|
Item 4.01
|
Change in Registrant's Certifying Accountant
|
(a)
Dismissal of Independent Registered Public Accounting Firm
On February 22, 2019, upon the recommendation and approval of the Audit Committee of the Board of Directors (the “Audit Committee”) of Janel
Corporation (the "Company"), which action was ratified by the Board of Directors, the Company dismissed Crowe LLP (“Crowe”) as its principal independent registered public accounting firm, as the Company and Crowe could not reach mutually acceptable
financial terms of engagement for the 2018 fiscal year-end audit work as a result of the need to significantly increase the scope of Crowe's audit procedures due to the internal control matters noted below.
On January 4, 2018, Crowe was appointed as the Company’s principal independent registered public accounting firm for the fiscal year ended September
30, 2018. As Crowe had not completed its audit of the Company’s financial statements for the fiscal year ended September 30, 2018 as of the date of its dismissal, Crowe did not issue any report on the Company’s financial statements that contained
any adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal year ended September 30, 2018 and the subsequent interim period through February 22, 2019, there
have been no disagreements with Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Crowe, would have caused it to
make reference to the subject matter of the disagreements in connection with its report on the financial statements for such year. Otherwise, there were no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K during the
fiscal year ended September 30, 2018, other than the need to significantly increase the scope of Crowe’s audit procedures, as referenced above, and certain material weaknesses in the Company’s internal control over financial reporting. Crowe
indicated that while it had not completed its audit, based on its observations and procedures performed to date, the Company did not maintain effective internal controls related to the following:
|
·
|
Management did not have a process or control in place to perform an assessment of gross vs. net revenue recognition criteria in accordance with ASC Topic 605-45 Revenue
Recognition – Principle Agent Consideration (“ASC Topic 605-45”) with respect to the Company’s logistics segment.
|
|
·
|
Management did not have a process or control in place to perform an assessment of timing of revenue recognition criteria in accordance with ASC Topic 605 with respect to
the Company’s logistics segment.
|
|
·
|
A number of deficiencies were identified related to the design, implementation and effectiveness of certain information technology general controls, including segregation
of duties, user access and change management.
|
|
·
|
The Company had inadequate controls over a) journal entries and approvals, b) cash disbursements and application of cash receipts, c) payroll changes and d) vendor set-up
and creation, credit policies and infrequent transactions.
|
The Company provided Crowe with a copy of the disclosure contained in this Current Report on Form 8-K and requested that Crowe furnish the
Company with a letter addressed to the SEC stating whether or not it agrees with the above statements and, if not, stating the respects in which it does not agree. A copy of such letter, dated February 22, 2019, is filed as Exhibit 16.1 to this
Form 8-K.
(b)
Appointment of New
Independent Registered Public Accounting Firm
On February 22, 2019, the Audit Committee recommended and approved the appointment of Prager Metis CPAs, LLC (“Prager”) as the Company’s principal
independent registered public accounting firm for the fiscal years ending September 30, 2018 and 2019, which action was ratified by the Board of Directors. The Audit Committee concluded that Prager offered the most advantageous and cost-effective
local audit and accounting resources for the Company's audit needs. During the Company’s two most recent fiscal years ended September 30, 2018 and 2017 and the subsequent interim period through February 22, 2019, neither the Company, nor anyone
acting on its behalf, consulted with Prager regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial
statements, and neither a written report nor oral advice was provided to the Company that Prager concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; (iii)
any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) and the related instructions of Regulation S-K; or (iv) any “reportable event” within the meaning of Item 304(a)(1)(v) of Regulation S-K.
In connection with the engagement of Prager, the Company has authorized Crowe to respond fully to inquires of Prager concerning the matters
referenced above.