Business Context and Reporting Period
This Form 8-K Current Report from Varex Imaging Corporation (VREX) is dated March 31, 2021. The filing primarily addresses a change in the Company's independent registered public accounting firm.
Key Financial Metrics
The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity. This report focuses on governance and audit matters rather than financial performance data.
Material Changes
Change in Certifying Accountant
- Dismissal: On March 31, 2021, the Audit Committee dismissed PricewaterhouseCoopers LLP (PwC) as the independent registered public accounting firm.
- Appointment: On the same date, the Audit Committee appointed Deloitte & Touche LLP (Deloitte) as the new independent registered public accounting firm for fiscal year 2021 and related interim periods.
- Audit Opinions: PwC's reports for fiscal years 2019 and 2020 did not contain adverse opinions, disclaimers, or qualifications regarding uncertainty, audit scope, or accounting principles.
- Disagreements: There were no disagreements with PwC on accounting principles, practices, or auditing scope during fiscal 2019, 2020, or the interim period through March 31, 2021.
Management Commentary, Risks, and Contingencies
Material Weaknesses in Internal Controls
The filing details significant material weaknesses in internal control over financial reporting identified in fiscal 2019 and 2020:
- Fiscal 2019 Weaknesses: Included ineffective risk assessment, insufficient resources for the control environment, and ineffective controls over revenue recognition, inventory valuation, and the financial reporting close process.
- Fiscal 2020 Weaknesses: Continued issues with the control environment, risk assessment, inventory accounting (specifically verification at third-party locations), and the financial reporting close process (including segregation of duties).
- Remediation Status: The Company states that fiscal 2019 weaknesses related to revenue, inventory valuation/count procedures, and specific close process controls have been remediated. However, remaining weaknesses from fiscal 2019 and 2020 (including the control environment and risk assessment) remain unremediated.
Consultations
The Company confirms that no consultations occurred with Deloitte regarding accounting matters or audit scope during the two most recent fiscal years or the subsequent interim period.
Investor Verification Checklist
- Verify the status of unremediated material weaknesses in the control environment and risk assessment processes.
- Review the transition plan between PwC and Deloitte to ensure continuity in audit oversight.
- Confirm the timeline for remediation of the remaining internal control deficiencies.
- Examine the upcoming fiscal 2021 financial statements for any restatements or adjustments resulting from the identified control issues.