8-K: Hills Bancorporation Changes Auditors Amid Control Weaknesses

Hills Bancorporation has appointed Crowe LLP as its new independent auditor for 2026, replacing Forvis Mazars, LLP, following a competitive review and disclosure of material weaknesses in internal controls.

Summary

• Hills Bancorporation's Audit Committee dismissed Forvis Mazars, LLP as its independent registered public accounting firm.
• The dismissal follows the completion of Forvis Mazars' audit of the company's consolidated financial statements for the fiscal year ending December 31, 2025.
• Crowe LLP has been approved to serve as the new independent registered public accounting firm for the fiscal year ending December 31, 2026.
• The engagement of Crowe LLP is subject to the completion of their standard client acceptance procedures and execution of an engagement letter.
• Forvis Mazars, LLP's reports for fiscal years 2023 and 2024 did not contain adverse opinions, disclaimers, or qualifications.
• No disagreements on accounting principles, financial statement disclosure, or auditing scope were reported with Forvis Mazars, LLP.
• Material weaknesses in internal control over financial reporting were identified, as detailed in the 2024 Form 10-K and 2025 quarterly reports.
• These weaknesses relate to management review and activity-level controls, segregation of duties for manual journal entries, and identification/disclosure of related party transactions.

Sentiment

Score: 4

Explanation: The change in auditor itself is neutral, but the disclosed material weaknesses in internal control over financial reporting are a significant negative, indicating potential risks to financial accuracy and operational integrity. The absence of disagreements with the prior auditor is a minor positive, but overshadowed by the control issues.

Positives

• The company conducted a comprehensive, competitive process to select its new auditor, indicating due diligence.
• Forvis Mazars, LLP's audit reports for the fiscal years ended December 31, 2024, and December 31, 2023, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified.
• There were no disagreements with Forvis Mazars, LLP on accounting principles, financial statement disclosure, or auditing scope or procedure.

Negatives

• The company reported material weaknesses in internal control over financial reporting for the year ended December 31, 2024, and subsequent interim periods through September 30, 2025.
• These weaknesses include issues with management review and activity-level controls over the period-end financial reporting process, including validation of correct filing versions and auditor review completion for Q3 2025.
• Further weaknesses were identified in the segregation of duties, review, posting, and approval of manual journal entries.
• There were also material weaknesses concerning the identification, prior approval, and disclosure of related party transactions.

Risks

• Material weaknesses in internal control over financial reporting could lead to errors or misstatements in financial statements.
• Weaknesses in management review and activity-level controls increase the risk of inaccurate financial reporting.
• Lack of proper segregation of duties for manual journal entries creates opportunities for fraud or error.
• Inadequate controls over related party transactions pose risks of conflicts of interest and improper disclosures.
• The new auditor's engagement is subject to acceptance procedures, which, if not completed successfully, could lead to further uncertainty.

Future Outlook

The formal engagement of Crowe LLP is subject to the completion of their standard client acceptance procedures and the execution of an engagement letter. Crowe LLP is expected to serve as the independent registered public accounting firm for the audit of the company's consolidated financial statements for the fiscal year ending December 31, 2026.

Management Comments

• "We have read Item 4.01 of Form 8-K dated January 9, 2026, of Hills Bancorporation and are in agreement with the statements contained therein with respect to our firm." (Forvis Mazars, LLP)
• "We have no basis to agree or disagree with other statements of the registrant contained therein." (Forvis Mazars, LLP)

Industry Context

Changes in independent auditors are a routine part of corporate governance, often driven by competitive bidding processes or a desire for fresh perspectives. However, the disclosure of material weaknesses in internal control over financial reporting is a significant concern within the banking industry, as it can signal potential risks to financial integrity and regulatory compliance. Such weaknesses often prompt increased scrutiny from regulators and investors regarding the company's operational controls and financial reporting accuracy.

Corporate Governance

Related Party Transactions

• Material weaknesses in internal control over financial reporting were identified concerning the identification, prior approval, and disclosure of related party transactions.

Stakeholder Impact

• Shareholders: May face increased uncertainty regarding the accuracy of financial reporting due to material weaknesses in internal controls. The auditor change, while a normal governance process, combined with control issues, could lead to concerns about financial transparency and potential future restatements.
• Regulators: The SEC and other regulatory bodies will likely scrutinize the company's remediation efforts for the disclosed material weaknesses.
• Management: Will need to dedicate significant resources to address and remediate the identified internal control weaknesses.

Next Steps

• Forvis Mazars, LLP to complete its audit of the company's consolidated financial statements for the fiscal year ending December 31, 2025.
• Crowe LLP to complete its standard client acceptance procedures and execute an engagement letter.
• Crowe LLP to serve as the independent registered public accounting firm for the audit of the company's consolidated financial statements for the fiscal year ending December 31, 2026.

Key Dates

Recommendation

While the change in auditors is a routine corporate governance event, the disclosure of material weaknesses in internal control over financial reporting is a significant concern. These weaknesses, particularly in areas like period-end reporting, segregation of duties, and related party transactions, indicate potential risks to financial accuracy and operational integrity. Although the previous auditor issued clean opinions and reported no disagreements, the ongoing control issues warrant a cautious approach. Investors should hold, awaiting further updates on the remediation of these material weaknesses and the successful transition to the new auditor before making further investment decisions.

Keywords

Hills Bancorporation, Auditor Change, SEC Filing, 8-K, Internal Controls, Material Weakness, Financial Reporting, Corporate Governance, Forvis Mazars, Crowe LLP, Accounting Firm, Risk Management, Related Party Transactions