Byju's Counters BDO's Resignation, Calls Auditor's Exit "Legally Unfounded"

Byju's, a leading edtech company, is facing yet another twist in its ongoing financial saga with the recent resignation of its auditor, BDO (MSKA & Associates). The auditors claimed issues of transparency and lack of cooperation from Byju's management, which have been refuted by the company’s founders, Byju Raveendran and Divya Gokulnath. In a strongly worded rebuttal, Byju's termed BDO's resignation as "legally untenable and escapist," and questioned the timing and manner of the auditor's exit.

The controversy began when BDO submitted a resignation notice citing multiple irregularities in Byju's financial practices. This notice came at a crucial time when Byju's was already under insolvency proceedings, with its board suspended and management responsibilities taken over by an Insolvency Resolution Professional (IRP). According to Byju's, the resignation was not only premature but also procedurally incorrect, as the company was in a state of insolvency, and the board was not in a position to accept such a resignation.

The edtech firm highlighted that BDO's initial notice requesting clarifications about certain Middle Eastern transactions was sent when the board was suspended. This, they argued, rendered the notice invalid, and any resignation based on an unanswered query from that period legally questionable. Byju's further accused BDO of using "blackmail tactics" and bypassing the appointed IRP who was in charge of the company at the time.

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BDO, however, maintained that its decision to step down was driven by a lack of transparency and cooperation from Byju's, claiming that the suspended board failed to provide adequate information about significant financial transactions. They also noted that attempts to engage with Byju's management were met with delays and insufficient responses, which severely impacted their ability to conduct a thorough audit.

Despite completing the audit for the fiscal year 2022, BDO cited that Byju's did not provide the necessary support to conclude the audit for the current year. They further alleged that Byju's had lost control over several of its subsidiaries, complicating the task of auditing their financial records. The firm raised concerns about the lack of clarity in the company’s accounts, which they felt could undermine the integrity of the auditing process.

Byju's, in turn, argued that the criticisms made by BDO were unfounded and largely speculative. The company emphasized that it had complied with all reasonable requests made by the auditor, except those deemed unnecessary or redundant by the IRP. Byju's accused BDO of acting hastily, just a day after the company formally began its bankruptcy proceedings, suggesting that the auditor's actions were driven by other motives.

The conflict escalated further when Byju's questioned BDO's decision to communicate directly with the suspended board members instead of the IRP, who was in charge of the company’s affairs during this period. The IRP reportedly confirmed that multiple attempts to contact BDO were met with no response. This, according to Byju's, undermines the legitimacy of BDO's resignation and raises questions about the auditor's conduct.

The resignation has added another layer of complexity to Byju's already tumultuous financial situation. The company is currently embroiled in several legal battles, delayed payments to creditors, and ongoing disputes with lenders. With BDO’s abrupt departure, Byju's insolvency proceedings are expected to face further delays and challenges.

The situation remains fluid as Byju's continues to grapple with its financial woes, which have become a focal point for stakeholders, creditors, and regulatory authorities. The outcome of this dispute with BDO will likely have significant implications for the company’s future, particularly as it navigates the intricacies of the insolvency process.

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As the dust settles, both Byju's and BDO appear entrenched in their positions, with the edtech giant determined to challenge the resignation and the auditor steadfast in its stance on the alleged lack of transparency. The final resolution may rest in the hands of the courts or regulatory bodies overseeing the insolvency process, making it a critical moment for both parties.

Source: MoneyControl