8-K: Forian Inc. Changes Accounting Firm from Marcum LLP to CBIZ CPAs P.C.

Forian Inc. has changed its independent registered public accounting firm from Marcum LLP to CBIZ CPAs P.C., effective for the fiscal year ending December 31, 2025.

Summary

• Forian Inc. announced that it dismissed Marcum LLP as its independent registered public accounting firm on April 24, 2025.
• The company engaged CBIZ CPAs P.C. as its new independent registered public accounting firm for the fiscal year ending December 31, 2025, with the approval of the Audit Committee.
• The change was prompted by CBIZ's acquisition of Marcum's attest business, effective November 1, 2024.
• Marcum's reports on Forian's financial statements for 2023 and 2024 did not contain adverse opinions, disclaimers, or qualifications regarding uncertainty, audit scope, or accounting principles.
• The company disclosed three material weaknesses identified in connection with the preparation of its financial statements for the years ended December 31, 2023 and 2024.
• These weaknesses related to IT controls, payables transactions, and revenue recognition for certain contracts.
• The material weakness relating to the design of general information technology controls surrounding logical access, change management, and vendor application management, which was identified in connection with the Company's preparation of its financial statements for the for the year ended December 31, 2023 and remediated as of December 31, 2024.
• The material weakness relating to the lack of properly designed controls to validate the accuracy and appropriateness of payables transactions and prevent the possibility of fraudulent or fictitious payments, which was identified in connection with the Company's preparation of its financial statements for the year ended December 31, 2024.
• The material weakness relating to our failure to design, implement and maintain effective controls over revenue recognized for certain contracts relating to the proper application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), specifically our failure to maintain effective controls relating to accounting for fixed minimum payments in contracts with variable revenues based on customer sales, which was identified in connection with the Company's preparation of its financial statements for the year ended December 31, 2024, and which led to the restatement of the Company's audited financial statements for the year ended December 31, 2023 and the unaudited financial statements for the quarterly periods ended March 31, 2023, June 30, 2023 and September 30, 2023.
• Forian confirmed that it did not consult with CBIZ on accounting principles or audit opinions during the relevant periods before engaging them.
• Marcum has provided a letter to the SEC agreeing with the statements made by Forian regarding their firm in the Form 8-K.

Sentiment

Score: 4

Explanation: The change in auditors itself is neutral, but the disclosure of material weaknesses and the restatement of financial statements are negative indicators, lowering the overall sentiment.

Positives

• Marcum's audit reports for 2023 and 2024 did not contain adverse opinions or disclaimers, suggesting no fundamental issues with the financial statements themselves.
• The company remediated the material weakness relating to the design of general information technology controls surrounding logical access, change management, and vendor application management, which was identified in connection with the Company's preparation of its financial statements for the for the year ended December 31, 2023 and remediated as of December 31, 2024.

Negatives

• The company disclosed three material weaknesses in its internal controls related to IT, payables, and revenue recognition.
• The material weakness relating to our failure to design, implement and maintain effective controls over revenue recognized for certain contracts relating to the proper application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), specifically our failure to maintain effective controls relating to accounting for fixed minimum payments in contracts with variable revenues based on customer sales, which was identified in connection with the Company's preparation of its financial statements for the year ended December 31, 2024, and which led to the restatement of the Company's audited financial statements for the year ended December 31, 2023 and the unaudited financial statements for the quarterly periods ended March 31, 2023, June 30, 2023 and September 30, 2023.

Risks

• The disclosed material weaknesses in internal controls could indicate a higher risk of errors or fraud in financial reporting.
• The restatement of prior financial statements due to a material weakness in revenue recognition controls raises concerns about the reliability of past financial information.
• The transition to a new accounting firm could present challenges in ensuring a smooth audit process and maintaining consistent financial reporting practices.

Future Outlook

The company will be working with CBIZ CPAs P.C. for the fiscal year ending December 31, 2025.

Industry Context

Changes in accounting firms are not uncommon, especially following acquisitions or mergers within the accounting industry. Companies often seek to align themselves with firms that have specific expertise or a better understanding of their business needs. The disclosure of material weaknesses is a standard practice to ensure transparency and accountability in financial reporting.

Comparison to Industry Standards

• The disclosure of material weaknesses is a common practice among publicly traded companies, particularly after the Sarbanes-Oxley Act.
• Companies like Enron and WorldCom had accounting scandals that led to increased scrutiny of internal controls and auditor independence.
• The PCAOB (Public Company Accounting Oversight Board) sets auditing standards and conducts inspections of accounting firms to ensure compliance and quality.
• Comparable companies in the pharmaceutical or healthcare technology sectors, such as Veeva Systems or Medidata Solutions, also disclose changes in auditors and any material weaknesses in their financial reporting.

Stakeholder Impact

• Shareholders may be concerned about the material weaknesses and the restatement of financial statements.
• Employees in the finance and accounting departments may face additional scrutiny and workload to address the identified weaknesses.
• Customers and suppliers may have concerns about the company's financial stability and reporting practices.
• Creditors may reassess the company's creditworthiness based on the disclosed weaknesses.

Key Dates

Keywords

accounting firm, CBIZ, Marcum, auditor, material weakness, financial statements, internal controls, Forian Inc.