Super Micro auditor resigns after raising concerns months ago

Great microphones Shares plunged as much as 35% on Wednesday morning after the company announced that its auditor had resigned following months of disagreements with the company over governance and board independence.

Ernst & Young said in its resignation letter that it was “unwilling to be associated with the financial reports prepared by management.” The accounting firm also raised concerns about the board's independence of CEO Charles Laing and “other members of management.”

The company announced that EY was commissioned to audit Super Micro for the first time in the 2024 financial year. Super Micro has still not released its financial statements and is reportedly under investigation by the federal government.

Super Micro makes computers that companies use as servers for websites, data storage and other applications, including AI algorithms. The company's customers include major players in the field of AI such as: Nvidia, AMD And Intel. Shares of Super Micro, which joined the S&P 500 in March, rose 246% in 2023.

The auditor first flagged problems with Super Micro's internal financial controls, governance and openness in late July, prompting the server company to appoint a special board committee to examine the company's internal controls.

“We are resigning due to information that has recently come to our attention that has resulted in us no longer being able to rely on the representations of management and the audit committee,” EY said in its resignation letter. EY's concerns were raised ahead of a report on short sellers that took aim at Super Micro's financial controls and accounting practices.

Super Micro has had problems with regulators before over its accounting practices. The company paid a $17.5 million penalty to the Securities and Exchange Commission in 2020 after the regulator alleged it had prematurely and improperly recognized revenue.

The company hired the Cooley law firm and a forensic accounting firm to review Super Micro's internal controls. This review is still ongoing, the company said in a regulatory filing.

Representatives for Super Micro and Ernst & Young did not immediately respond to a request for comment.