Deloitte report raised concerns about Byju’s financial controls

The digitally signed report from the auditor has only one attachment—the resignation letter shared with the board, and no further reference to any lapses in the company, showed the document accessed by Mint from the government’s website for statutory filings of companies. The contents of the auditor’s report were previously not reported.

However, the resignation letter provides authorities with pointers to probe further the areas of concern highlighted by Deloitte. In the letter, the auditor drew attention to the communication with Byju’s board and its leadership from November 2022 to March 2023.

The communication also includes observations about the alleged weaknesses in the company’s internal financial controls, expressed in the independent auditor’s report for FY21, dated 30 August 2022. The auditor’s report for FY21 is available to the authorities as it is part of the company’s annual returns for that year filed with RoC.

The auditor’s report for FY21 highlighted “material weaknesses in the company’s internal financial controls over financial reporting" as of 31 March 2021. This alleged weakness covered concerns around revenue recognition and a lack of personnel with adequate experience and competence in financial reporting and internal controls. Based on these weaknesses, the auditor made the adverse opinion that the firm has not maintained adequate and effective internal financial controls over financial reporting.

These observations are likely to be examined by RoC as part of an inspection of the books of account ordered by the ministry of corporate affairs.

Emailed queries to the spokesperson for Deloitte Haskins & Sells and the external spokesperson for Think & Learn Pvt. Ltd late on Tuesday and to a spokesperson for the edtech company early on Wednesday seeking comments for the story remained unanswered.

A second person informed about the developments at Byju’s said the company made major steps to address the concerns Deloitte had raised.

Responding to the former auditor’s concerns around the lack of personnel with experience and competence in financial reporting, Byju’s roped in Ajay Goel as its chief financial officer in April in a move it said will strengthen its financial operations, long-term business strategies, and path to profitability.

Founder and chief executive Byju Raveendran, in a statement in April, described Goel as the ideal candidate to take on the role of chief financial officer (CFO) and said his strategic thinking and financial acumen would be instrumental in helping the firm create even more value for stakeholders.

Earlier this month, Byju’s announced the appointment of former State Bank of India chairperson Rajnish Kumar and former CFO and board member of Infosys T.V. Mohandas Pai to the startup’s advisory council.

Last month, it announced the appointment of BDO (MSKA & Associates) as the statutory auditor for five years from FY22. “This strategic decision reflects Byju’s commitment to maintaining the highest standards of financial scrutiny and accountability," said the person, who spoke on condition of not being named.