Deloitte gives Dailyhunt parent VerSe Innovation clean audit despite internal control lapses

Deloitte has issued a “true and fair” opinion on VerSe Innovation’s standalone financial statements for FY24, even as it flagged several critical lapses in the company’s internal financial controls, the parent company of content platform Dailyhunt and short-video app Josh said on Wednesday.

"Deloitte, VerSe Innovation's long-term auditor, has issued a True and Fair view of our FY24 Consolidated Financial Statements, providing a clean audit opinion on our financials," VerSe Innovation spokesperson said in response to the recent audit findings.

"We are fully committed to strengthening our internal controls and remain confident in our plan to achieve break-even in the second half of this fiscal year," the spokesperson added.

The clean audit opinion comes in the wake of the recent exit of VerSe’s Chief Financial Officer Sandip Basu.

According to Deloitte’s audit report filed with the Ministry of Corporate Affairs, the company lacked adequate internal controls over key operational functions, including supplier selection and evaluation, purchase approvals, invoice processing, and payments.

The audit warned that such deficiencies could potentially result in “material misstatements” in trade payables and expense accounts, as well as open avenues for preferential payments or misappropriation.

The report further pointed to weak oversight in the management of virtual assets, flagging inadequate controls around customer onboarding, pricing, user access rights, and duty segregation. These gaps could lead to errors in revenue and cost recognition related to digital assets, the auditor noted.

Deloitte also raised concerns regarding VerSe’s advertisement revenue recognition practices. The auditor found that internal controls meant to ensure that campaigns were supported by customer-approved release orders were not functioning effectively, increasing the risk of misstated revenues and trade receivables.

The company said it is addressing the auditor’s concerns by implementing comprehensive frameworks for supplier management, enhancing controls around virtual assets, and improving revenue recognition processes.

For FY24, VerSe reported revenue from operations of ₹1,029 crore, down from ₹1,104 crore in FY23. The company’s net loss stood at ₹889 crore in FY24, compared to ₹1,909.7 crore in the previous fiscal. Separately, it had earlier reported an EBITDA loss of ₹710 crore on operating revenue of ₹1,261 crore.

VerSe Innovation had raised $805 million in April 2022 in a funding round led by the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan Board, valuing the firm at around $5 billion. To date, the company has raised over $2 billion and is eyeing an initial public offering this year.

VerSe's audit issues come amid heightened scrutiny of corporate governance among Indian startups. Earlier this month, Medikabazaar ousted its CEO over alleged financial irregularities, while Bizongo and Gensol Engineering are also under the lens for governance-related concerns.