Even as Byju’s is battling for its survival amid an increasing scrutiny on its finances, it has received yet another material blow.
Byju’s auditor MSKA & Associates has resigned. MSKA & Associates had been appointed in June last year after the resignation of Deloitte as Byju’s auditor. MSKA & Associates cited several reasons for its resignation, including inadequate support from Byju’s management in giving it the books of account, and the lack of transparency in allowing it to complete its audit. The auditor has also filed Form ADT-4 with the government, which is a form auditors submit to the Central Government of India to report suspected fraud against a company by its own employees or management.
“We are…tendering our resignation as statutory auditors of the Company with immediate effect for the financial year 2022-23 and onwards,” MSKA & Associates wrote in its resignation email. In the email, MSKA & Associates listed out several reasons why it was resigning.
“The financial statements for the year ended March 31, 2023 are long delayed,” MSKA Associates said. “In spite of these delays, there has been inadequate support from the management of the Company in providing us the books of account, information and explanations sought by us and sufficient appropriate audit evidence to enable us to complete the audit for the Financial Year 2022-23,” the letter said. The firm said it had repeatedly written to the management for details, but never got satisfactory responses. “We had received certain management responses vide emails, information shared, etc. which do not either address all the details requested or are inadequate and do not provide us with the sufficient appropriate audit evidence to enable us to complete our audit for financial year 2022-23,” it added.
MSKA also highlighted Byju’s inability to recover dues from a reseller, More Ideas General Trading, Dubai. Byju’s has been unable to recover Rs. 1,400 crore from More Ideas, while having paid it Rs. 300 crore in sales commissions. MSKA highlighted this as a “suspicious transaction”, and said that Byju’s seemed unwilling to investigate it. “There has been inordinate delay on the part of the management to initiate the forensic review, despite our repeated reminders sent vide various emails,” MSKA said.
Crucially, MSKA said that because of Byju’s seeming reluctance to investigate the Dubai reseller, it had filed form ADT-4 with the government. “We have filed Form ADT 4 in accordance with the provisions of the Companies Act, 2013 on September 02, 2024,” it said. Form ADT-4 is a report that auditors submit to the Central Government of India to report suspected fraud against a company by its own employees or officers.
Byju’s, for its part, has hit back against the resignation, claiming that it had complied with requests from MSKA. “As you are well aware, Byju’s has complied with every request made, except those that would require us to cross the lines of ethics and legality,” Byju’s founder Byju Raveendran said. “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,” he added.
MSKA’s resignation comes a year after Deloitte had resigned as Byju’s auditor over similar concerns. “The financial statements of the Company for the year ended March 31, 2022 are long delayed,” Deloitte had then said. “We have also not received any communication on the resolution of the audit report modifications in respect of the year ended March 31, 2021. As a result, there will be significant impact on our ability to plan, design, perform and complete the audit in accordance with the applicable auditing standards,” Deloitte had added in its resignation. A day prior, three Byju’s board members from firms including Chan Zuckerberg foundation, Prosus and Peak XV had resigned. They had later said they’d resigned because the company had continually disregarded their advice on issues relating to corporate governance, and they had been unable to influence an improvement in Byju’s compliance and governance norms. And with yet another auditor resigning a year later over similar concerns, it seems increasingly likely that there could be something amiss with the corporate governance and compliance at Byju’s.