Auditor-Hopping Is Rare, but 13 Small Companies Defy the Trend

Companies switch business strategy, headquarters, or even corporate names. What they don’t often change is the outside firm that vets their books.
Thirteen public companies prove the exception to this rule. These businesses hired and fired auditors more than seven times apiece in the past decade, according to an analysis of data from Ideagen Audit Analytics. They share similar characteristics: their shares all trade below $1 each and some of them are in emerging industries like cannabis. All but one trades over the counter, meaning they don’t meet the minimum financial thresholds to be listed on major exchanges like Nasdaq or the New York Stock Exchange.
Investors and analysts pay attention when a company changes its auditor. US securities laws require companies to alert the market via a special financial filing that they’ve hired or fired a firm or if their auditor resigns. These updates can offer potential warning signs of internal turmoil or issues with a company’s financials, though that’s not always the case.
Two of the companies with frequent auditor turnover—solar energy installation company ABCO Inc. and acquisition company Phoenix Rising Cos.—don’t appear to be in business anymore. Phone calls and emails to corporate headquarters went unanswered and neither has filed regulatory reports since 2023. The last-known auditor for both of them was the now-shuttered BF Borgers CPA PC, a firm the Securities and Exchange Commission dubbed a “sham audit mill” in May. The agency levied a total of $14 million in fines on BF Borgers and its founder.
The largest company, Nasdaq-listed financial services business Future FinTech Group Inc., has changed auditors nine times in the past 10 years. The company didn’t return requests seeking comment. It too briefly counted BF Borgers as its auditor for about a year in 2020. In July 2023, Future FinTech Group agreed to pay $1.65 million to settle SEC charges that it filed inaccurate annual reports and failed to maintain adequate books and records.
Small Business Growth
Auditor switching, especially among small businesses, isn’t automatically a sign of trouble. These companies tend to pick small, sometimes local audit firms. Some of those firms get bought out by larger firms or they decide to quit auditing public companies altogether. Other times, businesses grow and find they need a bigger audit firm with experience handling more complex business transactions.
“A different auditor may just be a better fit,” said Brian Bratten, an accounting professor at the University of Kentucky’s Gatton College of Business.
For Mitesco Inc., a healthcare technology company, changing auditors seven times in the past 10 years was part of being a small, growing business, said Richard Smyth, an adviser to the company.
Sometimes Mitesco needed to save money. Other times, a larger auditor put the company low on its list of priorities and missed deadlines. Mitesco’s latest switch was due to a technicality; its previous auditor merged with another firm, Smyth said.
“There has never been a change as a result of a dispute or other item, generally just to save money,” he said, calling it “small biz 101″ type issues.
Auditor Turnover
Corporate Strategy Shift
SUIC Worldwide Holdings Inc., a New York-based startup that focuses on information technology products and services, has switched auditors seven times in the past 10 years. It’s also changed names and business strategies. The company was previously known as Sino United, which produced electronic products, and AJ Greentech Holdings, when it marketed and manufactured alcohol-based vehicle fuel products in China.
The turnover stopped in 2019. SUIC Worldwide Holdings has had a steady relationship with its current auditor for five years, company CEO Hank Wang said in an email.
US audit regulators in 2017 and 2018 sanctioned two of its prior auditors, specifically calling out faulty audits related to the company’s previous corporate operations. Canuswa Accounting & Tax Services Inc. in 2012 and 2013 failed to take action after becoming aware of “possible illegal acts” by AJ Greentech. Zhang Hongling CPA PC didn’t ask enough questions about related party transactions for Sino United and then back dated debt cancellation agreements when prodded by inspectors, the Public Accounting Oversight Board said.
SUIC Worldwide Holdings’ predecessor businesses never got sanctioned, said Wang, who became CEO of the company in 2023.
“I can assure you that our financial and accounting practices are fully compliant,” Wang said.
Few Auditor Changes
Auditor turnover is rare among large, established companies. Consider the companies in the S&P 500, the much-watched index encompassing the largest US-listed businesses. More than half of S&P 500 companies have had the same auditor for more than a quarter century, Bloomberg data shows.
US audit regulators have raised concerns that relationships between large companies and their longtime auditors may become too cozy. The Public Company Accounting Oversight Board in 2011 floated the idea of mandatory auditor rotation, such as making companies find new auditors after 10 years, but the idea was so unpopular it never made it to a formal proposal. Auditor rotation is mandatory in Europe. The UK requires companies to change accounting firms every 20 years.
Even if frequent auditor changes are communicated as a money-saving move, they’re often due to auditors and company managers disagreeing on an issue or a change in the company’s risk level, academic research shows.
“There’s less commonly a benign explanation when it’s frequent,” said Bratten, who co-authored a recent paper on auditor changes.
Investors and analysts find auditor change details so valuable that Hudson Labs, an investment research software company, recently added a turnover feature to its research product. It lets customers dig in to see which companies have relatively high auditor turnover and if their securities filings reveal details on why their auditors got hired or fired.
Potential Red Flags
Sometimes high auditor turnover correlates with other financial reporting red flags, Hudson Labs CEO Kris Bennatti said.
Take electric vehicle company Ideanomics Inc., which was previously an artificial intelligence startup, a fintech, and a video-on-demand outfit. The company churned through five auditors—including BF Borgers—since 2014, but analysts had long noted cash flow problems, Bennatti said.
The company in August paid $1.4 million to settle SEC charges over an alleged scheme to mislead the public about its financial performance. “Ideanomics and its management team fully cooperated with the SEC,” a company representative told Bloomberg Law at the time. “Resolving these legacy matters was important to Ideanomics and settling the matter on a no admit, no deny, basis draws a line under almost six years of interaction with the SEC.”
Hiring new auditors is an expensive, time-consuming undertaking for businesses because new auditors essentially start vetting company financials from scratch. Most companies take great pains to avoid turnover, so investors should pay attention when businesses switch, said Bennatti, who is a former auditor.
“If an auditor specifically says, ‘hey, we’re quitting’ or ‘there’s a disagreement,’ that’s obviously a big deal,” Bennatti said. Or if a company changes its auditor after the firm questions their financials, “it’s definitely a bad sign,” she said.
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