Byju's Auditor BDO Resigns Within 15 Months, Suspects Fraud At Edtech

Byju's auditor BDO (MSKA & Associates) has resigned from its position, citing potential fraud at the company's Middle East unit and lack of transparency at the edtech.

In its resignation letter to the Ministry of Corporate Affairs, the audit firm highlighted the company's inordinate delay in financials, suppression of information on several occasions and the requirement of a forensic audit due to suspected fraud as the reasons for its departure.

BDO was appointed as the auditor by Byju's in June 2023, after Deloitte Haskins and Sells resigned as the statutory auditor, citing the delay in finalising financial statements for FY22.

BDO said Byju's provided "inadequate details and explanations" regarding its inability to recover the dues from More Ideas General Trading LLC, which is the unit via which it made sales in the Middle East.

"We had requested for a detailed forensic review of the transactions with MI due to the various reasons elaborated in our emails. There has been inordinate delay on the part of the management to initiate the forensic review, despite our repeated reminders....Accordingly, we have filed Form ADT 4 in accordance with the provisions of the Companies Act, 2013 on Sept. 2, 2024," BDO said.

ADT-4 is a report that auditors must submit to the central government when they suspect fraud by employees of a company. 

Further, BDO said there are various litigations initiated and notices received against the company, such as initiation of liquidation, oppression and mismanagement against the majority shareholders and show cause notice by the Enforcement Directorate, etc.

"We would also like to highlight that on few occasions certain information had not been provided to us for our consideration and evaluation, which were critical for the purposes of our audit and were only shared with us later after being repeatedly requested," BDO said, citing the EGM notice, various NCLT notices for insolvency proceedings by vendors and statutory authority letters not being disclosed.

"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," it said.

BDO added that because Byju's has lost control over some of its subsidiaries, it is unable to provide an audit trail and confirmation of the $533 million it took from lenders.

In response, Byju's has issued a statement against BDO, stating that the audit firm has resorted to unethical requests and manipulative tactics.

"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 said in a statement.

Regarding the transactions with its Middle East partner, Byju's said it couldn't complete the forensic review due to the initiation of the insolvency proceedings on July 16, 2024. "The failure to complete the forensic therefore cannot be attributed to the suspended board," it said.

Byju's added that it will support the resolution professional who is in control of Byju's, to conduct a forensic audit into this specific matter.