Ernst and Young are the independent auditors of Snapchat. PwC was previously the auditors of Snap Inc. until 2016. In 2016 Snap Inc replaced PwC with Ernst and Young. You can check out the SEC filing that shows the dismissal of PwC here.
That filing says that there was no adverse opinion on the previous filings audited by PwC.
Snap Inc is the parent company of Snapchat.
It is thought that snap changed auditors because PwC found a material weakness over financial reporting for Snap Inc. As you might know a material weakness is pretty severe and is something that could halt an IPO. However, if you are able to switch auditors and get them to disagree with that, that would be more favorable. This could be one of the reasons for the switch and the increase in audit fees that we will discuss later.
Snap Inc was initially valued at around $30 billion but has since dropped to $20 billion. Could this partially be due to their controls over financial reporting?
Ernst and Young is well known as an auditor of some of the largest tech companies in the world.
One of the most interesting things about Snapchat is that their accounting fees for their IPO were very high and caught a lot of people’s eye. When companies file for an IPO that have to disclose all expenses as part of their filing. Those expenses would include accounting expenses.
The accounting fees were $6.9 million for the IPO of Snap Inc. It has been said that these fees were very high than similar IPOs. They far outweighed the legal fees for the IPO which is pretty astonishing since it is usually lawyers that make out really well in an IPO.
This could be due to the complexity of accounting or this could be due to prior errors.