Super Micro Computer shares slumped 33.75% in morning trading on Wednesday after it said Ernst & Young had resigned as its public accounting firm, over a month after Hindenburg Research alleged "accounting manipulation" at the AI server maker.
Ernst & Young in its resignation letter said it was “unwilling to be associated with the financial statements prepared by management.” The accountancy also raised concerns about the board’s independence from CEO Charles Laing and “other members of management.”
EY had been hired to audit Super Micro for the first time for the 2024 fiscal year, the company said. Super Micro has still not issued its financial statements for this year, and is reportedly under federal investigation.
The auditor first flagged issues with Super Micro’s internal financial controls, governance and forthcomingness in late July, prompting the server firm to appoint a special board committee to investigate the company’s internal controls.
“We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations,” EY said in its resignation letter. EY’s concerns were raised prior to a short-seller report that took aim at Super Micro’s financial controls and accounting practices.
Super Micro has run into trouble with regulators over its accounting practices before. It paid a $17.5 million penalty to the Securities and Exchange Commission in 2020 after the regulator alleged it prematurely and improperly recorded revenue.
The company hired law firm Cooley and a forensic accounting firm to review Super Micro’s internal controls. That review remains ongoing, the company said in a regulatory filing.
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