Super Micro Computer stock plunges as accountant resigns

Investing.com -- Super Micro Computer shares plummeted 32% on Tuesday following the abrupt resignation of Ernst & Young LLP (EY) as the company's registered public accounting firm.

In a filing with the U.S. Securities and Exchange Commission (SEC), Super Micro disclosed that EY submitted its resignation on October 24. In late July, EY reportedly raised concerns over governance, transparency, and the completeness of communications with management.

EY's resignation comes while it was conducting its first audit for the company, covering the fiscal year ending June 30, 2024.

According to the filing, EY raised red flags in July regarding the company's internal controls and governance procedures, warning that the timely filing of the annual report was at significant risk.

In response, the board of directors launched an internal review through a Special Committee, hiring Cooley LLP and forensic accounting firm Secretariat Advisors to assist with the investigation.

Despite receiving preliminary updates, the filing says that EY stated the additional information from the review raised serious concerns about the company's commitment to integrity and the ability of the Audit Committee to act independently from management.

EY concluded that it would "no longer be able to rely on management's and the Audit Committee’s representations" and expressed unwillingness to be associated with the financial statements, according to the resignation letter filed with the SEC.

While Super Micro expressed disagreement with EY's decision, the company acknowledged the concerns and indicated that it will carefully consider the findings from the Special Committee's review.

The company has initiated the search for a new independent auditor.

EY's resignation has rattled investor confidence in a stock that has declined significantly from its March highs.

Source: Investing.com