When Auditors Walk: Red Flags and What They Signal

Understanding the Subtle but Telling Signs of Auditor Resignations

Red flags in auditor departures – update # 1

Audit firm’s departures do not always spell troubles. Companies may change auditors because they seek a larger firm with expertise that better aligns with a company’s growth or because they delist from an exchange following a going-private transaction. Audit firms may drop clients because the firm scales down its public audit practice or strategically reshuffles its clients' portfolios.

But you know what is a glaring red flag? When an auditor quits with public criticism of the company or due to disagreements with management, it often signals severe underlying accounting issues.  My friend and frequent co-author, Francine McKenna of The Dig, discussed how auditors publicly criticized Molex in 2004. For readers unfamiliar with the case, The Dig provides an excellent summary.

Public disagreements between auditors and their clients are rare. Using the Audit Analytics Auditor Changes database, I identified two 2024 cases where an audit firm resigne…