Shares of Super Micro Computer fell more than 30 percent on Wednesday after the server maker announced the unexpected resignation of Ernst & Young (EY) as its accounting firm.

The resignation, announced in a regulatory filing, has raised concerns about the company’s financial practices and governance, as EY cited issues with transparency and integrity in financial reporting.

Exam questions and company verification

EY was conducting an audit of Super Micro’s financial reports for the fiscal year when the company first raised concerns about internal controls and transparency in July. According to Super Micro, this led to a comprehensive review.

EY’s resignation letter said it could no longer rely on assurances from management and the audit committee, and noted concerns about the firm’s “commitment to integrity and ethical values” and the independence of its oversight. Super Micro responded that it disagreed with EY’s conclusion, but acknowledged that the decision was final.

Allegations, background of financial irregularities

The resignation comes amid an ongoing review of Super Micro’s financial practices.

In August, Hindenburg Research, a short-selling firm, released a report accusing Super Micro of financial misstatements, calling it “glaring accounting red flags” and accusing the company of failing to disclose certain transactions. Hindenburg also alleged that Super Micro rehired executives involved in a 2018 financial scandal.

At the time, Super Micro dismissed the claims as baseless, calling them “rumors and speculation.”

In 2020, Super Micro faced a penalty from the Securities and Exchange Commission (SEC) for alleged revenue recognition irregularities, which the company settled by paying $17.5 million.

The SEC accused Super Micro of prematurely recognizing revenue and understating expenses between fiscal years 2015 and 2017. Super Micro has since made statements about efforts to improve compliance, but recent developments have renewed concerns about its financial practices.

Financial performance despite market collapse

Despite recent challenges, Super Micro’s stock had been buoyed by growth in the AI ​​sector. The company posted fourth-quarter revenue of $5.31 billion, up 143 percent from $2.18 billion a year earlier, and its shares were up about 20 percent year to date before the recent slump.

Super Micro remains optimistic and plans to release a “business update” next week that will detail the start of its 2025 fiscal year and address questions raised by recent events.

Following EY’s exit and allegations from Hindenburg Research and regulators, Super Micro is now under increasing pressure to address transparency and compliance concerns to restore investor confidence and clarify its future trajectory.

This article contains reporting from The Associated Press.