Super Micro Computer (trading as Supermicro) saw its shares climb 29% on Monday after an internal investigation found no evidence of fraud or misconduct by the company’s management. The investigation was prompted by concerns from former auditor Ernst & Young (EY) over governance and financial reporting practices. The review, conducted by an independent special committee, followed EY’s resignation in August 2024 after raising concerns with Supermicro’s audit committee.
Supermicro’s special committee concluded its three-month investigation by clearing the company’s management and audit committee of wrongdoing. The probe involved the review of over nine million documents and interviews with 68 individuals, with the committee assisted by independent counsel Cooley and forensic accounting company Secretariat Advisors.
“The Special Committee has confirmed that the Company cooperated fully, and that the Company, Board,” said the former. “[T]he Audit Committee promptly complied with all requests for information, documentary evidence, and access to relevant witnesses.”
One area of focus was the rehiring of employees linked to a 2017 internal audit into revenue recognition practices. The committee determined these rehires were not involved in misconduct, although it noted lapses in communication regarding their readmission to the firm. The investigation also examined 52 revenue transactions, concluding that the company adhered to proper accounting standards, with no evidence of artificial revenue inflation near quarter-end reporting periods.
The committee additionally reviewed compliance with US export laws after allegations surfaced in a short-seller report and through EY’s claims. While the investigation found no violations or attempts to bypass export regulations, some of the conclusions relied on previous compliance assessments rather than fully independent findings.
To address findings from the investigation, the committee recommended governance enhancements, including appointing a new chief financial officer, creating separate chief compliance officer and general counsel roles, and expanding the compliance and legal teams. Supermicro confirmed the appointment of Kenneth Cheung as chief accounting officer and stated that current CFO David Weigand will remain in his role until a replacement is appointed.
The company has also committed to improving its internal training programmes and implementing stronger systems to monitor compliance with financial and governance standards. Supermicro stated that these changes were aimed at ensuring oversight processes to match the company’s growth trajectory in the AI server market.
Financial reporting and compliance plan
Recently, Supermicro announced additional steps to address its financial reporting and compliance challenges. The San Jose-based company appointed BDO USA as its new independent auditor and submitted a compliance plan to Nasdaq.
The plan seeks an extension to meet Nasdaq’s listing requirements, as the company has yet to file its annual report on Form 10-K for the fiscal year ending 30 June 2024 or its quarterly report on Form 10-Q for the period ending 30 September 2024. Supermicro stated it expects to complete these filings within the discretionary period Nasdaq may grant. Pending a review of the plan, Nasdaq has confirmed that the company’s securities will remain listed.
Read more: Supermicro shares surge 37% after compliance and auditor announcement
