Byju’s Faces Auditor Resignation Amidst Financial Crisis
The Edtech giant Byju’s is currently grappling with a significant crisis as its auditor, BDO (specifically MSKA & Associates), has resigned from its role. BDO was initially appointed to audit Byju’s and Aakash Educational Services for five years, starting June 2023. This resignation follows the previous departure of Deloitte, which stepped down due to concerns about alleged irregularities within the company.
Forensic Audit and Resignation Timeline
According to informed sources, BDO requested a forensic audit on July 17, just a day after Byju’s declared bankruptcy. Under statutory regulations, auditors can resign within 45 days of requesting additional information if they are not satisfied with the response provided by the company. This move raises questions about the ongoing financial reporting and management practices at Byju’s.
CEO’s Response to Allegations
Byju Raveendran, the founder and CEO of Byju’s, has publicly criticized BDO for what he describes as “blackmailing tactics.” In a strongly worded email sent to a senior BDO official on September 6, he emphasized that Byju’s has complied with all requests from BDO, with the exception of those that violate ethical and legal standards. Raveendran defended the company’s integrity, stating that during a virtual board meeting concerning fiscal year 2022, BDO’s representatives confirmed that there was no evidence of fraud or misconduct in Byju’s international transactions.
Financial Status and Payments Made
Despite the financial turmoil, Raveendran mentioned that Byju’s managed to make a partial payment of its outstanding fees to BDO, demonstrating the company’s commitment to maintaining a working relationship even during challenging times. However, he claimed that BDO’s resignation stemmed from the management’s refusal to comply with requests for backdated documents and filings, which he deems illegal. Raveendran remarked that there is recorded evidence where BDO’s senior partners allegedly encouraged Byju’s teams to submit these backdated reports, raising ethical concerns about the audit process.
Conclusion
The unfolding events at Byju’s highlight significant challenges facing the company in terms of governance and financial management. The resignation of prominent auditors not only questions the internal controls at Byju’s but also reflects the larger issues within the Edtech industry, particularly during times of economic strain. As Byju’s navigates through this tumultuous period, the company’s leadership must address these challenges head-on to restore stakeholder confidence and financial stability.
