Builder.ai, one of the UK’s best-funded tech start-ups, has relied on an auditor with long-standing links to its founder to sign off its accounts — a finding that has raised alarm with corporate governance experts.

A partner at accounting firm PKF Littlejohn signed off the UK accounts of the artificial intelligence start-up, despite having previously served as a director of another company also set up by Builder.ai’s founder, Sachin Dev Duggal, according to a review of hundreds of filings analysed by the Financial Times.

Duggal stepped down last month as chief executive of Builder.ai and last week resigned as a director from the UK entity, but he remains on the group’s board and retains the title of “chief wizard”. Builder.ai is still searching for a chief financial officer after its previous finance chief resigned in July 2023. 

The London-based group says it uses artificial intelligence to develop apps and has received about $450mn from top investors including Microsoft, SoftBank, Qatar Investment Authority and Insight Partners. 

The FT’s analysis also shows that two overseas subsidiaries of Builder.ai have employed a slew of small audit firms in quick succession, including a Singaporean accountancy firm that also audited a now-notorious cryptocurrency hedge fund before it collapsed.

Corporate governance experts said that the findings raise questions such as whether the person signing off the company’s UK accounts could have had a conflict of interest, and why multiple auditors of the overseas entities resigned in quick succession.

Other companies have previously faced scrutiny for their use of little-known firms to audit the books of key subsidiaries. Adani Group is among those to be targeted by short sellers over its use of small audit firms in India. 

Builder.ai said: “The selection of auditors for Builder.ai’s subsidiaries has evolved in alignment with our operational scale and revenue segmentation” as well as local regulations, and that “changes in auditors were based on appropriate business needs at the point in time”.

The company added that it had “now engaged a Big 4 internal audit firm and a Big 4 statutory group auditor for consolidated oversight”, underlining Builder.ai’s “commitment to strong financial governance”. 

It said it was taking the search for a new CFO “seriously” and that in September a new global head of finance had joined the company, adding that it had also made “a strategic change” in its CEO after long-term discussions to meet the company’s “evolution and growth”. 

According to filings, in 2010 Paul Goldwin, then a partner of accounting firm Linn Maggs Goldwin, became a director of SMX Corporation, a British company that Duggal founded a decade earlier. 

For several years Goldwin was the director responsible for signing the unaudited financial statements of SMX, which recently claimed to operate in disparate business lines including reselling computer hardware, investment consultancy and construction. 

In January 2017 Goldwin, who had by then moved to mid-tier accounting firm PKF Littlejohn, resigned as a director of SMX. Later that year Duggal incorporated Builder.ai’s London entity, recording its registered office address as PKF Littlejohn’s headquarters in Canary Wharf.

One of Builder.ai’s subsidiaries in India previously had the letters SMX in its name, having been established in 2003 — 13 years before Builder.ai itself — as SMX iExplore Software Services India. 

Despite the apparent links between SMX and Builder.ai, Goldwin has signed off accounts for the Builder.ai UK business as its senior statutory auditor every year since 2021, including accounts filed last August. 

Goldwin declined to comment.

PKF Littlejohn said it was “unable to comment on specific client work” but maintained “independence and integrity in full compliance with relevant rules and regulations”.

John Webb, a corporate governance consultant who previously headed internal audit at JPMorgan Cazenove, asked whether “the audit firm, or any of its partners working in any way on the Builder.ai audit, have a conflict of interest through past or present connections with Builder.ai”.

“Until one has the answers, no conclusions or opinions can be made,” he added.

PKF Littlejohn said SMX and Builder.ai “are two separate companies, with no trading relationships between them”, adding that before starting as Builder.ai’s auditor, the firm “examined the situation and concluded that there was no reason why a previous role at a separate company would compromise our independence”. 

Builder.ai said it had “no relationship” with SMX Corporation.

Builder.ai’s main subsidiary in India has experienced a string of statutory auditor resignations. In 2017 Delhi-based GMB & Associates resigned. Its replacement, which appears to be a sole trader, lasted a year.

The next auditor, VSC & Company, was replaced in 2020 by Navratn & Co, which appears to have no website. 

Similarly, the first auditor of Builder.ai’s Singaporean subsidiary, an apparent sole trader, was replaced after 11 months by Oakfield & Associates, which corporate filings show employs four partners. Oakfield also gave an unqualified audit to Three Arrows Capital in 2021, the year before the crypto investment firm collapsed in a high-profile scandal.

Paul Barnes, a retired professor of finance at Nottingham Business School, said the resignations raised “concerns” and “usually a large company will employ a single large firm of auditors, especially if it’s international”. 

Builder.ai said its board had consented to the auditors’ appointments when “their services aligned with the relative size of those subsidiaries”. It added that the small size of some of Builder.ai’s subsidiaries meant they “may not qualify for Big 4 audits”, whose engagement criteria it said generally require an audit fee of between $350,000 to $750,000. 

VSC & Company could not be reached for comment. The other Indian or Singaporean accounting firms or traders either did not respond or declined to comment.