Deloitte Drops Company Shortly after IPO

Just two months after going public, BioFuel Energy reports a material weakness in its internal controls and the resignation of its audit firm.
Sarah JohnsonAugust 24, 2007

Deloitte & Touche quit as BioFuel Energy Corp.’s audit firm earlier this week, leaving the newly public company without an auditor. The ethanol producer gave no reason for the auditor’s departure in a regulatory filing announcing the news.

The Denver-based company has acknowledged, however, that it has material weaknesses in its internal controls over financial reporting, and that it is addressing them. Deloitte found that the company fell short in terms of financial systems, accounting staff, and written policies and procedures.

BioFuel says it’s at work choosing another accounting firm and expects to have one in place within two weeks. The company did not immediately return’s request for comment.

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In an 8-K filed Friday, the company said the consolidated financials as of December 31, 2006, did not carry an adverse opinion by Deloitte. The company also noted that the audit firm’s reports on BioFuel predecessor companies — Bio Fuel Solutions Colorado and BioFuel Solutions Delaware — for fiscal years 2005 and 2006 didn’t have adverse opinions or spawn disagreements with Deloitte’s findings on BioFuel.

In a letter dated August 23, two days after the firm resigned, Deloitte said it agreed with most of BioFuel’s statements regarding its departure. Asked to comment further, Deloitte spokesman Daniel Mucisko referred to BioFuel’s 8-K and said the firm’s confidentiality policy prohibits him from talking about client matters.

In mid-June, BioFuel launched 9.5 million shares in what press reports described as a disappointing public offering. The ultimate sale of those shares at $10.51 each on their first day listed on Nasdaq was well below the company’s initial expectations of between $16 and $18.