Business Context and Reporting Period
This Form 8-K was filed by Garrett Motion Inc. on November 1, 2018. The filing reports a change in the company's certifying accountant following the company's spin-off from Honeywell International Inc. on October 1, 2018.
Key Financial Metrics
This filing does not contain revenue, profit, cash flow, margin, debt, or liquidity metrics. It focuses exclusively on the appointment of a new auditor and the dismissal of the previous auditor.
Material Changes
- Change in Auditor: The Audit Committee approved the engagement of Deloitte SA ("Deloitte Switzerland") as the independent registered public accounting firm, effective immediately. Simultaneously, Deloitte & Touche LLP ("Deloitte US") was dismissed.
- Reason for Change: The change occurred in connection with the company becoming a standalone entity after the spin-off from Honeywell.
Guidance, Risks, and Contingencies
- Material Weakness Identified: A material weakness in internal control over financial reporting was identified in August 2018. This weakness relates to the estimation of the liability for unasserted Bendix-related asbestos claims.
- Specific Control Failure: There were not effective controls in place to provide reasonable assurance that a material error would be prevented or detected regarding the application of ASC 450 (Contingencies) for the asbestos liability.
- Audit History: Deloitte US's reports for the fiscal years ended December 31, 2016, and 2017 did not contain adverse opinions, disclaimers, or qualifications. No disagreements or reportable events occurred between the company and Deloitte US, other than the previously disclosed material weakness.
- Consultation: The company did not consult with Deloitte Switzerland regarding accounting principles or audit opinions prior to this engagement.
Investor Verification Checklist
- Verify the details of the material weakness regarding Bendix-related asbestos claims and the company's remediation plan.
- Confirm the transition timeline and scope of work between Deloitte US and Deloitte Switzerland.
- Review the letter from Deloitte US (Exhibit 16.1) to ensure they agree with the statements regarding the dismissal and lack of disagreements.
- Monitor future filings for updates on the internal control remediation status.