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Item 4.01
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Changes in Registrant’s Certifying Accountant
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(a) Dismissal of Independent Registered
Public Accounting Firm
On March 30, 2020, following the completion
of BDO USA, LLP’s audit of the consolidated financial statements of Telkonet, Inc. (the “Company”) as of and
for the year ending December 31, 2019, and the issuance of their report thereon, the Company dismissed BDO USA, LLP (“BDO”)
as the Company’s independent registered public accounting firm effective immediately. The decision to dismiss BDO was approved
by the Audit Committee of the Board of Directors of the Company.
BDO’s reports on the Company’s
consolidated financial statements for each of the fiscal years ended December 31, 2019 and 2018 did not contain any adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles, except
as follows:
BDO’s
report on (i) the consolidated financial statements of the Company as of and for the years ended December 31, 2019 and 2018, each
contained separate explanatory paragraphs regarding substantial doubt about the Company’s ability to continue as a going
concern, (ii) the consolidated financial statements of the Company as of and for the year ended December 31, 2019 contained a separate
paragraph stating that as discussed in Notes B and M to the consolidated financial statements, the Company changed its method
of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic 842 – Leases, and (iii) the
consolidated financial statements of the Company as of and for the year ended December 31, 2018 contained a separate paragraph
stating that as discussed in Notes A, B and C to the consolidated financial statements, the Company changed its method of
accounting for revenue from contracts with customers in the year 2018 due to the adoption of Accounting Standards Codification
Topic 606, Revenue from Contracts with Customers.
During the fiscal years ended December
31, 2019 and 2018, and the subsequent interim period through March 30, 2020, there were no disagreements within
the meaning of Item 304(a)(1)(iv) of Regulation S-K between the Company and BDO on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to BDO’s
satisfaction, would have caused them to make reference to the subject matter of the disagreement(s) in connection with their reports
on the consolidated financial statements of the Company for such years.
During
the years ended December 31, 2019 and 2018, and the subsequent interim period through March 30, 2020, there
were no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K, except as follows:
In connection with BDO’s audit of
the Company's consolidated financial statements for the fiscal years ended December 31, 2019 and 2018, BDO advised the Company
that they had identified material weaknesses in the Company’s internal control over financial reporting relating to not having
adequate financial reporting and close process controls, a lack segregation of duties, not having effective controls over the recording
of revenue recognition contracts, and not having adequate processes and procedures for the Company’s IT general control environment.
These material weaknesses are further described in Part II, Item 9A. “Controls and Procedures” of the Annual Reports
on Form 10-K for each of the fiscal years ended December 31, 2019 and 2018, filed with the Securities and Exchange Commission on
March 30, 2020 and April 1, 2019, respectively. The subject matter of these internal control deficiencies was discussed by the
Audit Committee of the Board of Directors of the Company with BDO. The Company has authorized BDO to respond fully to the inquiries
of the successor independent registered public accounting firm concerning the internal control deficiencies.
The Company has provided BDO with a copy
of the foregoing disclosures. Attached as Exhibit 16.1 is a letter from BDO, dated April 2, 2020, stating their agreement with
such statements.
(b) Engagement of New Independent Registered
Public Accounting Firm
On March 30, 2020, the Company appointed
Wipfli LLP (“Wipfli”) as the Company’s new independent registered public accounting firm for the fiscal year
ending December 31, 2020, subject to completion of Wipfli’s standard client acceptance procedures
and execution of an engagement letter. The decision to engage Wipfli was approved by the Audit Committee of the Board of
Directors of the Company.
During the fiscal years ended December
31, 2019 and 2018, and the subsequent interim period through March 30, 2020, neither the Company nor
anyone on its behalf has consulted with Wipfli regarding: (i) the application of accounting principles to a specific transaction,
either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, and neither
a written report nor oral advice was provided to the Company that Wipfli concluded was an important factor considered by the Company
in reaching a decision as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a
disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions; or (iii) any “reportable
event” within the meaning of Item 304(a)(1)(v) of Regulation S-K.