Byju’s auditor BDO resigns, CEO Raveendran calls his departure ‘suspicious’

BDO, the auditing firm of the educational technology startup Byju’sresigned amid a worsening situation at the company, Moneycontrol reported citing an email on Saturday, September 7. The resignation comes at a time when the company is facing multiple legal cases, from insolvency proceedings to employee and supplier quotas, according to the news report.

According to the report, BDO (MSKA & Associates) has taken over as auditor of 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 Under legal requirements, the auditor can resign within 45 days of sending the letter if he is not satisfied with the company’s response, the news portal reported.

“As you are well aware, Byju’s has complied with all requests made by BDO, except those that would require us to cross the boundaries of ethics and legality,” said Byju Raveendran, CEO (Executive Director) by Byju in his email to a senior BDO executive on Friday evening, according to the news report.

Queries from the news portal to the auditor, BDO, went unanswered until the report was published.

BDO intervened as auditor at a time when Byju’s was facing regulatory scrutiny over the company’s failure to file its financial statements for the year ending 2022, prompting Delloite to flag the issue and resign as the company’s auditor, the report said.

“Furthermore, 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 proceedings“This guarantee came directly from you and we have it on file,” Raveendran told a BDO partner in his email, the news portal reported.

“I also find it worrying that BDO’s emails requesting information on July 17, exactly one day after the insolvency “The bankruptcy proceedings initiated have not been flagged in the Professional Resolution. The timing, coming just a day after Byju’s initiated bankruptcy proceedings, raises serious questions about the motivation behind his company’s decision to step down,” he said in the email, cited in the report.

Among the problems of the educational technology Despite the rollout, the firm has still managed to partly pay the fees owed to BDO, CEO Raveendran was quoted in the report as saying.

“This indicates our willingness to work together in difficult times. However, it appears that the real reason for BDO’s resignation is management’s firm refusal to accept its request to backdate documents and presentations, which are illegalWe have multiple pieces of evidence in the form of electronic recordings where BDO’s senior partners explicitly ask our teams to provide multiple retroactive reports. In fact, I have come to learn that your senior partner recommended the valuation firm itself to facilitate this illegal activity… There are several aspects to your firm’s conduct operations“And indeed, the nature of his resignation remains suspect,” Raveendran said in his email, the news portal reported.

BDO’s return to Byju’s:

BDO responded to Byju’s board of directors through a letter to the founder’s family and stated that the company lacked transparencysimilar to what the previous auditor highlighted, according to the report.

The company did not provide support to complete the audit of the results for the 2022-23 financial year, as it had already completed the audit of those for 2021-22, according to the report.

“Due to the ongoing litigation with the lenders“Management has made it clear to us that the company has lost control over some of its subsidiaries and that management would not have access to the accounting records of these subsidiaries. This would further hamper the company’s ability to complete the preparation of its consolidated financial statements,” BDO said in the letter, according to 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 noted excessive delays by management in initiating the forensic review, despite multiple email reminders, according to the BDO email cited in the report.

“Since the Company has lost control over some of its subsidiaries, management has not been able to provide us with sufficient appropriate information evidence “In relation to these funds, despite repeated reminders, we therefore have reason to believe that the company’s management lacks transparency with regard to providing full information to the auditor for consideration and evaluation,” they said, citing the report.

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