8-K: Marqeta Changes Auditors, Appoints KPMG After Dismissing Ernst & Young

Marqeta, Inc. has dismissed Ernst & Young LLP as its independent auditor and appointed KPMG LLP, effective March 1, 2024.

Summary

• Marqeta, Inc. dismissed Ernst & Young LLP (EY) as their independent registered public accounting firm on March 1, 2024.
• The dismissal was not due to any disagreements on accounting principles, financial statement disclosure, or auditing scope.
• EY's reports on the company's financial statements for 2023 and 2022 did not contain any adverse opinions or disclaimers.
• There were no disagreements between Marqeta and EY that would have caused EY to reference them in their reports.
• Two material weaknesses in internal control over financial reporting were previously reported, one related to business combination accounting and the other to IT general controls.
• KPMG LLP was appointed as the new independent registered public accounting firm, effective March 1, 2024, for the fiscal year ending December 31, 2024.
• Marqeta did not consult with KPMG on any matters described in Items 304(a)(2)(i) and (ii) of Regulation S-K during the past two fiscal years.

Sentiment

Score: 5

Explanation: The change of auditors is not inherently negative, but the previously reported material weaknesses in internal controls are a concern. The lack of disagreement with the previous auditor is a positive.

Positives

• The change in auditors was not due to any disagreements on accounting or auditing matters, suggesting a smooth transition.
• EY has confirmed their agreement with the statements made by Marqeta in the 8-K filing, providing assurance on the accuracy of the information.

Negatives

• The company previously reported two material weaknesses in internal control over financial reporting, indicating potential issues with their financial reporting processes.
• The material weakness related to IT general controls was deemed ineffective for the period ended December 31, 2023.

Risks

• The previously reported material weaknesses in internal controls could indicate ongoing risks in financial reporting.
• The transition to a new auditor could present challenges, although the company has stated there were no disagreements with the previous auditor.

Future Outlook

The company will be working with KPMG as their new independent auditor for the fiscal year ending December 31, 2024.

Management Comments

• The Audit Committee of the Board of Directors approved the dismissal of EY and the engagement of KPMG.
• The company has authorized EY to respond fully to the inquiries of KPMG concerning the reportable events.

Industry Context

Changes in auditors are not uncommon, but the disclosure of material weaknesses in internal controls is a concern that investors will be monitoring closely. The appointment of a new auditor is a significant event that can impact investor confidence.

Comparison to Industry Standards

• The change of auditors is not unusual, but the disclosure of material weaknesses is a concern.
• Many companies in the tech sector have faced challenges with internal controls, particularly related to IT systems.
• Companies like PayPal and Block, which are in similar payment processing industries, have also faced scrutiny over their internal controls and financial reporting.

Stakeholder Impact

• Shareholders will be monitoring the company's progress in addressing the material weaknesses in internal controls.
• The change in auditors may cause some uncertainty among investors.

Next Steps

• KPMG will begin their audit of the company's financial statements for the fiscal year ending December 31, 2024.
• The company will need to address the previously reported material weaknesses in internal controls.

Key Dates

Keywords

auditor, KPMG, Ernst & Young, accounting, financial reporting, internal controls, material weakness