Super Micro Auditor EY Resigns, Citing ‘Integrity’ Concerns
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(Bloomberg) -- Ernst & Young LLP resigned as the auditor to troubled server maker Super Micro Computer Inc., citing concerns about the company’s governance and transparency.
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Ernst & Young raised questions about the firm’s commitment to integrity and ethics, according to a filing that Super Micro released on Wednesday. “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,” Ernst & Young wrote.
The resignation comes after news broke last month that the Department of Justice had launched a probe into an ex-employee’s claims that Super Micro violated accounting rules. A month earlier, Super Micro said it would delay its annual financial filings and that a special committee was evaluating internal controls over financial reporting.
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Shares of the server supplier plunged as much as 34% Wednesday morning before paring some losses after the company said it would hold a quarterly “business update” call with investors next week.
Scrutiny has intensified on Super Micro since a former employee, Bob Luong, alleged earlier this year in federal court that the company had sought to overstate its revenue. Short-seller Hindenburg Research subsequently referenced Luong’s claims in a research report about Super Micro, alleging “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.”
Super Micro said it doesn’t expect the issues to lead to revisions in previously issued financials and that it has begun looking for another auditor. The company said it disagrees with Ernst & Young’s decision to resign, but has taken the concerns expressed seriously and will carefully consider findings and suggested actions by the suggested special committee.
Ernst & Young said that it only agreed with portions of Super Micro’s filing. The auditor could not guarantee that the issues raised would not lead to Super Micro restating previously issued financial results. In its resignation letter, Ernst & Young said it’s “unwilling to be associated with the financial statements prepared by management.”