Dive Brief:

• Trump Media & Technology Group, which is majority-owned by former President Donald Trump, said it has dismissed its public auditor BF Borgers and hired Semple, Marchal & Cooper to replace it in a move that was recommended and approved by the Sarasota, Florida-based company’s audit committee, according to a Monday filing with the Securities and Exchange Commission. 
• The media company’s move to part with Borgers was effective Friday, the same day the SEC announced that the Lakewood, Colorado-based auditing firm agreed to pay a $12 million civil penalty to resolve SEC charges that Borgers committed massive fraud and performed sham reviews of clients’ financial statements, with at least 1,625 public filings and disclosures from January 2021 through June 2023 impacted, CFO Dive previously reported.
• The SEC, “has advised that, in lieu of obtaining a letter from BF Borgers stating whether or not it agrees with the statements herein, the Company may indicate that BF Borgers is not currently permitted to appear or practice before the SEC for reasons described in the SEC’s Order Instituting Public Administrative and Cease-and-Desist Proceedings...dated May 3,” Trump media’s SEC filing states. 

Dive Insight:

The case comes as SEC accounting and auditing enforcement actions have ramped up. In fiscal 2023, such actions rose about 22% to 83 from 68 in 2022, a level above the annual average of 66 for fiscal years 2018-2022, according to Cornerstone Research. The most common allegations initiated last year related to issues around companies’ revenue recognition and internal accounting controls, while only four actions alleged violations of auditor independence, the study found.  

BF Borgers has struggled with previous disciplinary woes. In April, the Canadian Public Accountability Board, Canada’s audit watchdog, imposed multiple sanctions on the company including calling for it to immediately terminate any audit engagements with Canadian public companies. And last fall the American Institute of Certified Public Accountants terminated the firm from its enrollment in the association’s peer review program “because the firm was found to be so seriously deficient in its performance that education and remedial, corrective actions are not adequate,” according to a report on the AICPA’s website. 

Companies that used BF Borgers’ services will likely be impacted in a number of ways. For starters, as of the order on Friday clients that used BF Borgers for SEC filings must find new auditors as Borgers can no longer practice before the commission, according to a Friday statement providing guidance after the order was issued. In addition, any affected Borgers clients also must file 8-Ks if BF Borgers resigns or is dismissed. 

And, although SEC filings made before May 3 don’t necessarily need to be amended, “issuers should consider whether their filings may need to be amended to address any reporting deficiencies arising from the BF Borgers engagement,” according to the agency’s statement. 

Trump Media and Borgers didn’t immediately respond to requests for comment. Borgers consented to the SEC order without admitting to or denying its findings.