In 2010-11, TRF’s profits, on a stand-alone basis, nosedived to a mere Rs83.25 lakh against Rs47.17 crore it posted in the previous year.
Bulk material handling company TRF Ltd, a Tata group firm, has informed its shareholders that its internal audit function has been outsourced to “a reputed audit firm”, PricewaterhouseCoopers (PwC), in response to an accounting fraud perpetrated earlier by its own staff.
In October, TRF Ltd, in which Tata Steel holds 34.58% stake, shocked the capital market when it told a group of analysts following its quarterly earnings announcements that it had to undertake a Rs46-crore write off because of an accounting fraud in one of its divisions committed by some of its staff.
“This was done by a group of officers who were discharged from the company and the company has initiated necessary legal proceedings against them. A new team, who had taken charge of the division had reviewed the costs of the projects under execution and corrected the same wherever necessary. Consequently, the company had to book losses in the division bringing down the overall profits of the company,” TRF has told shareholders in its report.
Selecting PwC, the disgraced audit firm, to prevent any future accounting frauds wouldn’t perhaps go down well with investors in TRF. About two years back, one Ramalinga Raju had shocked the country when he admitted fixing Satyam Computers’ books, inflating revenues, profits and payroll, creating fortunes for his associates. PwC were their auditors, responsible for detecting such frauds early on.
In 2010-11, TRF’s profits, on a stand-alone basis, nosedived to a mere Rs83.25 lakh against Rs47.17 crore it posted in the previous year.
Apart from the fraud, profitability was lower because of lower margin in the projects under execution, it said.
Describing steps being taken for ‘improvement’, TRF said PwC would now be its external-internal auditors, directly reporting to the audit committee.
“Stringent accounting practices and procedures have been put in place and a more robust system of reviewing estimates and costs at various levels has been instituted,” TRF said in its report.
TRF is now promising better days ahead. “The company has started better project monitoring and cost control initiatives, which will increase the productivity by 20% and will have a positive contribution. The company’s overall profitability is also expected to be reasonable in the financial year 2011-12,” it said in the report.
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