The edtech giant Byju’s is now under the scrutiny of the disciplinary committee of the Institute of Chartered Accountants of India (ICAI), according to official sources. The Financial Reporting Review Board (FRRB) of ICAI had previously been examining Byju’s financial disclosures.
An individual familiar with the matter disclosed that the FRRB has highlighted certain issues for the disciplinary committee’s attention. “Some areas warranted a deeper investigation. There are three or four areas of concern which the disciplinary committee will further explore,” they said.
The ICAI’s FRRB has the authority to review general-purpose financial statements of businesses and their audit reports. In Byju’s case, the board has examined the company’s balance sheet, profit and loss statement, notes on accounts, and the auditor’s report, among other items.
If found guilty of professional misconduct, the auditor could face a maximum penalty of Rs. five lakh and disqualification by the disciplinary committee. The ICAI can take action against the auditor but not the audit firm under the current Chartered Accountants Act.
Deloitte Haskins & Sells recently stepped down as the statutory auditor of Byju’s. Deloitte cited a significant delay by the company in providing audited financial statements for the year ended March 31, 2022, as the reason for their resignation. Deloitte did not respond to an email query from Business Standard, and an email to Byju’s also remained unanswered.
ICAI’s scrutiny of Byju’s financial disclosures was triggered by a 22-month delay in the submission of the company’s financial reports. The Ministry of Corporate Affairs has also launched an inquiry against the company.
This review could also place the role of the auditor under question, as Byju’s has yet to file its results for FY22. Moreover, even the FY21 results were submitted late. According to the latest available financial report, Byju’s incurred losses of Rs. 4,588 crore in FY21, a nineteen-fold increase from the previous year, while earning a revenue of Rs. 2,428 crore.
On July 22, Deloitte Haskins & Sells resigned from its role as Byju’s auditor, citing prolonged delays in the filing of financial results. The resignation letter to the company’s board stated: “The financial statements of the company for the year ended March 31, 2022, are long delayed…we have not received any communications on the resolution of the audit report modifications for the year ended March 31, 2022, the status of audit readiness of the financial statements, or the underlying books and records, and we have been unable to commence the audit to date.”
Following the resignation of the auditor, representatives of the top three investors in the firm — Prosus, Peak XV Partners, and Chang Zuckerberg Initiatives — also resigned. After these resignations, Byju’s founder Raveendran Byju addressed shareholders and employees regarding the issue.
Nonetheless, rumours circulated post town hall that “While the shareholders expressed gratitude to Deloitte, they also mentioned that the auditor had been causing delays and complications in the results,” a source noted.
In response to these events, the company announced the appointment of BDO as the statutory auditor for the next five years and established an Advisory Council on July 13. Rajnish Kumar, former State Bank of India chief and current chairman of BharatPe, along with Mohandas Pai, former chief financial officer (CFO) of Infosys, have joined Byju’s BAC.