8-K: Arcturus Therapeutics Changes Auditors, Appoints Deloitte & Touche LLP

Arcturus Therapeutics has dismissed Ernst & Young LLP and appointed Deloitte & Touche LLP as its new independent registered public accounting firm, effective April 5, 2024.

Summary

• Arcturus Therapeutics has changed its independent registered public accounting firm from Ernst & Young LLP (EY) to Deloitte & Touche LLP, effective April 5, 2024.
• The decision to change auditors was the result of a competitive process undertaken by management and the Audit Committee.
• EY's audit reports for the fiscal years ended December 31, 2023 and 2022 did not contain any adverse opinions or disclaimers, but their report on internal controls for 2023 did contain an adverse opinion.
• There were no disagreements between Arcturus and EY on accounting principles, financial statement disclosure, or auditing scope.
• Management had previously identified material weaknesses in internal controls related to information technology and the review of costs for collaboration arrangements.
• Deloitte has not been consulted on accounting principles or audit opinions prior to their appointment.

Sentiment

Score: 5

Explanation: The change in auditors is neutral, but the adverse opinion on internal controls is a concern. The competitive process for selecting the new auditor is a positive.

Positives

• The transition to a new auditor was the result of a competitive process, suggesting a thorough evaluation.
• There were no disagreements between the company and the previous auditor, EY, on accounting principles or auditing scope.

Negatives

• EY's report on the company's internal control over financial reporting as of December 31, 2023, contained an adverse opinion.
• Management had previously identified material weaknesses in internal controls related to information technology and the review of costs for collaboration arrangements.

Risks

• The adverse opinion on internal controls by the previous auditor indicates potential weaknesses in the company's financial reporting processes.
• The material weaknesses identified by management in internal controls could lead to future financial reporting issues.

Future Outlook

The company will now be audited by Deloitte & Touche LLP for the fiscal year ending December 31, 2024.

Management Comments

• The decision to change the Company's principal independent accountants was the result of a competitive process undertaken by management and the Audit Committee.

Industry Context

Changes in auditors are not uncommon, but the reasons for the change and the previous auditor's opinion on internal controls are important factors for investors to consider. This change could be part of a broader effort to improve financial reporting and internal controls.

Comparison to Industry Standards

• The change of auditors is not unusual, but the presence of an adverse opinion on internal controls is a concern.
• Many companies in the biotech sector use large firms like EY and Deloitte, so the change itself is not unusual.
• The competitive process used to select the new auditor is a positive sign of good governance.

Stakeholder Impact

• Shareholders should be aware of the change in auditors and the previous auditor's adverse opinion on internal controls.
• The company's management and audit committee will need to work with Deloitte to ensure a smooth transition and address any internal control weaknesses.

Next Steps

• Deloitte will conduct the audit for the fiscal year ending December 31, 2024.

Key Dates

Keywords

auditor, accounting, Ernst & Young, Deloitte, internal controls, financial reporting, audit committee