Who accepted and approved KPMG's resignation as the independent registered public accounting firm for Liberty Tax, Inc., the parent company of Zoomin Groomin?
Zoomin_Groomin Franchise · 2025 FDDAnswer from 2025 FDD Document
es in Registrants Certifying Accountant.
On December 8, 2017, KPMG LLP ("KPMG") resigned as the independent registered public accounting firm of Liberty Tax, Inc. (the "Company"), effective immediately, and KPMG's resignation was accepted and approved by the Audit Committee of the Board of Directors of the Company (the "Board"). The Company is currently in the process of finding a successor independent registered public accounting firm in the hope that the Company's financial statements for the second quarter ended October 31, 2017 can be completed with as little delay as possible.
KPMG's reports on the Company's financial statements for the fiscal years ended April 30, 2017 and April 30, 2016 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. In addition, there were no disagreements between the Company and KPMG on accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of KPMG, would have caused them to make reference to the disagreement in their reports for such periods, or any subsequent interim period preceding KPMG's resignation. The Company will authorize KPMG to respond fully to the inquiries of the successor independent registered public accounting firm, which has yet to be selected.
KPMG expressed to the Audit Committee and Company management its concern that the actions of former Chief Executive Officer John T. Hewitt, who remains the Chairman of the Board and controlling stockholder as the sole holder of the Company's outstanding Class B common stock, have created an inappropriate tone at the top which leads to ineffective entity level controls over the organization. Prior to the termination of Mr. Hewitt's employment as Chief Executive Officer of the Company on September 5, 2017, the Audit Committee oversaw an investigation of allegations of misconduct by Mr. Hewitt. In particular, KPMG noted that Mr. Hewitt took actions to replace two independent members of the Board around the time information relating to this investigation appeared in media reports. KPMG also noted that following the replacement by Mr. Hewitt of two Class B directors, the chair of the Audit Committee retired from the Board, the Company's Chief Financial Officer announced her intention to resign from the Company, and another independent member of the Board announced that he would not stand for reelection at the Company's next annual meeting. Further, KPMG was made aware that following his termination as Chief Executive Officer, Mr. Hewitt may have continued to interact with franchisees and area developers of the Company. Although Mr.
Source: Item 4 — 01. Changes in Registrants Certifying Accountant. (FDD pages 66–67)
What This Means (2025 FDD)
According to Zoomin Groomin's 2025 Franchise Disclosure Document, the resignation of KPMG LLP as the independent registered public accounting firm for Liberty Tax, Inc. was accepted and approved by the Audit Committee of the Board of Directors of the Company (the "Board"). This occurred on December 8, 2017, and was effective immediately. At the time of the resignation, Liberty Tax, Inc. was in the process of finding a successor independent registered public accounting firm.
KPMG's resignation stemmed from concerns regarding the actions of former Chief Executive Officer John T. Hewitt, who remained the Chairman of the Board and controlling stockholder. KPMG expressed concerns that Hewitt's actions created an inappropriate tone at the top, leading to ineffective entity-level controls within the organization. These concerns arose after an investigation into allegations of misconduct by Hewitt, including replacing independent board members and continued interactions with franchisees and area developers even after his termination as CEO.
KPMG also communicated that they could no longer rely on management's representations due to Hewitt's continued involvement in the company's business and operations. While KPMG stated they did not question the integrity of current management, the structural arrangement allowing Hewitt to control the Board was the primary cause for concern. This situation led KPMG to advise the Audit Committee and management that these issues should be evaluated as potential material weaknesses in the company's internal control over financial reporting.
For a prospective Zoomin Groomin franchisee, this information highlights the importance of understanding the parent company's leadership and governance structure. The resignation of an auditor due to concerns about internal controls and the influence of a former executive could indicate potential risks or instability within the organization. It would be prudent for potential franchisees to further investigate the current state of Liberty Tax, Inc.'s financial controls and governance practices to assess any potential impact on the Zoomin Groomin franchise.