On 7 August 2019, the audit committee of US firm Sealed Air Corporation dismissed Ernst & Young LLP (EY) as the company’s independent registered public accounting firm. The move followed the receipt of a subpoena from the Securities and Exchange Commission (SEC) on 2 May 2019 for documents and information relating to the process by which the company selected its independent audit firm for the period beginning with fiscal year 2015, and relating to the independence of that audit firm.
EY believes there has been no independence violation, and while Sealed Air has not reached a contrary conclusion, the fact of the ongoing SEC inquiry and the committee’s dissatisfaction with information it learned about the process by which EY was selected are behind the removal of EY.
Sealed Air has announced that PwC will take over as auditor. Although the firm has performed certain non-audit services for the company in the past, neither parties believe these activities will affect the auditor’s independence.
On 20 June, the company had announced that James M Sullivan was taking over as CFO, following the dismissal on the same date of William G Stiehl who was ‘terminated for cause’. Sealed Air said at the time that Stiehl's termination was related to an internal review by the audit committee in connection with the SEC inquiry.
In its latest quarterly results, under ‘risk factors’ the company said: “There have been no significant changes to our risk factors since December 31, 2018, with the exception of an additional risk factor related to the ongoing investigations by the US Department of Justice and the SEC.
“We are involved in ongoing investigations by the US Department of Justice and US Securities and Exchange Commission, the results of which could adversely impact our business and results of operations and our ability to comply with certain obligations imposed by federal securities laws and other applicable rules.
“The company has received from the staff of the SEC subpoenas for documents and requests for information in connection with the SEC's previously disclosed investigation. Those subpoenas and requests seek documents and information regarding the company's accounting for income taxes, its financial reporting and disclosures, the process by which the Company selected its independent audit firm beginning with fiscal year 2015, the independence of that audit firm, and other matters. The company has also received a Grand Jury subpoena from the US Attorney's Office seeking documents relating to the termination of our former CFO and relating to the process by which the company selected its independent audit firm beginning with fiscal year 2015.”
Sealed Air added that it is ‘fully cooperating’ with the SEC and the US Attorney's Office but pointed out it cannot predict the outcome or duration of the respective investigations and warned that ‘any determination that the company’s audit firm was not independent’ could mean that historical financial statements would need to be re-audited.