On a Tuesday morning in March 2024, a single email landed in SEBI's inbox. Not from a whistleblower. Not from a disgruntled ex-employee or a rival firm trying to sink a competitor. Just a shareholder - a nobody, really - asking a simple, inconvenient question: Why were trade receivables sitting unpaid for more than two years?
It was the kind of question that, in hindsight, should have been asked years earlier. Rajesh Exports Limited had spent over a decade presenting itself as one of India's greatest gold success stories - a Bengaluru-born company that had clawed its way from jewellery manufacturing into the rarefied air of global commodities, reporting consolidated revenues that placed it comfortably among the biggest names on the Indian stock exchange.
At its peak, this company reported revenues touching the trillions. Trillions. As in, figures that could make a government budget blush.
Two years later, on June 3, 2026, SEBI released a 109-page document that has shaken the markets like nothing in recent memory. Inside it, the regulator describes what it calls a prima facie misrepresentation of approximately ₹15.15 lakh crore in revenues - spread across five financial years, running through a web of overseas subsidiaries, and, allegedly, nearly impossible to verify.
What Went Wrong?
The recent SEBI action against Rajesh Exports has triggered intense discussions among auditors, investors, regulators, and corporate governance professionals. SEBI has alleged that the company misrepresented approximately ₹15.15 lakh crore of revenue linked to overseas subsidiaries between FY21 and FY25, making it one of the largest alleged financial reporting discrepancies in Indian corporate history.
While the investigation is ongoing and Rajesh Exports has denied the allegations, the case presents valuable insights into audit red flags that professionals should never ignore.
Heavy Dependence on Overseas Subsidiaries
One of the primary concerns raised by SEBI relates to revenues attributed to overseas subsidiaries, particularly the Swiss refinery Valcambi SA.
According to the regulator, nearly 97–99% of the group's reported revenues originated from overseas entities, yet sufficient financial disclosures and supporting evidence were allegedly unavailable.
Audit Red Flag:
- Excessive dependence on foreign subsidiaries.
- Limited visibility of subsidiary operations.
- Difficulty obtaining independent audit evidence.
Audit Response:
- Perform enhanced group audit procedures.
- Obtain direct confirmations from subsidiaries.
- Review local statutory filings and audited financial statements.
Revenue That Could Not Be Independently Verified
SEBI's investigation reportedly focused on whether the revenues reported at the consolidated level could actually be substantiated through underlying records and documentation.
Audit Red Flag:
- Significant revenue growth without corresponding operational evidence.
- Lack of third-party documentation.
- Reliance solely on management representations.
Audit Response:
- Verify customer contracts.
- Match sales with banking transactions.
- Obtain independent customer confirmations.
Large Outstanding Trade Receivables
The investigation reportedly began after complaints regarding substantial trade receivables that remained outstanding for extended periods.
Audit Red Flag:
- Receivables growing faster than revenue.
- Long ageing periods.
- Repeated rollovers of balances.
Audit Response:
- Conduct debtor ageing analysis.
- Obtain external balance confirmations.
- Test subsequent collections.
Alleged Fictitious Transactions
SEBI has alleged that over ₹11,400 crore worth of sales and purchases were recorded with a broker without sufficient evidence of genuine business transactions.
Audit Red Flag:
- Round-tripping transactions.
- Identical purchase and sales values.
- Absence of commercial substance.
Audit Response:
- Verify delivery documentation.
- Review logistics records.
- Confirm transactions directly with counterparties.
Missing Documentation for Investments
The regulator has also questioned investments reportedly made in African gold mining operations due to a lack of supporting documentation.
Audit Red Flag:
- Material investments without legal documentation.
- Inability to verify ownership rights.
- Unsupported valuation claims.
Audit Response:
- Obtain title documents.
- Review investment agreements.
- Engage independent valuation experts.
Fund Movements Through Personal Accounts
SEBI's interim findings reportedly identified instances where company funds were routed through promoter-linked or personal accounts.
Audit Red Flag:
- Related-party transactions lacking transparency.
- Personal account involvement.
- Unusual fund transfers.
Audit Response:
- Review related-party disclosures.
- Trace fund flows end-to-end.
- Test board approvals and authorizations.
Inability of Forensic Auditors to Verify Transactions
Reports indicate that forensic auditors were unable to verify a substantial portion of reported transactions because of inadequate documentation.
Audit Red Flag:
- Missing audit trail.
- Poor record retention.
- Lack of supporting evidence.
Audit Response:
- Increase substantive testing.
- Expand sample sizes.
- Consider modified audit opinions where necessary.
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