Business Context and Reporting Period
This Form 8-K Current Report was filed by The Lovesac Company on July 21, 2022. 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 metrics. It is a disclosure regarding auditor changes and internal control matters rather than a financial performance report.
Material Changes
- Accountant Change: The Audit Committee approved the engagement of Deloitte & Touche LLP as the new independent registered public accounting firm for the fiscal year ending January 29, 2023.
- Dismissal of Prior Auditor: Marcum LLP was dismissed as the independent registered public accounting firm effective July 21, 2022.
- Disagreements: There were no disagreements with Marcum LLP regarding accounting principles, practices, or auditing scope during the fiscal years ended January 30, 2022, and January 31, 2021, or the interim period through July 21, 2022.
Outlook, Risks, and Contingencies
Material Weakness in Internal Controls: Marcum LLP previously advised the Company of a material weakness in internal control over financial reporting as of January 30, 2022. This weakness stemmed from an ineffective control environment due to the ineffective design and implementation of information technology and related activity level controls. Specifically, inadequate information technology general controls (ITGC) affected the integrity of data used to support activity level controls.
Audit Opinions: Marcum's audit reports for the fiscal years ended January 30, 2022, and January 31, 2021, did not contain adverse opinions, disclaimers, or qualifications regarding the financial statements. However, the report on internal control effectiveness for January 30, 2022, indicated the Company did not maintain effective internal control due to the aforementioned material weaknesses.
Consultation with New Auditor: The Company has not consulted Deloitte regarding any accounting principles or audit opinions that would be considered important factors in decision-making prior to this engagement.
Investor Verification Checklist
- Verify the status of remediation efforts for the material weakness in IT general controls (ITGC) identified by Marcum LLP.
- Confirm the execution date of the engagement letter with Deloitte & Touche LLP.
- Review the letter from Marcum LLP (Exhibit 16.1) to ensure they agree with the Company's statements regarding the change in auditors.
- Monitor future filings for updates on the effectiveness of internal controls over financial reporting.