VerSe Innovation, Parent Company of Dailyhunt, Being Investigated for Audit Findings

Umang Bedi, a cofounder of VerSe Innovation, informed a media outlet that the company's financials are accurate and fair, and the report is clean. Although Deloitte found that the company's controls were inadequate, it has been established that these shortcomings do not affect the consolidated financial statements of the business.

VerSe Innovation, the parent company of DailyHunt and Josh, is situated in Bengaluru. In its audit report for the fiscal year that ended in March 2024 (FY24), Deloitte found flaws in its internal financial controls.

Numerous weaknesses in VerSe Innovation's internal procedures, such as supplier selection, expense provision, revenue recognition, virtual asset handling, and IT systems control, were brought to light by the audit. It is noteworthy that the company's operational revenue for FY24 decreased 8.8% from INR 1,046.8 Cr to INR 954.7 Cr.

During the same year, their net loss decreased by over 56% to INR 814.8 Cr from INR 1,878.4 Cr in FY23. Additionally, according to Bedi, the loss was cut in half in FY25. (FY25 assertions from Dailyhunt will be discussed later.)

What Deloitte’s Findings State?

Deloitte, VerSe Innovation's auditor, claimed in its report that the business lacked adequate controls over vendor selection, purchase order approval, and payment processing. Deloitte claims that this may result in overpayments, incorrect payments, or even fraud.

 For example, one vendor provided specific invoice numbers associated with INR 35 Cr when the auditor requested confirmation of all outstanding payments as of March 31, 2024. VerSe Innovation discovered, however, that it had never received the aforementioned bills when it examined its internal records. VerSe Innovation claims that the invoice numbers seemed to be from FY22 rather than the fiscal year that was being examined.

This was not an isolated problem. The company's controls over the purchase, sale, and management of virtual assets were deemed inadequate by the auditor. This raised the possibility of asset theft or even revenue misreporting.

Notably, the business runs and maintains mobile platforms that allow users to engage with live streamers in real time and view live-streamed material from the streamers. Such content is sold under the category of virtual assets.

 Additionally, the auditor stated that VerSe's approach to documenting all costs before the end of the fiscal year was inadequate, potentially leading to inaccuracies in the costs that were reported.

VerSe Innovation's controls for capturing advertising revenues were deemed ineffective by Deloitte. Some campaigns ran the danger of inaccurate revenue reporting because they were not adequately documented with client permissions.

Playing with the Rules

The auditor added that VerSe Innovation had trouble appropriately implementing revenue recognition rules under Indian accounting standards. It is because of the complexity of its company, which included serving as an aggregator across numerous partners, publishers, and ad platforms.

 In addition to the news aggregator Dailyhunt and the short video platform, VerSe Innovation also runs Valueleaf, a digital marketing solutions company, and Magzter, a news subscription platform.

VerSe Innovation acknowledged the problems the auditor had found and stated that it was strengthening internal controls through IT access policies, process workshops, and new documentation frameworks.