BYJU’S auditor BDO quits citing lack of transparency from management

The statutory auditor of BYJU’S has quit in just 15 months since appointment citing a lack of transparency from the company’s management, in the latest of setbacks for the embattled edtech.

In a letter dated September 3, filed with the Ministry of Corporate Affairs on Friday, MSKA & Associates, an affiliate of BDO International in India, cited several reasons including lack of communication and transparency from the management, which compelled it to resign as BYJU’S statutory auditor.

BYJU’S has not named a new auditor yet.

Meanwhile, the edtech firm, in a statement, has claimed that there were "unethical requests" made and "manipulative tactics" suggested by BDO.

"BYJU’S has complied with every request made by BDO, except those that would require crossing ethical and legal boundaries. 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 firm said in the statement.

MSKA & Associates has also demanded a forensic review of the company’s accounts after getting “inadequate details and explanations” regarding the company’s inability to recover dues from More Ideas General Trading LLC, Dubai, a Middle East-based entity floated by BYJU’S to do business in the GCC countries.

“There has been an inordinate delay on the part of the management to initiate the forensic review, despite our repeated reminders sent vide various emails,” BDO MSKA & Associates said in the letter.

Regarding the transactions with its Middle East partner, BYJU'S said, "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 company added that the forensic could not be completed due to the initiation of the insolvency proceedings on July 16 and the failure to complete the forensic therefore cannot be attributed to the suspended Board.

The Bengaluru-based firm asserted that, in the virtual board meeting of FY22 , the "same foreign transactions were greenlighted resulting in an audit report which was clean".

BDO MSKA & Associates was appointed the company’s statutory auditor after Deloitte quit citing the delay in the company filing its FY22 financial statements.

'Lack of transparency'

The auditor has claimed that BYJU'S management failed to disclose the whereabouts of $533 million, which was part of the $1.2-billion term loan B raised in 2021. This amount has been a point of contention as lenders accused the company of concealing it last year.

“We have requested the management to provide us audit trail and confirmation in respect of $533 million, which were part of the borrowed funds from lenders primarily represented by Glas Trust Company LLC, as these were available to the group for investing outside India,” said the auditor.

“This information is required for the purposes of the audit of the consolidated financial statements. 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,” the auditor added.

MSKA & Associates also said that since BYJU’S has lost control of some of its subsidiaries, it would not have access to those books of accounts, which would hamper the auditor’s ability to carry out its responsibilities.

According to the auditor, the management of BYJU’S also did not provide details to them for their consideration and evaluation on certain matters, including the notice sent by BYJU’S shareholders for conducting an EGM (extra-ordinary general meeting) and insolvency filings made by a few vendors.

“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,” the auditor said.

The auditor also said that it had sent multiple emails to the management of BYJU'S between January and June this year, requesting information but BYJU’S failed to furnish the necessary details.

BDO MSKA & Associates was appointed as the statutory auditor of BYJU’S and its wholly-owned subsidiary Aakash Educational Services in June last year, right after Deloitte, BYJU’S previous auditor, had quit citing similar reasons. Deloitte had said that BYJU’S management had failed to resolve the modifications mentioned in its audit report for FY21.

BDO MSKA & Associates was appointed the interim auditor for BYJU’S after Deloitte quit and was reappointed as the company’s statutory auditor at the annual general meeting held on December 20, 2023, for five years.

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Mounting troubles

BYJU’S, once a high-flying startup commanding a valuation of more than $22 billion, has been rocked with corporate governance and compliance issues, which have come to the fore in the last two years. The company’s investor board members also resigned in June last year due to differences with its management.

Further, multiple operational and financial debtors have taken BYJU’S to various courts in the country for unpaid dues.

In July this year, BYJU’S was admitted to insolvency by the Bengaluru bench of the National Company Law Tribunal (NCLT) following a plea filed by the Board of Control for Cricket in India (BCCI), seeking to initiate a CIRP for BYJU’S parent company, Think and Learn Private Limited (TLPL).

BYJU’S dodged a potential “death” after the National Company Law Appellate Tribunal (NCLAT) approved a Rs 158-crore settlement between the edtech firm and the BCCI on August 2. It is undergoing insolvency process following an interim order by the Supreme Court of India on August 14 staying the appellate tribunal’s decision. The company’s management has lost control as the interim resolution professional Pankaj Srivastava has been given charge of the company amid the insolvency proceedings.

On Friday, YourStory reported BYJU’S owes over Rs 15,000 crore to a bunch of operational and financial creditors, including its wholly-owned subsidiary Aakash. BYJU’S also owes about $101 million (Rs 848 crore) to the Government of India and the Government of Karnataka.

(The article was updated with more information and BYJU'S statement.)