Business Context and Reporting Period
This Form 8-K Current Report was filed by Inspired Entertainment, Inc. (INSE) on March 17, 2023. The filing discloses a change in the Company's independent registered public accounting firm.
Key Financial Metrics
This filing does not contain revenue, profit, cash flow, margin, debt, or liquidity figures. It focuses exclusively on the dismissal of the prior auditor and the engagement of a new auditor.
Material Changes and Auditor Transition
- Dismissal of Prior Auditor: On March 17, 2023, the Company dismissed Marcum LLP as its independent registered public accounting firm, effective immediately.
- Engagement of New Auditor: On March 17, 2023, the Audit Committee approved the engagement of KPMG LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2023, and related interim periods.
- Audit Opinions: Marcum LLP issued no adverse, qualified, or modified opinions on the financial statements for the years ended December 31, 2022, and 2021. However, the audit report for 2022 indicated the Company did not maintain effective internal control over financial reporting due to material weaknesses.
Management Commentary, Risks, and Contingencies
Material Weaknesses in Internal Controls
Marcum LLP identified the following material weaknesses in the Company's internal controls:
- 2021: Ineffective control environment due to the ineffective design and implementation of process controls, including management review controls.
- 2022:
- IT program and data changes affecting financial IT applications were not properly identified, tested, authorized, or implemented.
- Cash collection processes for the holiday park business lacked consistent documentation and implementation for reviewing and approving cash receipts, creating a risk of understatement.
- Deficiencies in the design and operation of the contract review and approval process regarding certain contract amendments.
Disagreements and Consultations
The Company reported no disagreements with Marcum LLP on accounting principles, practices, or auditing scope. Additionally, the Company had not consulted KPMG LLP regarding accounting principles, audit opinions, or matters subject to disagreement or reportable events prior to their engagement.
Investor Verification Checklist
- Verify the reasons for the dismissal of Marcum LLP beyond the stated lack of disagreements.
- Review the Company's remediation plan for the material weaknesses in internal controls identified for 2021 and 2022.
- Confirm the timeline for KPMG LLP's initial audit and the issuance of the next financial report.
- Examine Exhibit 16.1 (Marcum LLP's letter to the SEC) for any additional context regarding the dismissal.