More than 200 listed Indian companies have discrepancies in their annual audited financial results. Some of the errors are serious, like for this company whose reserves in the balance sheet show a whopping Rs 2.16 billion discrepancy.

These findings have been thrown up in a study of the financials of the past 5 years of more than 1400 listed Indian companies. The research project was carried out by the analysts at myiris.com, India`s leading financial portal, as a service to investors. The study, which is being carried out in phases, has so far covered only companies in manufacturing and services. Banks and financial services companies will be covered in the next round.

``For all of the companies, one or more of the numbers simply do not add up. If you add up the numbers in the schedules under one head, this computed value should tally with the total reported for the corresponding item in the main balance sheet or the P&L statement as the case may be. We find that for these 209 companies, they don`t add up,`` explains S. Swaminathan, Founder & CEO of myiris.com, whose analysts carried out the research project.

``It does not matter whether the quantum of discrepancies are material. The very fact that there are discrepancies is a serious enough matter warranting further examination to prevent such occurrences in the future,`` Swaminathan elaborates. ``We will pass on the findings of the study to the Ministry of Corporate Affairs, SEBI, and the stock exchanges,`` he said while refusing to disclose the names of the companies to the public ``as it might have unintended consequences.``

Swaminathan refuses to describe this as fraudulent reporting. ``I would say that the companies and auditors should have paid more attention. But while I agree that there could be the odd case where some companies may have fudged their accounts deliberately, I would not pin the fraud label on all of them,`` he said. ``In fact, we are contacting each company individually to point out the problems to them which they may rectify if they so desire,`` he said, arguing that that would be the constructive way forward.

Outlining the approach adopted by his team, Swaminathan said that the errors were discovered in the course of creating India`s first ever corporate fundamentals database in XBRL. ``You convert the entire data set into XBRL and you will see all these red flags immediately``, he added. The project used the taxonomy approved recently by the Institute of Chartered Accountants as a first step towards full fledged adoption of XBRL in India.

Swaminathan believed that it would be unfair to simply blame the auditors, as it is the responsibility of company managements to get it right. ``In fact, we wish to compliment the Institute of Chartered Accountants for introducing XBRL in India, that alone would have thrown up every one of these cases of misreporting which the auditors could have then caught and corrected,`` he added.

While declining to name the errant companies, Swaminathan shared the key findings of the study. According to the findings:

>> 60% of the companies are listed on both the NSE and BSE, 1% on the NSE alone and the rest on the BSE alone.

>> In terms of sectoral dispersion, the research found that textiles with 27 companies accounted for the most followed by IT (18), Steel (10) and pharmaceuticals (9).

>> In terms of geographical dispersion, Maharashtra with 60 companies accounted for the most, followed by Delhi at a distant second with 29 companies. Tamil Nadu (22), Andhra (22) and Gujarat (19) followed.

>> 109 companies had errors in the balance sheet, 66 in their cash flow statements while 34 had errors creeping into their Profit & Loss Statements.

XBRL, or eXtensible Business Reporting Language, is often described as the barcode of information and has been acknowledged as the harbinger of transparency in financial reporting worldwide. More than 100 countries have adopted XBRL, this includes India. RBI, SEBI and the two stock exchanges are championing the adoption of XBRL in India, with the ICAI providing leadership.

All Indian companies with ADRs outstanding have to file with the Securities Exchange Commission of the USA in XBRL starting next year. In fact, Infosys has been part of the voluntary compliance program of the SEC for the last 3 years and Mohandas Pai is a recent addition to the board of XBRL International.

``I must state unequivocally that the purpose of introduction of XBRL is not to catch errant companies. In fact, with XBRL, companies will not make errors in their reporting if they are able to implement XBRL within the organization effectively,`` Swaminathan says. ``I want to tell companies that it improves the accuracy and quality of your own financial information in the marketplace,`` says Liv Watson, Vice Chair of XBRL International, and one of the originators of the XBRL concept, describing the introduction of XBRL as the greatest thing that has happened for investors in a long time.

Citing examples from other countries, he pointed out that in Spain, the incremental net NPA of the banking system dropped to less than 1%, contributing to the health of the banking system.

**IRIS, the owners of myiris.com, is India`s leading XBRL company.