RCI Hospitality Holdings has revealed that BDO USA had resigned as the company’s independent registered public accounting firm [auditor]. RCI has filed detailed plans with Nasdaq including the fact that next week it expects to report on the status of the independent internal review into allegations raised anonymously by articles in forums associated with the short-selling community, and also report preliminary second quarter 2019 financial results in more detail.

In a filing to the Securities & Exchange Commission, the company noted that the SEC had initiated an inquiry after a series of negative articles were anonymously published online. The company says its own inquiry is being led by a former US Attorney with ‘extensive experience in matters of this nature’ and that the company had fully cooperated with both inquiries.

“Our management and employees have fully cooperated with both the Special Committee’s review and the SEC inquiry, and Special Counsel has presented the findings to the Audit Committee and to the Board of Directors. Following Special Counsel’s presentation of the findings, BDO notified RCI’s Board of Directors on July 12, 2019 that, due to certain concerns relating to the procedural aspects of the review process of the Special Committee and Special Counsel, it was providing notice to the Board in accordance with Section 10A(b)(2) of the Exchange Act and resigning effective immediately.”

The company’s filing to the SEC goes on to say: “BDO stated that it believes the company has not performed sufficient investigatory procedures and has not taken timely and appropriate remedial action in response to certain deficiencies that BDO thinks exist in the way the internal review has been conducted, including: (i) undue restriction on the scope of the internal review; (ii) failure to initiate certain forensic procedures; (iii) refusal to provide BDO access to pertinent interview summaries and other documents; (iv) lack of assessment as to the impact of the matters identified to date on existing and future regulatory filings, including financial statements related footnotes; and (v) restrictions, based on privilege, hindering BDO’s ability to properly shadow and evaluate the adequacy of the internal review.”