Ebix, Inc. (EBIX) Misled Shareholders About the Adequacy of its Internal Controls Over Financial Reporting
On February 19, 2021, after the market closed, Ebix revealed that its independent auditor, RSM US LLP, resigned because it was unable “to obtain sufficient appropriate evidence that would allow it to evaluate the business purpose of significant unusual transactions that occurred in the fourth quarter of 2020” related to the Company’s business gift card business in India. RSM also stated that the Company’s “internal control over financial reporting was not effective as of December 31, 2020 due to the identification of material weaknesses” related to Ebix’s failure to design controls “over the gift or prepaid card revenues transaction cycle sufficient to prevent or detect a material misstatement.” Further, Ebix and RSM disagreed over the accounting treatment of $30 million that had been transferred into a commingled trust account of Ebix’s outside counsel in December 2020. On this news, Ebix shares fell over $20, or approximately 40%, on February 22, 2021, and have yet to regain their lost value.
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