Byju’s Crisis: A day after auditor BDO (MSKA & Associates) exited edtech, Byju Raveendran-led Byju’s on Saturday said the company was making unethical demands and manipulating the audit process.
Byju’s founders Byju Raveendran and Divya Gokulnath have questioned the legality of BDO’s resignation and accused him of procedural lapses and a « copious » approach.
“There are several recordings of calls, in which BDO representatives explicitly suggest backdating these documents, which BYJU’S has refused to do,” Byju’s statement noted.
The company said it complied with all of BDO’s requests, except those that allegedly involved a violation of ethical and legal boundaries. It alleged that the auditor made unethical requests and used manipulative tactics.
The company said, “The real reason for BDO’s resignation is Byju’s outright refusal to backdate its reports, while BDO went to the extent of recommending a company that could facilitate such illegal activity. There are numerous recordings of calls, in which BDO representatives explicitly suggest backdating these documents, which Byju’s refused to do. Byju’s strongly believes that this is the main reason for their resignation.”
BDO (MSKA & Associates) has been appointed as auditor of Byju’s and Aakash Educational Services in June 2023 for a period of five years following the resignation of Deloitte due to irregularities.
BDO highlighted several concerns, including significant delays in financial reporting, insufficient management support and doubts about the company’s ability to recover significant debts from a Dubai-based entity.
Byju’s former auditor Deloitte, along with key members of the startup’s board, resigned in 2023, attributing their resignations to governance issues within the organization.
What Bjyu said about BDO
1. “The real reason for BDO’s resignation is Byju’s categorical refusal to backdate its reports, while BDO went to the extent of recommending a firm that could facilitate such illegal activity.”
2. Byju’s claimed that BDO had sent an email on July 17 seeking clarification on its historical transactions with a partner in the Middle East, but had only listed the suspended company’s board on the request.
3. The board was suspended on July 16, 2024 after Byju’s legal dispute with the Board of Control for Cricket in India (BCCI) led to the initiation of insolvency proceedings. The process triggered the appointment of an Insolvency Resolution Professional (IRP), to take control of the startup.
4. Byju’s alleges that in the July 17 email, BDO « threatened to resign » if the requested clarifications were not provided within 45 days, but did not mark the IRP in the email.
5. “BDO eventually resigned after the expiry of the 45-day period, citing the inability of the suspended board to provide the clarifications sought. However, surprisingly, BDO failed to understand that for most of this 45-day period, the IRP was in control of Byju’s and only the IRP could provide the answers they were seeking,” the company said.
6. At the first meeting of the Committee of Creditors (CoC) on September 3, the IRP indicated that it had “repeatedly contacted BDO for clarification” but had received no response. “BDO’s lack of communication with the IRP is surprising and suspicious,” the edtech explained.
Forensic audit
Byju’s further clarified that the edtech’s suspended board and management had taken « a proactive step by arranging a fully transparent, BDO-supervised forensic audit » prior to their July 17 email.
However, this investigation was incomplete due to the opening of insolvency proceedings and therefore « the failure of the forensic investigation cannot therefore be attributed to the suspended council ».
The company also said these foreign transactions were « approved » at its FY22 virtual board meeting, resulting in a « clean » audit report.
They added that a senior BDO partner confirmed via video that they had « found no evidence of fraud or wrongdoing in these transactions after conducting extensive due diligence. »
“We hope that the insolvency admission order will be set aside very soon by the Supreme Court, but till the Resolution Professional (RP) is in charge of Byju’s, we warmly welcome the RP taking the initiative to conduct a forensic audit on this specific issue. We are ready to extend all possible support to facilitate the comprehensive audit process,” Byju’s added in its statement.
