caalley logo

The alley for Indian Chartered Accountants

Auditor makes adverse opinion on internal financial controls of BYJU’S

Bengaluru, October 19, 2022

The statutory auditor of the company -- Deloitte Haskins & Sells – has made an adverse opinion, a rarity, on the finances of the company.

Edtech major BYJU’S, which recently filed its FY21 financial statement with the Ministry of Corporate Affairs, seems to be facing some serious issues with internal financial controls.

The statutory auditor of the company -- Deloitte Haskins & Sells – has made an adverse opinion, a rarity, on the finances of the company.

Deloitte Haskins & Sells, in the adverse opinion, has said the parent and its subsidiary companies have not maintained adequate and effective internal financial controls over financial reporting as of March 31, 2021. It has identified certain material weaknesses including revenue recognition relating to assessment of terms of consumer contracts, evaluation of probability of collection, determination of fair value of guarantees given on behalf of customers and estimation of sales returns, among others.

It said that recording of customer-wise details of collections may result in inadequate provision for expected credit loss. “Weaknesses in internal financial control would indicate presence of some high value transactions that do not culminate into accepted accounting practices,” said Rajat Mohan, senior partner, AMRG & Associates.

He added that this kind of reporting by an auditor would have serious repercussions for the investors of the company. The auditor has also not recongnised revenues from transfer of products under deferred payment terms totalling Rs. 1,156.27 crores because these transfers did not meet the criteria in respect of collections on the date of the transfers.

The firm has been facing the heat after it announced $800 million funding in March this year, and subsequently it did not receive $250 million funds from Sumeru Ventures and Oxshott till July. However, it raised the same amount last week from existing investors including Qatar Investment Authority.

The company has sacked 2,500 employees, and said its top priority is to achieve profitability by March 2023. BYJU’S revenue from operations grew 4% to Rs 2,280.26 crore in FY21 compared to `2,189 crore in the previous year.

Of the total revenue, 81% (Rs 1,848.74 crore) came from just selling of edutech products such as SD cards, tablets and others. However, this sale has reduced 9.5% compared to the previous fiscal year, as in FY20 it stood at Rs 2,043.52 crore.

Also, its revenue from streaming services stood at Rs 108.47 crore in FY21, compared to Rs 145.17 crore in the previous year. The company provides the content in the form of streaming services and it categorises as sale of services.

Recently, Lok Sabha MP Karti Chidambaram urged the Institute of Chartered Accountants of India (ICAI) to investigate the company's financials. He asked whether it is not a blatant misinterpretation of facts to classify hardware products as edutech.

[The New Indian Express]

Read more on:
Don't miss an update!
Subscribe to our newsletter