B. Riley to change auditor after reporting delays

B. Riley Financial Inc., the brokerage struggling to file its long-overdue financial reports, said it will change accounting firms just weeks before a deadline to produce audited results that B. Riley needs to preserve its stock listing.

Marcum LLP will be succeeded by BDO USA once Marcum has completed the 2024 audit, Los Angeles-based B. Riley said in a statement. The firm said it expects to file its annual results "soon" and has made "substantial progress" on readying its filings for the first two quarters of 2025.

"By appointing BDO and staging the 2025 review process while simultaneously working with Marcum to complete the 2024 audit, we put the Company on what we believe to be the surest path to returning to timely financial reporting," the firm said. 

B. Riley's failure to report results to the Securities and Exchange Commission for full-year 2024 and quarterly results for this year have prompted Nasdaq to repeatedly warn that B. Riley is in danger of being kicked off the exchange. The firm had said Nasdaq wouldn't grant any more extensions beyond Sept. 29.  

The firm's shares have tumbled from about $60 in 2023 to around $5 currently after investments soured, annual losses piled up and financial reports repeatedly came in late. Attacks by short sellers and a probe by the SEC added to the company's woes, and B. Riley has negotiated several deals to put off dates for debt payments.

Marcum criticized B. Riley's accounting in past filings, including a series of flaws in the company's controls over its financial reporting cited in the 2023 annual report. It singled out B. Riley's ability to gauge its investment valuations, and said management's procedures lacked "a level of precision sufficient to prevent or detect a potential material misstatement in the consolidated statements."

The auditor also called out efforts "to properly identify and disclose material related-party transactions," a category that can include deals with people who have close ties to the company or its personnel and might pose conflicts of interest.  

Those issues became acute last year after one of B. Riley's biggest holdings, retailer Franchise Group Inc., went bankrupt. Investors alleged that B. Riley hadn't properly disclosed important details of the transaction and its arrangements with Franchise Group's leader, Brian Kahn. The SEC launched an investigation that included B. Riley and Chairman Bryant Riley; the firm has said it's cooperating and there's been no wrongdoing.