Byju's exposes gap in NFRA mandate

Regulator’s oversight extends to listed firms, banks, insurers

- Gireesh Chandra Prasad

The resignation of Deloitte Haskins & Sells Llp as the auditor of Think and Learn Pvt. Ltd, which runs the online learning platform Byju’s, has exposed a gap in the regulatory framework for auditors, a person informed about the government’s regulatory response in the case said.

The oversight of audit regulator National Financial Reporting Authority (NFRA) extends only to statutory auditors of listed companies, banks, insurers, power utilities, and large unlisted public limited companies but excludes private limited companies, no matter how big they are, the person said on condition of anonymity.

Therefore, NFRA faces a challenge in looking into the issue of auditor resignation in this case and concerns around the delay in financial reporting, the person said.

This concern around auditors of private limited companies remaining outside the ambit of NFRA’s oversight is significant in the context of the rapid growth of the startup ecosystem and the mushrooming of unicorns, many of which remain private limited entities but raise substantial capital and, in some cases, have a vast customer base.

This certainly makes a case for amending the NFRA Rules of 2018, which defines the public interest entities, the auditors of which come under the regulator’s ambit, according to the person.