RCom debunks special audit reports, expects no liability

The adverse findings of the special audit report done on Reliance Communications (RCom) and its subsidiaries are clearly wrong and will not result in any additional financial liability, says the Anil Dhirubhai Ambani group company.

“The Special Auditor’s report estimating alleged additional liability of Rs 316 crore is incorrect, hopelessly biased, one-sided and prejudiced… RCom strongly affirms that it anticipates no additional financial liability towards licence or spectrum fee,” it said in a statement issued here today.

Following allegations of overstating of accounts by telecom companies, the Department of Telecommunications had appointed Parakh & Co to conduct a special audit on five companies. Apart from RCom, the others were Bharti Airtel, Vodafone-Essar, Tata Teleservices and Idea Cellular, and reports on these are awaited.

Special audits were conducted on RCom and its subsidiaries, Reliance Communications Infrastructure Ltd, Reliance Telecom Ltd and Reliable Internet Services Ltd for financial years 2006-07 and 2007-08.

RCom also debunked the report, stating that itconflicted with industry practice and judgments of the Telecom Disputes Settlement and Appellate Tribunal and Customs, Excise and Service Tax Appellate Tribunal (Cestat).

“For instance, the report has incorrectly alleged that there is an additional liability of Rs 90 crore towards licence fee on discounts allowed by the company. RCom’s stand that no licence fee is payable on this item is completely in line with industry practice, and this has also been upheld by Cestat,” its statement said.

Similarly, it says the special auditors have wrongly alleged that there is an additional liability of Rs 70 crore towards licence fees on income like unrealised foreign exchange gains and interest and dividends earned by the company before it became a licensee.

The Special Auditor’s report is liable to be rejected outright, as, contrary to all norms of audit and professional conduct, they did not discuss their findings and observations with the company at any stage, it added.