On February 19, Ebix's independent auditor RSM resigned as the company's public accounting firm as a "result of being unable, despite repeated inquiries, to obtain sufficient appropriate audit evidence that would allow it to evaluate the business purpose of significant unusual transactions [in Ebix's gift cards business] that occurred in the fourth quarter of 2020”. Following this announcement, NASDAQ-listed Ebix's stock crashed, falling from $50.74 per share on February 19 to around $24 by February 22. Share price fell as much as 27% during after-hours trading on February 19 and continued to drop as much as 40% on February 22. Ebix is a software company that supplies insurance, financial, health and e-learning business with software and e-commerce services. RSM also said it had identified a "material weakness" related to Ebix's failure to design and implement controls "over the gift or prepaid card revenue transaction cycle sufficient to prevent or detect a material misstatement". The company and the auditor also disagreed over the accounting treated of $30 million that had been transferred to a trust account of Ebix's outside counsel in December 2020. The gift cards business of EbixCash has been a huge growth driver for Ebix, showing a 95% quarterly growth in Q3FY21. After its stock fell, Ebix is now attempting to downplay the news, noting that its unaudited results for Q4 2020 includes revenue greater than $220 million. The unaudited gift card business generated in excess of $130 million of revenues in Q4 (95% QoQ growth) and (unaudited) operating income…
