Why Apple's operations in India are under auditor scrutiny
What's the story
Apple's Global Capability Center (GCC) in India has come under auditor scrutiny for the first time in its inaugural year of operations. SR Batliboi & Associates flagged several compliance gaps in the company's annual report for FY25. The report was submitted to the Registrar of Companies (RoC). The auditor found that Apple Operations India failed to maintain daily electronic backups of financial records on servers located within the country between April and October 5, 2024.
Remedial action
Compliance measures implemented after initial period
After the initial non-compliance period, Apple Operations India started maintaining daily backups as per legal requirements. The company also set up an automated system to ensure compliance with these regulations. However, SR Batliboi & Associates also flagged issues with certain audit trails, saying it couldn't be determined if they were preserved according to record retention laws.
Software issues
Audit trail feature and preservation concerns
The auditor noted that Apple's primary accounting software has an audit trail recording feature, which was active throughout FY25 for all relevant transactions. However, it wasn't enabled for certain changes made using privileged/administrative access rights. The audit trail for the year ending March 31, 2024, wasn't preserved as per statutory requirements either.
Regulatory requirements
Government mandates for transparency and risk management
The Indian government mandates daily backups and audit trails to ensure transparency, prevent fraud, and manage risks. However, the auditor said that Apple Operations India couldn't extract adequate audit evidence from its accounting software or produce service organization control reports from third-party software service providers. This has raised concerns about whether the audit trail feature was enabled and operated throughout the year for all relevant transactions recorded in these systems.
Tampering fears
No tampering detected, but concerns remain
The auditor said it didn't find any evidence of tampering with the audit trail facility of the accounting software where it was enabled. However, the lack of server backups and unverifiable IT trails in a business that handles sensitive R&D work has raised concerns about operational maturity. Apple Operations India is a 99% subsidiary of Apple Inc, with Apple Europe holding the remaining 1%.