.
"We are yet to initiate an
investigation but prima facie there seems to be critical lapses in the
way the company's auditors functioned," said ICAI president, Jaideep N
Shah. "Without the knowledge of auditors, both internal and statutory,
such huge misappropriation of funds is impossible, " he said.
While
the institute has written to Reebok India for more clarity regarding
negligence by professional chartered accountants and the charges leveled
against the ex-top officials, they haven't yet received any
communication from the sports goods maker.
"Reebok India needs
to provide details of their auditors. Being a CA institute, we will
focus on the roles played by any professional in the alleged scams,"
Shah added.
Last month, the Adidas group, the world's
second-largest sporting goods company, had announced commercial
irregularities of 870 crore in Reebok's India business. Last week, the
company filed an FIR with the Gurgaon police station accusing former CEO
Subhinder Singh Prem and COO Vishnu Bhagat, accusing them of
misappropriation of funds, inventory diversion, and fictitious inflation
of sales revenue.
While the Haryana police has issued a look
out notice against the duo, a person aware of the development said they
have moved the Chandigarh High Court for anticipatory bail, after a
local Gurgaon court rejected their anticipatory bail pleas.
According
to a media report, the parent company, Adidas AG had hired the
forensics team of KPMG to probe into the matter in 2010, in a project
codenamed "project diamond." But KPMG gave a clean chit to the two
dismissed executives, claimed the report.
"We cannot investigate
the probe launched by KPMG as forensics is a consulting assignment and
not an auditing process. KPMG is not a registered auditor with ICAI and
cannot conduct any auditing roles in India," said Shah.
A KPMG
official declined to comment on the forensic audit. He said the firm was
the global auditor of Adidas AG, but had no role to play in the
auditing of the Indian arm of the German sports goods maker.
The ministry has accused Adidas of not cooperating with its inquiry and of not submitting some important documents.
But
the Adidas India spokesman said the company was cooperating with the
authorities in their investigation. "Please understand that we cannot
provide any further details since the matter now rests with the Indian
law enforcement authorities," he said.