8-K: DNOW Inc. Appoints KPMG as New Independent Auditor, Dismissing Ernst & Young

DNOW Inc. announced the appointment of KPMG LLP as its new independent registered public accounting firm for the fiscal year ending December 31, 2025, following the dismissal of Ernst & Young LLP.

Summary

• DNOW Inc.'s Audit Committee approved the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2025, effective May 21, 2025.
• Concurrently, Ernst & Young LLP (EY) was dismissed as the company's independent auditor on May 21, 2025.
• EY's reports on DNOW Inc.'s consolidated financial statements for the fiscal years ended December 31, 2024, and 2023, did not contain any adverse opinions, disclaimers, qualifications, or modifications.
• There were no disagreements on accounting principles, financial statement disclosure, or auditing scope/procedure between DNOW Inc. and EY during the fiscal years 2024, 2023, and the subsequent interim period through May 21, 2025.
• No reportable events, as defined by Regulation S-K, occurred during the fiscal years 2024, 2023, and the subsequent interim period through May 21, 2025.
• DNOW Inc. did not consult with KPMG regarding accounting principles, audit opinions, disagreements, or reportable events prior to their appointment.
• EY provided a letter to the SEC, dated May 22, 2025, confirming their agreement with DNOW Inc.'s disclosures regarding their reports and the absence of disagreements or reportable events.

Sentiment

Score: 7

Explanation: The sentiment is positive to neutral. The change in auditors is a procedural event, and the explicit statement that there were no disagreements or reportable events with the outgoing auditor is a strong positive, indicating a smooth transition without underlying financial issues.

Positives

• The transition of auditors appears smooth, with no reported disagreements or reportable events between DNOW Inc. and the outgoing auditor, Ernst & Young LLP.
• Ernst & Young LLP's audit reports for 2023 and 2024 were unqualified, indicating sound financial reporting during their tenure.

Risks

• While no specific issues were reported, any change in a certifying accountant carries an inherent, albeit typically low, risk of disruption to financial reporting processes during the transition period.

Future Outlook

The document does not provide any forward-looking statements or guidance beyond the appointment of the new auditor for the fiscal year ending December 31, 2025.

Management Comments

• The Audit Committee of the Board of Directors of DNOW Inc. conducted a competitive selection process to determine the company's independent registered public accounting firm for the fiscal year ending December 31, 2025.
• Following the review and evaluation of proposals from participating firms, the Committee approved the appointment of KPMG LLP and the dismissal of Ernst & Young LLP.

Industry Context

Changes in independent auditors are a routine part of corporate governance, often driven by competitive bidding processes, fee considerations, or a desire for fresh perspectives. The absence of reported disagreements or reportable events suggests a standard transition rather than one prompted by underlying financial or accounting issues, which is a positive sign for market confidence.

Comparison to Industry Standards

• The process of conducting a competitive selection for an independent auditor, as undertaken by DNOW Inc.'s Audit Committee, aligns with best practices in corporate governance and financial oversight, common among publicly traded companies.
• The explicit statement that there were no disagreements or reportable events with the outgoing auditor (EY) is a standard disclosure required by SEC regulations (Item 304(a)(1)(iv) and (v) of Regulation S-K) and is crucial for maintaining investor confidence in the integrity of financial reporting during an auditor transition. This transparency is consistent with industry norms for such changes.

Corporate Governance

Stakeholder Impact

• Shareholders: The smooth transition of auditors without reported disagreements or issues helps maintain confidence in the integrity and reliability of the company's financial statements.
• Investors: Provides transparency regarding the change in audit firms, which is important for investment analysis and due diligence.
• Management: Will work with a new audit firm, requiring a transition period for familiarization with company processes and personnel.

Next Steps

• KPMG LLP will serve as DNOW Inc.'s independent registered public accounting firm for the fiscal year ending December 31, 2025.

Key Dates

Keywords

Auditor Change, Independent Accountant, KPMG, Ernst & Young, SEC Filing, Form 8-K, Financial Reporting, Corporate Governance, Audit Committee, DNOW Inc.