News Summary

  • Trump Media & Technology Group — majority-owned by former President Donald Trump — said in a Monday filing with the U.S. Securities and Exchange Commission that it has dismissed its public auditor, BF Borgers, and hired Semple, Marchal & Cooper as its replacement. The decision was recommended and approved by the audit committee of the Sarasota, Florida-based company.
  • The media company's split with Borgers took effect last Friday, the same day the SEC announced that BF Borgers, a Lakewood, Colorado-based audit firm, agreed to pay a $12 million civil penalty to settle charges of massive fraud and false reviews of client financial statements. At least 1,625 public filings and disclosures were affected between January 2021 and June 2023, as previously reported by CFO Dive.
  • Trump Media said in the SEC filing: "The SEC has advised that the company need not obtain a letter from BF Borgers regarding whether it agrees with the statements in this filing, but may note that BF Borgers is currently not permitted to appear or practice before the SEC for the reasons set forth in the SEC's 'Order Instituting Public Administrative and Cease-and-Desist Proceedings' issued on May 3."

In-Depth Analysis

This case comes amid heightened SEC accounting and auditing enforcement actions. According to Cornerstone Research data, such actions in fiscal 2023 rose about 22% to 83 from 68 in 2022, above the annual average of 66 from fiscal 2018-2022. The most common charges initiated last year involved revenue recognition and internal accounting control issues, while only four actions alleged audit independence violations.

BF Borgers has previously faced disciplinary issues. In April, the Canadian audit watchdog — the Canadian Public Accountability Board — imposed several sanctions on the firm, including requiring it to immediately cease any audit work on Canadian public companies. Additionally, last fall, the American Institute of Certified Public Accountants removed the firm from its peer review program registry, citing that the firm's reports on its website "were found to be so seriously deficient that educational and remedial corrective actions were inadequate."

Companies that used BF Borgers' services may be affected in multiple ways. First, effective from the date of last Friday's order, clients who used BF Borgers for SEC filings must find a new auditor, as Borgers can no longer practice before the SEC, according to guidance provided in a Friday statement following the order. Additionally, if BF Borgers resigns or is dismissed, any affected Borgers client must also file an 8-K.

Although SEC filings submitted before May 3 may not necessarily need to be amended, according to the agency's statement, "issuers should consider whether their filings may need to be amended to address any reporting deficiencies resulting from BF Borgers' audit work."

Neither Trump Media nor Borgers immediately responded to requests for comment. Borgers agreed to the SEC order without admitting or denying its findings.