While researching into the root cause of all of our misfortunes, the missing 10k, I began to think more about why EY exactly decided to resign from auditing for SMCI. It's entirely possible that EY resigned due to some serious issue within SMCI, but a more nuanced reason may exist as to why they had to resign - due to their lack of knowledge about the issues raised in the Hindenburg Research report, and their concern about their responsibility as auditors rather than the severity of the financial impact of the discovery.

Here's a more detailed explanation (credit to ChatGPT):

1. Role of Auditors:

• Auditors are supposed to have a deep understanding of a company’s financial situation, internal controls, and governance. If EY was unaware of serious accounting issues or internal control weaknesses at SMCI that were uncovered by Hindenburg Research, it could suggest a failure in their due diligence during the audit process.
• As auditors, EY is expected to identify financial irregularities or potential issues that could affect a company's financial statements. If these issues weren’t caught during their auditing process, it could have significant reputational and legal consequences for EY.

2. Resignation Due to Lack of Knowledge:

• EY may have resigned because they could no longer rely on the representations made by SMCI’s management and audit committee. This could indicate that the management did not disclose certain facts, or perhaps they were misleading EY during the audit process.
• If the concerns raised by Hindenburg Research (or any other material information) were not brought to EY’s attention during their audit process, it could mean that EY was unaware of those issues, and the firm decided to sever the relationship to protect their own reputation and avoid liability.

3. Impact on SMCI:

• Hindenburg's short report may not have been directly the cause for EY's resignation. It’s possible that the audit committee or management failed to disclose key information, and the auditors were blindsided by the issues raised in the report, leaving them unable to rely on the company’s internal controls.
• The financial impact on SMCI could stem from reputational damage due to the issues uncovered by Hindenburg Research and the subsequent resignation of EY, which could create investor uncertainty, drop the company’s stock price, and raise questions about its financial integrity.

4. Possible Motivations for Resignation:

• EY might have terminated the relationship not because the Hindenburg Research materials directly affected SMCI's financial performance, but because the auditor’s responsibility is to ensure they can fully trust the company’s financials. If they found discrepancies or if they felt unable to rely on management's assertions, they had no choice but to resign to avoid potential legal or reputational fallout.

Together with the fact that EY has been making an effort to actively reduce the number of their clients in the recent years and the downfall of Hindenburg's era of relevance as of this week, it might be possible that EY resigned due to the revelation of previously unknown information that called into question the SMCI's governance and internal controls or due to EY's own internal concerns about the repercussions for their own standing as auditors rather than the findings being detrimental to SMCI directly.