8-K: iPower Inc. Changes Auditors Amidst Persistent Material Weaknesses

iPower Inc. has dismissed UHY LLP as its independent registered public accounting firm and appointed HTL International, LLC, following disclosures of material weaknesses in its internal controls over financial reporting for two consecutive fiscal years.

Summary

• iPower Inc. dismissed UHY LLP as its independent registered public accounting firm on June 24, 2025, with the approval of the audit committee.
• UHY LLP's audit reports for the fiscal years ended June 30, 2024, and June 30, 2023, did not contain adverse opinions, disclaimers, or qualifications.
• There were no disagreements with UHY LLP on accounting principles, financial statement disclosure, or auditing scope or procedure.
• However, reportable events included material weaknesses related to controls over the financial statements closing process for the fiscal year ended June 30, 2024.
• For the fiscal year ended June 30, 2023, material weaknesses included a lack of effective communication and reconciliation procedures in controlled subsidiaries, and inadequately designed or implemented controls over the financial statements closing process.
• iPower Inc. appointed HTL International, LLC as its new independent registered public accounting firm for the fiscal year ending June 30, 2025, also on June 24, 2025.
• Neither iPower Inc. nor anyone on its behalf consulted HTL International, LLC regarding accounting principles or audit opinions prior to their appointment.
• UHY LLP provided a letter to the SEC, dated June 30, 2025, agreeing with the statements in the Form 8-K pertaining to UHY LLP.

Sentiment

Score: 4

Explanation: The dismissal of an auditor without disagreements is neutral, but the underlying and persistent material weaknesses in internal controls are a significant negative, indicating potential issues with financial reporting reliability. This outweighs the positive of no adverse opinions from the previous auditor.

Positives

• UHY LLP's audit reports for fiscal years ended June 30, 2024, and June 30, 2023, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
• There were no disagreements with UHY LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Negatives

• The company disclosed material weaknesses related to controls over the financial statements closing process for the fiscal year ended June 30, 2024, which were deemed not adequately designed or appropriately implemented to identify material misstatements.
• For the fiscal year ended June 30, 2023, material weaknesses included a lack of effective communication and reconciliation procedures in controlled subsidiaries and inadequately designed or implemented controls over the financial statements closing process to identify material misstatements on a timely basis.

Risks

• Material weaknesses in controls related to the financial statements closing process could lead to material misstatements in financial reporting.
• A lack of effective communication and reconciliation procedures in controlled subsidiaries poses a risk to accurate financial reporting.
• The ongoing presence of material weaknesses indicates a potential for continued challenges in ensuring the accuracy and reliability of financial statements.

Future Outlook

No specific forward-looking statements or guidance regarding financial performance or operational targets were provided in this document.

Management Comments

• Chenlong Tan, Chief Executive Officer, signed the report on behalf of iPower, Inc.

Industry Context

Changes in independent auditors are common corporate events, often driven by factors such as fee negotiations, service quality, or strategic alignment. However, an auditor change occurring concurrently with disclosed material weaknesses in internal controls, even if not cited as a direct disagreement, warrants closer scrutiny as it can signal underlying issues in financial reporting processes. Companies are expected to maintain robust internal controls to ensure the reliability of their financial statements, and persistent material weaknesses can raise concerns among investors and regulators about the integrity of financial data.

Comparison to Industry Standards

• The disclosure of material weaknesses in internal controls for two consecutive fiscal years (FY2023 and FY2024) is below industry best practices for financial reporting and corporate governance. Leading companies strive for effective internal controls to prevent and detect material misstatements.
• While the dismissal of an auditor without reported disagreements on accounting principles is not inherently negative, the context of ongoing material weaknesses suggests that the company's control environment is not yet aligned with the robust standards seen in well-governed public companies like Microsoft or Apple, which consistently report effective internal controls.

Corporate Governance

Stakeholder Impact

• Shareholders: May face increased uncertainty regarding the reliability of financial statements due to persistent material weaknesses, potentially impacting investor confidence and stock valuation.
• Management: Bears the responsibility for remediating the identified material weaknesses and ensuring robust internal controls going forward.
• Auditors (UHY LLP and HTL International, LLC): UHY LLP has completed its engagement, while HTL International, LLC assumes the responsibility of auditing the company's financial statements and assessing the effectiveness of internal controls.

Next Steps

• The company will continue to work with its new independent registered public accounting firm, HTL International, LLC, for the fiscal year ending June 30, 2025.
• The company is expected to address and remediate the identified material weaknesses in its internal controls over financial reporting.

Key Dates

Recommendation

Keywords

auditor change, independent registered public accounting firm, material weaknesses, internal controls, financial reporting, SEC filing, Form 8-K, corporate governance, audit committee, iPower Inc.