BYJU'S Insolvency: Edtech Accuses the Auditors of Unethical Practices

BYJU'S, India's largest edtech company, is facing a significant corporate shake-up as its auditors, BDO, have resigned amidst ongoing insolvency proceedings. In a strong statement, BYJU'S has outlined serious concerns regarding BDO's conduct, accusing the audit firm of unethical practices and manipulation.

BYJU'S Accuses Auditors of Unethical Practices, Refuses Backdating Reports

According to BYJU'S spokesperson, the company has complied with all requests from BDO, except those deemed unethical or illegal. The key issue cited for BDO's resignation is BYJU'S firm refusal to backdate reports. The company alleges that BDO went as far as recommending another firm to facilitate this illegal activity. BYJU'S claims to have call recordings in which BDO representatives explicitly suggested backdating documents, which the edtech giant refused.

"We believe that our refusal to engage in such unethical practices is the real reason behind BDO's decision to resign," said the spokesperson in a written statement. 

BYJU'S Insolvency Proceedings: Timeline of Events Leading to Resignation

BYJU'S entered insolvency proceedings on July 16, 2024, due to an ongoing legal dispute with the Board of Control for Cricket in India (BCCI). This led to the appointment of an Insolvency Resolution Professional (IRP) and the suspension of the company's board. On July 17, just a day after the insolvency proceedings began, BDO emailed BYJU'S suspended board, seeking clarifications on historical transactions with a Middle East-based partner. In the same email, BDO allegedly threatened to resign if clarifications were not provided within 45 days.

However, BYJU'S noted that BDO failed to include the IRP in the email, despite being aware that the IRP had taken control of the company after the board's suspension. BDO eventually resigned after the 45-day period, citing a lack of response from the suspended board. The IRP later confirmed during a creditors' meeting on September 3, 2024, that he had reached out to BDO multiple times during the 45-day period but received no communication from the audit firm.

"This lack of communication is both surprising and suspicious," stated the IRP, adding fuel to the controversy surrounding BDO's exit.

BYJU'S Faces Corporate Shake-Up: Middle East Transactions and Forensic Audit Concerns

Regarding the transactions with their Middle East partner, which were the focus of BDO's clarification request, BYJU'S emphasized that a forensic audit had already been initiated well before BDO's email. This audit, fully transparent and supervised by BDO, was unfortunately halted due to the insolvency proceedings that began on July 16. The company stressed that the failure to complete the audit cannot be attributed to the suspended board.

Further raising questions about BDO's conduct, BYJU'S pointed out that the same foreign transactions had been greenlighted in a virtual board meeting for FY22, with the audit report being clean. A senior partner from BDO even confirmed in a video that after due diligence, no evidence of fraud or malpractice was found in BYJU'S international transactions.

BYJU'S Battles Insolvency, Forensic Audit and Insolvency Proceedings

As BYJU'S battles insolvency, the company remains hopeful that the Supreme Court will vacate the insolvency order soon. In the meantime, BYJU'S has expressed full support for the Resolution Professional (RP) taking the lead in conducting a forensic audit into the Middle East transactions. The company has promised to extend full cooperation to ensure a thorough audit process.

"We welcome the RP's leadership in this matter and are prepared to offer every possible support to facilitate the forensic audit," the spokesperson concluded.

The resignation of BDO raises many questions. With an ongoing legal battle, the insolvency proceedings and forensic audits will play a crucial role in determining BYJU'S future.