8-K: Qualis Innovations Appoints New Auditor, Dismisses Kreit & Chiu CPA LLP

Qualis Innovations, Inc. has appointed Victor Mokuolu, CPA PLLC as its new independent auditor, replacing Kreit & Chiu CPA LLP, effective April 4, 2023.

Summary

• Qualis Innovations, Inc. has changed its independent registered public accounting firm, appointing Victor Mokuolu, CPA PLLC (VMCPA) on February 16, 2023.
• The previous auditor, Kreit & Chiu CPA LLP (K&C), was dismissed on April 4, 2023.
• There were no disagreements between Qualis Innovations and K&C regarding accounting principles, financial statement disclosure, or auditing scope.
• K&C's reports on the 2020 and 2021 financial statements contained an explanatory paragraph about the company's ability to continue as a going concern.
• K&C did not audit the 2022 financial statements.
• Qualis Innovations did not consult with VMCPA prior to their appointment on any accounting or auditing matters.
• K&C has confirmed that they agree with the statements made by Qualis Innovations regarding the change of auditors.

Sentiment

Score: 3

Explanation: The change of auditors, combined with the previous going concern warning and the lack of a 2022 audit, suggests potential financial instability and raises concerns about the company's future prospects.

Positives

• The transition to a new auditor was completed without any reported disagreements on accounting or auditing matters.
• The previous auditor confirmed agreement with the company's statements regarding the change of auditors.

Negatives

• The previous auditor's reports for 2020 and 2021 included an explanatory paragraph about the company's ability to continue as a going concern, indicating potential financial instability.
• The company did not have its 2022 financial statements audited by Kreit & Chiu CPA LLP.

Risks

• The going concern issue raised in previous audit reports suggests potential financial challenges for the company.
• The lack of a 2022 audit by the previous firm could raise concerns about the company's financial reporting.

Management Comments

• The appointment of VMCPA was approved by the Board of Directors of the Company.
• Patrick Adams, Acting Chief Executive Officer, signed the report on behalf of the company.

Industry Context

Changes in auditors are a common occurrence, but the lack of a 2022 audit and the previous going concern warnings may raise concerns among investors and stakeholders.

Comparison to Industry Standards

• The change of auditors is not unusual, but the circumstances surrounding the change, including the lack of a 2022 audit by the previous firm and the going concern issue, are not typical.
• Most companies ensure a smooth transition between auditors with a full audit for the previous year, which was not the case here.
• The going concern issue is a significant concern that would be flagged by most auditors and is not a common occurrence for established companies.

Stakeholder Impact

• Shareholders may be concerned about the company's financial stability due to the going concern issue and the lack of a 2022 audit.
• Creditors may be more cautious about extending credit to the company given the financial uncertainties.

Key Dates

Keywords

auditor, accounting, financial statements, Kreit & Chiu CPA LLP, Victor Mokuolu CPA PLLC, going concern, audit, Qualis Innovations