Byju’s crisis: A day after auditor BDO (MSKA & Associates) quitted the edtech, Byju Raveendran-led Byju’s on Saturday said that the firm is making unethical requests and manipulating the audit process.
Byju’s founders Byju Raveendran and Divya Gokulnath have questioned the legality of BDO’s resignation and accused it of procedural failure and an “escapist” move.
“Multiple call recordings exist, where BDO representatives explicitly suggest backdating these documents, which BYJU’S refused to do,” the Byju’s statement noted.
The company stated it adhered to all of BDO’s requests, except for those that would involve breaching ethical and legal boundaries. They claimed that the auditor had made unethical requests and used manipulative tactics.
The company said: “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. Multiple call recordings exist, where 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) was appointed as the auditor of Byju’s and Aakash Educational Services in June 2023 for a period of five years following Deloitte’s resignation due to irregularities.
BDO highlighted several concerns, including notable delays in financial reporting, insufficient management support, and doubts surrounding the company’s capacity to recover significant debts from a Dubai-based entity.
Deloitte, the former auditor of Byju’s, along with the startup’s key board members, stepped down in 2023, attributing their resignation to governance concerns within the organization.
What Bjyu’s said on BDO
1. “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.”
2. Byju’s has claimed that BDO sent an email on July 17, for clarifications about its historical transactions with a partner in the Middle East, but only marked the suspended company 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 initiative 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 in 45 days, but failed to mark the IRP in the email.
5. “BDO eventually resigned after the 45-day window expired, citing the suspended board’s failure to provide the requested clarifications. However, surprisingly, the BDO failed to appreciate that for most of that 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. In the first meeting of the Committee of Creditors (CoC) on September 3, the IRP noted that he had “repeatedly reached out to BDO for clarification”, but received no response. “BDO’s lack of communication with the IRP is surprising and suspicious,” the edtech elaborated.
Forensic audit
Byju’s further clarified that the suspended Board and management at the edtech took “proactive step of arranging a forensic audit, fully transparent and supervised by BDO” before their email on July 17.
However, this was incomplete due to the initiation of the insolvency proceedings and thus “failure to complete the forensic therefore cannot be attributed to the suspended Board”.
The company also stated that these foreign transactions were “greenlighted” in their FY22 virtual board meeting, resulting in an audit report which was “clean”.
They added that a BDO senior partner confirmed on video that they “found no evidence of fraud or malpractice in these transactions after conducting thorough due diligence”.
“While we hope that the insolvency admission order will be vacated by the Supreme Court very soon, until such time as the Resolution Professional (RP) is in control of Byju’s, we wholeheartedly welcome the RP taking the lead in conducting a forensic audit into this specific matter. We are prepared to extend every possible support to facilitate the full audit process,” Byju’s added in its statement.
