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Audit firm Deloitte has flagged multiple critical lapses in the internal financial controls of Verse Innovation, the parent company of content aggregator Dailyhunt and short-video app Josh, according to its latest filings with the Ministry of Corporate Affairs.

In its report, Deloitte said that Verse did not have appropriate internal controls over the selection and evaluation of suppliers, approval of purchase orders and invoices, and payments. This, the auditor warned, could lead to “material misstatements” in trade payables, expense accounts, and even preferential payments or misappropriation.

The allegations come at a time when several Indian startups are facing scrutiny over corporate governance lapses – including firms like Gensol, Medikabazaar, and Bizongo, as reported by Moneycontrol earlier.

Deloitte further pointed to weak controls around the company’s handling of virtual assets — specifically highlighting inadequate oversight on customer acceptance, pricing, segregation of duties, and user access for transfer of digital assets. These lapses could result in misstatements in the company's revenue and costs related to virtual assets, the auditor said.

The auditor also raised red flags around revenue recognition practices for advertisement revenue. Deloitte found that the company’s internal controls for ensuring campaigns were backed by customer-approved release orders were not operating effectively, posing a risk of misstated revenues and trade receivables.

This also comes days after reports that VerSe’s chief financial officer Sandip Basu stepped down.

In addition, Deloitte highlighted deficiencies in Verse’s IT general controls — particularly around user access, program development, change management procedures, and the non-availability of audit logs.

Significantly, Deloitte drew attention to an unsubstantiated claim of Rs 35 crore stemming from "certain unexplained invoices" from a supplier – amounts which the company has not acknowledged as trade payables.

This comes against the backdrop of several similar cases of corporate misgovernance among other Indian startups. Earlier this month, Medikabazaar removed its former CEO Vivek Tiwari from the board over allegations of financial misreporting and misappropriation, as reported by Moneycontrol.

Separately, digital supply chain platform Bizongo is facing scrutiny after its auditors flagged potential fraud. Renewable energy company Gensol Engineering has also come under the scanner for governance issues.

Responding to the auditor's observations, VerSe said it is strengthening its processes, including introducing end-to-end frameworks for supplier management, tightening virtual asset controls through dashboards and access segregation, and improving revenue recognition mechanisms.

According to the company’s updated financial report, its revenue from operations for FY24 stood at Rs 1,029 crore compared to Rs 1,104 crore in the previous financial year. Meanwhile, its net loss stood at Rs 889 crore in FY24 versus Rs 1,909.7 crore the year prior.

To be sure, VerSe has previously reported its FY24 operating revenue at Rs 1,261 crore, and an earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss of Rs 710 crore.

VerSe Innovation previously raised $805 million in a funding round led by the Canada Pension Plan and Investment Board and the Ontario Teachers' Pension Plan Board at a valuation of around $5 billion in April 2022. The company has, so far, raised over $2 billion across multiple rounds, and was eyeing an initial public offering (IPO) this year.

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