Byju’s auditor BDO quits citing concerns over forensic audit, CEO Raveendran views exit as ’suspicious’

BDO, the auditor firm for the ed-tech startup Byju's, resigned in the middle of a worsening situation at the company, reported Moneycontrol quoting an email on Saturday, September 7. The stepdown comes at a time when the company is facing multiple legal cases from insolvency proceedings to employee and vendor dues, as per the news report.

According to the report, BDO (MSKA & Associates) took charge as the auditor for Byju's and Aakash Educational Services for the next five years in June 2023 after the previous auditor, Deloitte, resigned, citing irregularities in the company.

The new auditor requested a forensic audit on July 17, a day after Byju's insolvency plea. According to the statutory requirements, the auditor can resign within 45 days of initiating a letter if they are not satisfied with the company's response, reported the news portal.

“As you are well aware, Byju’s has complied with every request made by BDO, except those that would require us to cross the lines of ethics and legality,” said Byju Raveendran, chief executive officer (CEO) of Byju's in his email to a top executive at BDO on Friday night, as per the news report.

The news portal's queries to the auditor, BDO, remained unanswered till the report was published.

BDO stepped in as an auditor at a time when Byju's was facing regulatory scrutiny as the company did not file financials for the year ended 2022, which led to Delloite flagging the issue and stepping down as the auditor for the company, as per the report.

“Additionally, I must remind you that in the virtual board meeting of FY22 where the audit report is also clean, you personally confirmed that after conducting thorough due diligence, you found no evidence of fraud or malpractice in our international transactions. This assurance came from you directly, and we have it on record,” said Raveendran to a Partner at BDO in his email, reported the news portal.

“I also find it troubling that BDO's emails requesting for information on July 17, exactly a day after the insolvency proceeding started, were not marked to the Resolution Professional. The timing, coming just a day after Byju’s initiated bankruptcy proceedings, raises serious questions about the motivation behind your firm's decision to step down,” he said in the email, quoted in the report.

In between the troubles for the ed-tech startup, the company has still managed to pay payments in parts to the fees due to BDO, according to CEO Raveendran, cited in the report.

“This indicates our willingness to work together through difficult times. However, it seems the true reason for BDO's resignation is the management's firm refusal to entertain your request to back-date documents and filings, which are illegal. We have multiple proofs in the form of electronic recordings where BDO'S senior partners are explicitly asking our teams to furnish multiple backdated reports. In fact, I have come to know that your senior partner recommended the valuation firm themselves to facilitate this illegal activity…There are several aspects of your firm's operations, and indeed, the nature of your resignation, that remain suspicious,” Raveendran said in his email, reported the news portal.

BDO's comeback to Byju's:

BDO responded to Byju's board through a letter to the founder's family and stated that the company lacked transparency, similar to what the previous auditor highlighted, according to the report.

There was no company support to finish auditing the financial year 2022-23 results, as it finished auditing the 2021-22 ones, according to the report.

“Due to the ongoing litigation with the lenders, we are given to understand by the management that the Company has lost control over certain of its subsidiaries and the management would not have access to the books of account of these subsidiaries. This would further hamper the ability of the Company to be able to complete the preparation of its consolidated financial statements,” said BDO in the letter, reported the news portal.

The auditor also raised concerns over a forensic audit on More Ideas General Trading, Byju's Middle East business, as the auditor flagged inordinate delays from the management to start the forensic review, despite multiple reminders though mails, according to BDO's mail cited in the report.

“Since the Company has lost control over certain of its subsidiaries, the management has been unable to provide us sufficient appropriate evidence in respect of these funds, despite repeated reminders. We have therefore reason to believe that the management of the Company lacks transparency with respect to providing full information to the auditor for their consideration and evaluation,” they said, quoted the report.

The auditor also filed a Form ADT 4 under the Companies Act 2013 on September 2, 2024, which indicates fraudulent activities at Byju's.