Byju's auditor BDO resigns after seeking forensic audit, founder Raveendran alleges blackmail tactics

Byju Raveendran, Founder & CEO, BYJU'S

BDO, the firm that was roped in as the auditor of Byju’s a year ago has resigned amid the worsening crisis at the edtech, according to an email that Moneycontrol has reviewed.

BDO (MSKA & Associates) was appointed as the auditor of Byju’s and Aakash Educational Services in June 2023 for a period of five years immediately after Deloitte had tendered its resignation citing irregularities. 

Moneycontrol has learnt that BDO had initiated a request for a forensic audit on July 17, a day after Byju's was admitted into insolvency. Per statutory requirements, the auditor can resign within 45 days of initiating such a letter if it isn't satisfied with the company's response.

Byju Raveendran has however hit back at the firm, alleging blackmail tactics.

“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,” founder and CEO Byju Raveendran said in his email to a top executive at BDO late night on September 6.

BDO did not immediately reply to Moneycontrol's queries.

BDO had stepped in at a time when Byju’s had delayed filing its financials for FY22 with the regulators by several months, a move that prompted Deloitte to flag discrepancies and even step down eventually.

“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,” Raveendran said in the email sent to a Partner at the audit firm.

BDO’s move to step down also comes at a time when the edtech company – once the posterboy of Indian startups – is fighting several cases. From insolvency proceedings to employee and vendor dues, the going has only gotten tough for Byju’s.

“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,” the email added.

While Byju’s has been going through financial difficulties, CEO Raveendran said the company has still managed to make part payments toward the fees due to BDO.

“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.

BDO hits back

In a letter to Byju's board, which only includes the founder's family currently, BDO has however said the company lacked transparency, a sentiment even previous auditors have highlighted.

Even as it finished auditing FY22 results, there was no company support to finish auditing for FY23, BDO said.

"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," BDO said in its letter.

Further, BDO raised concerns over a forensic audit over More Ideas General Trading, Byju's Middle East business. "There has been inordinate delay on the part of the management to initiate the forensic review, despite our repeated reminders sent vide various emails," BDO's mail said.

"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," it concluded.

BDO also filed Form ADT 4 in accordance with the provisions of the Companies Act, 2013 on September 02, 2024 which indicates that it has identified fraudulent activities at Byju's.