SUMMARY
- BDO MSKA & Associates have stepped down as BYJU’S statutory auditor.
- The auditor cited many reasons including poor communication and transparency from the management.
- Due to BYJU’s loss of control over some subsidiaries, the auditor was not able to access to those books of accounts and fulfill its duties.
The statutory auditor for BYJU’S has resigned just 15 months after taking up the role, citing a lack of openness from the company’s leadership as the reason. This is the latest blow to the struggling edtech company.
In a letter dated September 3, filed with the Ministry of Corporate Affairs on Friday, MSKA & Associates, an affiliate of BDO International in India, detailed several issues, including poor communication and transparency from the management, which led to their decision to step down as BYJU’S statutory auditor.
The company has yet to appoint a replacement auditor. Meanwhile, BYJU’s response in a statement accused BDO of making “unethical requests” and suggesting “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 firm stated.
MSKA & Associates has also requested a forensic audit of the company’s accounts following inadequate explanations for the company’s failure to recover dues from More Ideas General Trading LLC, Dubai, which was set up by BYJU’s to operate 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 mentioned in their letter.
Regarding the dealings with its Middle East partner, BYJU’s stated, “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 further explained that the audit could not be completed due to the commencement of insolvency proceedings on July 16, and therefore, the failure to finish the audit cannot be blamed on the suspended board.
BYJU’s asserted that, during the virtual board meeting in FY22, the same transactions that were later deemed questionable were approved, leading to an audit report that was deemed clean. BDO MSKA & Associates was chosen as the company’s statutory auditor after Deloitte withdrew due to delays in the filing of the company’s financial statements for FY22.
“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,” the auditor stated. The amount was part of the $1.2-billion term loan B raised in 2021.
The auditor added that the Bengaluru-based company has lost control over some of its subsidiaries, making it difficult for the management to provide the necessary evidence for these funds, despite repeated reminders. MSKA & Associates also mentioned that due to BYJU’s loss of control over some subsidiaries, access to those books of accounts would be denied, which would hinder the auditor’s ability to fulfill their duties.
The auditor reported that the management of BYJU’S did not share the necessary information with them for their review and assessment on various issues, such as the notice issued by BYJU’S shareholders regarding an EGM (extra-ordinary general meeting) and the insolvency documents submitted by some suppliers.
BDO MSKA & Associates was chosen as the official auditor for BYJU’S and its subsidiary Aakash Educational Services in June 2023, following Deloitte, BYJU’S prior auditor, who left due to similar concerns. Deloitte had previously criticized BYJU’s management for not addressing the changes highlighted in its audit report for FY21. BDO MSKA & Associates took over as the interim auditor for BYJU’s after Deloitte’s departure and was subsequently confirmed as the firm’s permanent auditor at the annual general meeting on December 20, 2023, for a five-year term.
