CSP Inc. changes auditor, cites internal control issues

LOWELL, MA - CSP Inc. (CSPI), a $185 million market cap company specializing in computer integrated systems design with annual revenue of $55.5 million, announced on Monday that it has replaced its independent registered public accounting firm. According to InvestingPro data, the company maintains a FAIR financial health score, which makes this auditor transition particularly noteworthy. The decision, approved by the Audit Committee and the Board of Directors, sees the dismissal of RSM LLP effective February 12, 2025, and the selection of CBIZ (NYSE:CBZ) CPAs P.C. as the new auditor for the fiscal year ending September 30, 2025, pending client acceptance procedures.

The change follows the identification of two material weaknesses in the company's internal control over financial reporting for the fiscal year ended September 30, 2024. These weaknesses pertained to business expense reimbursement and selected purchase policy, including issues with documentation and review of certain business expenses, and financial reporting for income taxes. While these issues are concerning, InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 3.15 and holds more cash than debt on its balance sheet, providing some financial stability during this transition period. The company has stated that these issues have prompted the implementation of a remediation plan.

CSP Inc. has provided RSM with the necessary disclosures as required by Regulation S-K Item 304(a) and has requested a letter from RSM to the Securities and Exchange Commission to confirm their agreement with these statements. RSM's letter, dated February 14, 2025, has been filed as part of the company's Form 8-K.

The company's reports from RSM for the fiscal years ended September 30, 2024, and September 30, 2023, contained no adverse opinions and were not qualified or modified in terms of audit scope or accounting principles. Moreover, during these periods and the interim period through February 12, 2025, CSP Inc. did not experience any disagreements with RSM on accounting principles or practices, financial statement disclosure, or auditing scope or procedure that could have led to a reference in RSM's reports.

Additionally, CSP Inc. confirmed that prior to selecting CBIZ, there were no consultations regarding the application of accounting principles to specified transactions or any matter that was subject to disagreement or a reportable event as defined by Regulation S-K.

This announcement is based on the company's recent SEC filing and reflects CSP Inc.'s commitment to maintaining robust financial reporting and internal controls as it moves forward with its new auditor. For investors seeking deeper insights, InvestingPro offers comprehensive financial health analysis and a detailed Pro Research Report, which is particularly valuable for monitoring companies during significant governance changes. The platform's analysis indicates the stock is currently trading above its Fair Value, making careful monitoring of these developments even more critical.

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In other recent news, CSP Inc has reported a promising start to its fiscal year 2025 with a 17% increase in revenue in the first quarter. The company's gross profit margin has also seen an improvement, rising to 29.1% from 26.6% in the previous year. The revenue growth, reaching $15.7 million, was driven by a strong demand in the Technology Solutions sector, which generated $15.2 million in sales. CSP Inc has attributed its positive results to its strategic focus on the Operational Technology (OT) cybersecurity market and new partnerships in the water treatment sector.

CSP Inc also reported a net income of $472,000, or $0.05 per diluted share, and a quarterly cash dividend of $0.03 per share. The company is optimistic about its growth prospects, particularly in its AZT Protect cybersecurity solution. In addition, CSP Inc is planning to expand sales through Rockwell distribution channels and is targeting top U.S. Rockwell Distributors with the aim of converting generated leads into proposals. These developments highlight CSP Inc's ongoing efforts to strengthen its financial performance and position itself for future growth.

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