Home / Research / Auditor changes (8-K Item 4.01)

Stock returns after auditor changes, 2015-2026

Published 2026-10-19 · updated 2026-10-19 · RedFlagFilings research · 9,421 verified flags from SEC filings, 2015-01-05 to 2026-10-16

8,280verified flags

-32.2%median 1-year return vs SPY

70%trailed SPY over 1 year

-31.8%delisting-adjusted median vs SPY

Summary

Auditor changes (8-K Item 4.01): across 4,893 flags with a full year of price data (2015-2026), the median stock returned -18.5% and trailed the S&P 500 (SPY) by 32.2 percentage points over the next year; 70% did worse than SPY.
Auditor resigned: median 1-year return vs SPY -40.4%, 73% trailed SPY (n=1,197).
Auditor dismissed: median 1-year return vs SPY -28.7%, 68% trailed SPY (n=2,912).
Change without a stated resignation or dismissal: median 1-year return vs SPY -32.7%, 71% trailed SPY (n=784).
Disagreements reported: median 1-year return vs SPY -45.0%, 71% trailed SPY (n=42).
Routine change (audit-firm merger etc.): median 1-year return vs SPY -45.4%, 76% trailed SPY (n=836).
95 of these stocks stopped trading within a year; counting them at their last trade moves the 1-year median vs SPY from -32.2% to -31.8%.
By size: large caps (over $10B) -1.3% vs SPY over a year (n=60); nano caps (under $50M) -43.4% (n=2,387).

Historical averages, not a prediction, a trading strategy or investment advice. Many flagged stocks went up.

What this flag is

A company must file an 8-K under Item 4.01 within four business days when its independent auditor resigns, declines to stand for re-appointment, or is dismissed. The filing has to say whether there were any disagreements with the auditor over accounting or auditing matters, and the departing auditor writes a letter (Exhibit 16) saying whether it agrees with the company's account.

Many auditor changes are routine, for example when audit firms merge or a newly public company appoints its first auditor. We show those separately and leave them out of the headline group, which covers resignations and dismissals.

Returns after the flag

Group	90 days after the filing						180 days after the filing						1 year after the filing
Group	n	median return	mean return*	median vs SPY	mean vs SPY*	% trailed SPY	n	median return	mean return*	median vs SPY	mean vs SPY*	% trailed SPY	n	median return	mean return*	median vs SPY	mean vs SPY*	% trailed SPY
Auditor resignations and dismissals (not routine) 8,280 flags	5,300	-4.2%	-5.0%	-8.5%	-8.6%	64%	5,166	-8.8%	-7.8%	-16.0%	-15.0%	68%	4,893	-18.5%	-10.6%	-32.2%	-24.8%	70%
Auditor resigned 2,157 flags	1,292	-5.4%	-6.0%	-10.0%	-9.4%	67%	1,257	-14.3%	-10.8%	-21.6%	-17.7%	71%	1,197	-26.4%	-14.4%	-40.4%	-28.4%	73%
Auditor dismissed 4,762 flags	3,184	-3.6%	-4.1%	-7.6%	-7.9%	63%	3,097	-7.0%	-6.3%	-14.3%	-13.7%	66%	2,912	-15.0%	-8.6%	-28.7%	-22.8%	68%
Change without a stated resignation or dismissal 1,361 flags	824	-4.5%	-6.2%	-8.7%	-9.8%	65%	812	-9.2%	-8.4%	-16.1%	-15.6%	68%	784	-18.7%	-10.3%	-32.7%	-24.5%	71%
Disagreements reported 67 flags	42	-22.5%	-10.9%	-21.1%	-12.7%	71%	42	-13.4%	-9.6%	-11.8%	-15.2%	64%	42	-39.0%	-14.2%	-45.0%	-24.9%	71%
Routine change (audit-firm merger etc.) 1,141 flags	892	-5.4%	-5.5%	-9.8%	-10.2%	65%	871	-12.3%	-11.2%	-23.0%	-20.8%	70%	836	-29.3%	-20.5%	-45.4%	-35.7%	76%

* Mean = trimmed mean that drops the top and bottom 5% of returns (a few micro-cap returns of +1,000% or more would otherwise dominate). "vs SPY" is the stock's return minus the S&P 500 ETF's return over the same dates, in percentage points.

By year of the filing

Year	Flags	90 days			180 days			1 year
Year	Flags	n	median vs SPY	% trailed	n	median vs SPY	% trailed	n	median vs SPY	% trailed
2015	1,073	450	-5.5%	62%	451	-12.6%	66%	448	-24.4%	66%
2016	852	362	-5.9%	58%	361	-7.4%	56%	362	-15.1%	61%
2017	802	399	-5.3%	64%	394	-9.9%	63%	394	-21.8%	66%
2018	738	432	-6.0%	61%	429	-11.2%	68%	429	-24.8%	73%
2019	638	409	-9.0%	65%	409	-15.1%	69%	409	-32.8%	73%
2020	501	368	-2.2%	52%	369	-2.7%	53%	367	+0.9%	50%
2021	547	434	-14.1%	69%	434	-24.1%	72%	429	-43.4%	74%
2022	605	499	-8.7%	64%	494	-23.8%	72%	468	-44.5%	78%
2023	721	584	-14.5%	72%	571	-26.9%	75%	560	-58.1%	80%
2024	895	685	-11.6%	68%	683	-21.0%	70%	666	-34.1%	70%
2025	513	430	-9.4%	63%	428	-16.9%	67%	361	-36.4%	71%
2026	395	248	-14.9%	72%	143	-26.7%	77%	0	too few

Recent years have fewer completed windows: a 1-year return needs a full year after the filing.

By company size at the flag

Market cap at the flag	90 days after the filing						180 days after the filing						1 year after the filing
Market cap at the flag	n	median return	mean return*	median vs SPY	mean vs SPY*	% trailed SPY	n	median return	mean return*	median vs SPY	mean vs SPY*	% trailed SPY	n	median return	mean return*	median vs SPY	mean vs SPY*	% trailed SPY
Nano-cap (under $50M) 2,712 flags	2,591	-8.8%	-3.4%	-13.0%	-7.1%	65%	2,518	-17.2%	-5.2%	-23.5%	-12.6%	68%	2,387	-28.6%	-3.9%	-43.4%	-18.6%	70%
Micro-cap ($50M-300M) 1,360 flags	1,324	-2.0%	-3.7%	-7.1%	-7.4%	64%	1,293	-5.0%	-6.3%	-12.9%	-13.5%	67%	1,217	-11.4%	-8.8%	-25.4%	-23.4%	69%
Small-cap ($300M-2B) 912 flags	896	-1.8%	-4.2%	-5.8%	-7.7%	64%	879	-3.8%	-6.7%	-10.2%	-13.3%	67%	845	-9.6%	-11.8%	-22.4%	-24.3%	70%
Mid-cap ($2B-10B) 230 flags	228	-1.5%	-0.8%	-5.3%	-4.2%	62%	219	-1.2%	+1.5%	-7.1%	-6.0%	65%	199	-2.4%	-1.6%	-15.0%	-14.0%	67%
Large-cap (over $10B) 70 flags	66	+1.6%	+1.1%	-1.2%	-1.7%	52%	64	+4.2%	+3.7%	-0.6%	-2.3%	52%	60	+14.7%	+14.3%	-1.3%	-1.3%	55%
Market cap unknown at the flag 2,996 flags	195	-17.9%	-19.1%	-20.2%	-22.6%	72%	193	-35.8%	-33.4%	-40.4%	-38.8%	82%	185	-60.0%	-46.6%	-68.3%	-57.3%	83%

Delisting-adjusted returns

Group	90 days		180 days		1 year
Group	completed windows	delisting-adjusted	completed windows	delisting-adjusted	completed windows	delisting-adjusted
Auditor resignations and dismissals (not routine)	-8.5%	-8.5% (16 stopped)	-16.0%	-15.9% (36 stopped)	-32.2%	-31.8% (95 stopped)
Auditor resigned	-10.0%	-9.9% (3 stopped)	-21.6%	-21.5% (11 stopped)	-40.4%	-40.4% (28 stopped)
Auditor dismissed	-7.6%	-7.6% (10 stopped)	-14.3%	-14.3% (21 stopped)	-28.7%	-28.4% (56 stopped)
Change without a stated resignation or dismissal	-8.7%	-8.6% (3 stopped)	-16.1%	-16.1% (4 stopped)	-32.7%	-31.9% (11 stopped)
Disagreements reported	-21.1%	-21.1% (0 stopped)	-11.8%	-11.8% (0 stopped)	-45.0%	-45.0% (0 stopped)
Routine change (audit-firm merger etc.)	-9.8%	-9.5% (15 stopped)	-23.0%	-22.0% (17 stopped)	-45.4%	-43.4% (25 stopped)

Median return vs SPY. The plain figure only counts stocks that still traded at the end of the window. The delisting-adjusted figure also counts stocks that stopped trading first at their last close. Stopping can mean a delisting or bankruptcy, but also an acquisition, merger or going-private deal, and a last close can come before a later loss (for example shares that keep trading over the counter without price data), so the adjustment can move the median either way. Companies that no longer have any ticker are missing from both figures.

Notable large-cap cases

Filed	Company	Flag	Market cap at the flag	90 days vs SPY	1 year vs SPY
2022-04-15	T-Mobile US, Inc. (TMUS)	Auditor change	$167B	+15.3%	+17.0%
2025-09-11	LAM RESEARCH CORP (LRCX)	Auditor change	$146B	+51.6%	+160.8%
2021-11-08	MERCADOLIBRE INC (MELI)	Auditor change	$82B	-32.3%	-25.3%
2025-02-28	CRH PUBLIC LTD CO (CRH)	Auditor change	$69B	-9.8%	-1.0%
2020-02-26	ESTEE LAUDER COMPANIES INC (EL)	Auditor change	$68B	+1.4%	+28.0%
2017-09-29	General Motors Co (GM)	Auditor change	$58B	-4.6%	-31.0%
2021-11-10	CANADIAN PACIFIC RAILWAY LTD/CN (CP)	Auditor change	$56B	-5.0%	+15.2%
2023-01-13	Monster Beverage Corp (MNST)	Auditor change	$53B	+1.2%	-5.1%
2024-07-24	FASTENAL CO (FAST)	Auditor change	$39B	+7.7%	+28.3%
2018-07-26	AIR PRODUCTS & CHEMICALS INC /DE/ (APD)	Auditor change	$35B	+1.4%	+41.8%
2016-07-29	AMERICAN ELECTRIC POWER CO INC (AEP)	Auditor change	$34B	-6.4%	-11.0%
2015-03-13	Energy Transfer Equity, L.P. (ET)	Auditor change	$33B	+9.9%	-74.7%

Every flag in this group where the company was worth at least $10B on the filing date and its stock traded at least $25M a day (one row per company, its latest such flag, largest first). Big companies are rare in this data and are shown for context, not as a sample.

Method and caveats

Data: SEC EDGAR filings since 2015, each verified against the filing text with the same rules as the live site and checked by a separate second-opinion verifier and hand samples; split- and dividend-adjusted daily closes and historical market caps from our market data.
Returns: from the last close before the filing to the first close on or after 90 days, 180 days and 1 year later; "vs SPY" subtracts the S&P 500 ETF's return over the same dates. Groups with fewer than 30 completed windows are not shown.
Survivorship: companies without a traded ticker today are missing entirely, and stocks that stopped trading drop out of the plain figures (see delisting-adjusted). Missing companies are often the ones that failed, so the real outcome for investors was likely worse than these figures.
Overlap and size: companies often file several flags and windows overlap, so these are descriptive statistics, not significance tests. Most flagged companies are micro caps, while SPY is a large-cap index; part of the gap is a size effect.
Errors: classification is automated and errors are possible. Reused tickers, reverse splits and thin trading can distort individual returns; medians limit their effect.
Not investment advice: nothing here is a recommendation to buy or sell any security. Past returns say nothing certain about the future.

Download the numbers on this page: auditor-changes.csv · Chart image: cards/auditor-changes.png · Recent flags of this type: Auditor changes

More research: All research · 10-year study (all flags) · Going-concern warnings · Late filings (NT 10-K / NT 10-Q) · Restatements (8-K Item 4.02)

Frequently asked questions

What happens to a stock after its auditor resigns or is dismissed?

Auditor changes (8-K Item 4.01): across 4,893 flags with a full year of price data (2015-2026), the median stock returned -18.5% and trailed the S&P 500 (SPY) by 32.2 percentage points over the next year; 70% did worse than SPY.

Does the type of auditor changes matter?

Auditor resigned: median 1-year return vs SPY -40.4%, 73% trailed SPY (n=1,197). Auditor dismissed: median 1-year return vs SPY -28.7%, 68% trailed SPY (n=2,912). Change without a stated resignation or dismissal: median 1-year return vs SPY -32.7%, 71% trailed SPY (n=784). Disagreements reported: median 1-year return vs SPY -45.0%, 71% trailed SPY (n=42). Routine change (audit-firm merger etc.): median 1-year return vs SPY -45.4%, 76% trailed SPY (n=836).

Do delisted stocks change the result?

95 of these stocks stopped trading within a year; counting them at their last trade moves the 1-year median vs SPY from -32.2% to -31.8%.

Does company size matter?

By size: large caps (over $10B) -1.3% vs SPY over a year (n=60); nano caps (under $50M) -43.4% (n=2,387).

Is this investment advice?

No. These are historical averages computed from SEC filings and market data. They are not a prediction or a recommendation to buy or sell any security, and many flagged stocks went up.