Business Context and Reporting Period
Company: Sportsman's Warehouse Holdings, Inc. (SPWH)
Filing Type: Form 8-K (Current Report)
Date of Report: July 6, 2020
Principal Event: Change in Registrant's Certifying Accountant.
Key Financial Metrics
This filing does not contain current period revenue, profit, cash flow, margin, debt, or liquidity figures. It references historical data solely to contextualize the prior auditor's report:
- Acquired Assets: Eight Field & Stream stores acquired in 2019 represented 9.7% of total assets and 2.7% of total revenues for the fiscal year ended February 1, 2020.
- Accounting Changes: The company adopted FASB Accounting Standards Update No. 2016-02 (Leases) effective February 3, 2019.
Material Changes and Auditor Dismissal
The Company dismissed KPMG LLP as its independent registered public accounting firm, effective July 6, 2020. The dismissal was approved by the Audit Committee. Key details regarding the prior engagement include:
- Opinion Status: KPMG's reports for fiscal years ended February 1, 2020, and February 2, 2019, did not contain adverse opinions, disclaimers, or qualifications regarding accounting principles, except for an explanatory paragraph regarding the adoption of new lease accounting standards.
- Internal Control Weakness: KPMG's audit report for the fiscal year ended February 1, 2020, stated the Company did not maintain effective internal control over financial reporting due to a material weakness.
- Scope of Weakness: The weakness involved ineffective information technology general controls (ITGCs) in user access and change management. Contributing factors included insufficient control documentation, inadequate IT resources/training, and inadequate risk-assessment processes.
- Exclusions: The audit excluded the eight Field & Stream stores acquired in 2019 from the assessment of internal controls.
- Disagreements: There were no disagreements between the Company and KPMG on accounting principles, practices, or auditing scope/procedures.
Outlook, Risks, and New Appointment
New Auditor: The Audit Committee appointed Grant Thornton LLP as the new principal accountant, effective immediately on July 6, 2020.
Consultations: No consultations were held with Grant Thornton regarding accounting principles, audit opinions, disagreements, or reportable events prior to their engagement.
Risks: The filing highlights the risk associated with the previously identified material weakness in IT general controls, which impacted the effectiveness of business process controls dependent on those systems.
Investor Verification Checklist
- Verify the remediation plan for the material weakness in IT general controls (user access and change management) identified by KPMG.
- Confirm the timeline for Grant Thornton LLP to complete the audit of the current fiscal year.
- Review the impact of the excluded Field & Stream stores (9.7% of assets) on the overall assessment of internal controls.
- Monitor future filings for any additional reportable events or disagreements with the new auditor.