Found gross negligence by Byju's auditors: ICAI president
Mar 13, 2024
Synopsis
ICAI found gross negligence by auditors of Byju's. FRRB will review the conduct of auditors and take appropriate action. RBI barred Paytm Payments Bank from business. Byju Raveendran was removed from the board of Byju's.
Chartered accountants' apex body ICAI has "found gross negligence on the part of the auditors" of the now-crippled edutech firm Byju's, said its president Ranjeet Kumar Agarwal on Wednesday. Besides, the top official also said the accounting body is also planning to inspect the books of payments major Paytm.
"Our inspection has found gross negligence on accounting practices by individual auditors of Byju's and accordingly we have recommended to the Financial Reporting Review Board (FRRB) to take punitive actions on auditors concerned," Ranjeet Kumar Agarwal, the president of the Institute of Chartered Accountants of India (ICAI), told PTI here.
When asked whether the ICAI will inspect the books of the payments major Paytm group now, he said, "As we have taken a suo moto decision to look into the role of the auditors of Byju's, we are now thinking about looking to the role of the auditors of the payments major Paytm now".
Following a slew of regulatory breaches, the Reserve Bank of India (RBI) has barred Paytm Payments Bank from doing any business from March 15.
The RBI action first came in on January 31 when it asked the payments bank to stop nearly all its businesses except allowing already loaded payments from its wallets from March 1, but later extended the deadline till March 15.
On crisis-hit Byju's, Agarwal said, "The FRRB will review our report on the conduct of the auditors of Byju's both individually as well as at the group levels, apart from the role of the board of the company. After this three-stage review will form an opinion on the role of the individual auditors and take appropriate action. After that, the report will be made public".
For long the international auditing major Deloitte was the statutory auditors of Byju's. However, as the financial trouble mounted at the edutech major, it in June 2023 resigned midway, citing a long delay in preparation of the financial statement of the company for FY22.
Following the resignation of Deloitte, Byju's appointed another global firm BDO as its new auditors. BDO's audit arm is MSKA & Associates.
The FRRB is a non-standing committee of the Council of the ICAI and was constituted in July 2002.
The FRRB may determine whether any scrutiny of the books is necessary over allegations of regulatory lapses and their impact on the payment bank's accounting, Agarwal said, adding that it is the discretion of the board whom to review and when to do so.
"In cases of gross negligence, which we have found in the case of Byju's auditors', we will proceed with further investigation. If there are minor issues, we provide advisory guidance," Agarwal said at a function organised by industry body CII.
Recently, the corporate affairs ministry had asked its field officers to expedite the inspection of the books of Byju's and submit the report. The ministry, which is implementing the company's law, will decide on a further course of action after receiving the report from its regional office.
In July 2023, a month after Deloitte resigned as the statutory auditor of Byju's, the ministry had asked the office of the regional director in Hyderabad to conduct an inspection of the holding company Think & Learn, which is registered in Bengaluru.
Last year, the ministry ordered the inspection in the wake of various developments at that time at the edtech company, including its inability to finalise the statements and the resignation of the auditor.
On February 23, shareholders of Byju's voted unanimously to remove founder-CEO Byju Raveendran and his family members from the board over alleged "mismanagement and failures" at what was once India's hottest tech startup. However, the company had called the voting done in the absence of founders as invalid and ineffective.
Raveendran, his wife and brother -- the only three members on the company board as of now -- stayed away from the extraordinary general meeting called by a group of six investors, who collectively hold more than 32 per cent of Think & Learn.
In the end, more than 60 per cent of the shareholders voted in favour of all the seven resolutions, which included removing the current management, reconfiguration of the board and a third-party forensic investigation into acquisitions done by the company, sources close to the investors had said.
Meanwhile, delivering the keynote address at the CII event on financial reporting and governance framework Ajay Bhushan Prasad Pandey, the chairman of the National Financial Reporting Authority, called upon the auditors fraternity to do everything to increase public trust in them.
"Everyone in the system, especially the auditors, have to ensure the five lines of defence to ensure there is trust in financial matters and corporate governance. These fine lines of defence are the management of the company, the audit committee and independent directors, auditors, investors and finally regulators. These are also the building blocks of sound corporate governance," Pandey said.
[The Economic Times]
