Byju’s auditor: Byju’s says auditor BDO resigned after start of bankruptcy proceedings

The auditing firm informed the company’s board of its resignation as the statutory auditor, although it had been appointed for a five-year term set to end in FY27.

This decision will impact the firm’s audit of FY23 accounts.

“The real reason for BDO’s resignation is Byju’s firm refusal to backdate its reports, while BDO went to the extent of recommending a firm that could facilitate such an illegal activity,” the edtech said in a statement.

ET reported that MSKA decided to resign due to the management’s lack of cooperation, difficulty in getting necessary numbers and information for a thorough investigation, and the emergence of an issue that had to be reported to the MCA in accordance with the Companies Act.

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MSKA & Associates has become the second audit firm to step down from Byju’s in just over two years, following the resignation of Deloitte Haskins & Sells on June 23, 2023. Deloitte had cited a significant delay by the edtech company in providing audited financial statements for the fiscal year ending March 31, 2022.

In the resignation letter, MSKA & Associates also highlighted a suspicious transaction involving Dubai-based reseller More Ideas General Trading LLC, which had been reported to the Ministry of Corporate Affairs (MCA) on September 2. This transaction concerns the recovery of approximately Rs 1,400 crore from the reseller.

“Regarding the transactions with our Middle East partner in respect of which BDO had sought clarifications in its email of July 17, we wish to make it clear that the suspended Board and management of Byju’s, had taken the proactive step of arranging a forensic audit, fully transparent and supervised by BDO, to ensure that there were no issues well before their email on July 17,” the edtech said highlighting that the forensic could not be completed due to the initiation of the insolvency proceedings on July 16, 2024.

Byju’s woes

• The National Company Law Tribunal (NCLT) on June 16 ordered initiation of insolvency proceedings against Byju’s, on a BCCI petition claiming Rs 158 crore in arrears over a sponsorship deal.

• Founder Byju Raveendran, appeared close to settling this dispute with BCCI after approval by the National Company Law Appellate Tribunal (NCLAT). However, on August 14, the Supreme Court intervened by staying the NCLAT order that had approved the settlement.

• The recent development of the auditor resigning comes at a time when the Bengaluru-based edtech faces legal battles with lenders, defaults on loans, and valuation markdowns by its existing investors.

• This year in April, Byju’s India chief executive Arjun Mohan left the edtech firm a little over six months after taking on the role.

• Despite a group of investors pushing for Byju Raveendran’s removal from day-to-day management, he continues as the chief executive and is focusing on the company’s operations in India following Mohan’s exit.