BYJU'S auditor MSKA resigns amid unresolved financial issues
MSKA & Associates, the auditing firm for Indian edtech giant BYJU'S, has resigned as the company's statutory auditor. The resignation was announced to the board and is effective immediately. This development will impact the auditing of BYJU'S accounts for FY23. MSKA & Associates was initially appointed for a five-year term that would have concluded in FY27.
Resignation linked to questionable transaction
The resignation of MSKA & Associates is reportedly linked to a dubious transaction involving More Ideas General Trading LLC, a Dubai-based reseller. This transaction, which was reported to the Ministry of Corporate Affairs (MCA) on September 2, involves an unrecovered amount of around ₹1,400 crore from the reseller. BYJU'S investors had previously expressed concerns over this unresolved financial issue.
MSKA's challenges and BYJU'S previous auditor resignation
MSKA & Associates's decision to resign was reportedly influenced by difficulties in obtaining necessary data for a thorough investigation, and an uncooperative attitude from BYJU'S management. The firm also had to report an issue to the MCA under the Companies Act. This marks the second time in just over two years that an audit firm has resigned from BYJU'S, following Deloitte Haskins & Sells's departure on June 23, 2022.
'Material uncertainty' reported in FY22 audit
In its audit report for FY22, MSKA & Associates noted a "material uncertainty" about BYJU'S status as a "going concern." The firm faced challenges in acquiring required books of accounts, information, and audit evidence, despite multiple attempts and reminders between January and June this year. This led to an incomplete FY23 audit due to lack of critical information regarding unrecovered dues from More Ideas General Trading LLC.
MSKA initiated proceedings under Companies Act
MSKA & Associates had to initiate proceedings under Section 143(12) of the Companies Act, 2013, due to BYJU'S failure to recover approximately ₹1,400 crore from More Ideas General Trading LLC. The firm informed BYJU'S board about this in mid-July. However, after receiving no response from the management or board by August end, MSKA reported the suspicious transaction to the central government as required by law.
Lack of information led to delay in financial statement
According to sources, the auditor took the final step of filing Form ADT-3 with the RoC on September 6. Form ADT-3 is a mandatory filing required when an auditor resigns before completing its term. The subsequent lack of information resulted in significant delays and prevented the financial statement for FY23 from being completed and delivered to stockholders by the September 30, 2023, deadline under the Companies Act, 2013. BYJU'S is also under scrutiny by Enforcement Directorate (ED) and Revenue Department.
