8-K: QuidelOrtho Appoints KPMG as New Independent Auditor, Replacing Ernst & Young

QuidelOrtho Corporation has appointed KPMG as its new independent registered public accounting firm, replacing Ernst & Young, effective February 28, 2025.

Summary

• QuidelOrtho Corporation has changed its independent registered public accounting firm.
• On February 28, 2025, the Audit Committee approved the appointment of KPMG LLP as the company's new auditor for the fiscal year ending December 28, 2025.
• This decision effectively dismissed Ernst & Young LLP (EY), the previous auditor, also effective February 28, 2025.
• The audit report from EY for the fiscal years ended December 29, 2024, and December 31, 2023, did not contain any adverse opinions, disclaimers, qualifications, or modifications regarding uncertainty, audit scope, or accounting principles.
• There were no disagreements between QuidelOrtho and EY on accounting principles, practices, financial statement disclosure, or auditing scope or procedure during the specified periods.
• EY's report on internal control over financial reporting, dated February 27, 2025, included an adverse opinion due to material weaknesses related to revenue, accounts receivable, accrued rebates, and deferred tax assets.
• An interim material weakness related to goodwill impairment assessment was identified in the first quarter of 2024 but was fully remediated as of December 29, 2024.
• QuidelOrtho did not consult with KPMG on accounting principles or the type of audit opinion before appointing them.
• EY has provided a letter to the Securities and Exchange Commission agreeing with the disclosures made by QuidelOrtho regarding their departure.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While there are disclosed material weaknesses, the company has taken steps to address them and is transitioning to a new auditor. The lack of disagreements with the previous auditor is also a positive sign.

Positives

• The audit report from EY for the fiscal years ended December 29, 2024, and December 31, 2023, did not contain any adverse opinions, disclaimers, qualifications, or modifications regarding uncertainty, audit scope, or accounting principles.
• The interim material weakness related to goodwill impairment assessment identified in the first quarter of 2024 was fully remediated as of December 29, 2024.

Negatives

• EY's report on internal control over financial reporting, dated February 27, 2025, included an adverse opinion due to material weaknesses.
• The company identified material weaknesses related to revenue, accounts receivable and accrued rebates due to undue reliance on information generated from certain software solutions and design and operating deficiencies related to management review controls.
• The company identified insufficient controls over the evaluation of all available evidence to assess realizability of deferred tax assets.

Risks

• The identified material weaknesses in internal control over financial reporting could indicate potential risks in the company's financial reporting processes.
• Failure to maintain effective internal controls could lead to errors or fraud in financial statements.

Future Outlook

The company will be working with KPMG as their independent registered public accounting firm for the fiscal year ending December 28, 2025.

Industry Context

Changes in auditors are not uncommon, but they can signal a need for closer scrutiny of a company's financial reporting practices. Investors often look to the reasons behind auditor changes and any related disclosures about disagreements or reportable events.

Comparison to Industry Standards

• The appointment of a new auditor is a standard corporate governance practice.
• Companies like Abbott, Roche, and Siemens also undergo periodic auditor reviews.
• The disclosed material weaknesses in internal controls are not uncommon, but their remediation is critical for maintaining investor confidence.

Stakeholder Impact

• Shareholders may want to monitor the transition to the new auditor and the remediation of the identified material weaknesses.
• Employees in the finance and accounting departments may experience changes in processes and procedures as a result of the new auditor's requirements.

Key Dates