Business Context and Reporting Period
This Form 8-K filing by Xencor, Inc. (Delaware) was submitted on June 24, 2015. The report discloses a change in the Company's independent registered public accounting firm for the fiscal year ending December 31, 2015.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on the appointment of a new auditor and the history of the previous auditor's engagement.
Material Changes and Auditor Transition
- New Appointment: The Audit Committee appointed McGladrey LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2015.
- Dismissal: BDO USA, LLP was dismissed from the role following a competitive review process.
- Historical Opinions: BDO's reports for the fiscal years ended December 31, 2014, and 2013 did not contain adverse opinions, disclaimers, or qualifications regarding uncertainty, audit scope, or accounting principles.
- Disagreements: There were no disagreements with BDO on accounting principles, financial statement disclosures, or auditing scope during the 2013 and 2014 audits or the interim period through June 24, 2015.
Risks, Contingencies, and Internal Control Issues
The filing discloses a specific "reportable event" regarding internal controls:
- Material Weakness: BDO identified a material weakness in internal control over financial reporting during the audit of the fiscal year ended December 31, 2013.
- Nature of Weakness: The weakness related to revenue recognition, specifically the improper recording of negotiated terms in product development partnerships and license agreements, and the misapplication of GAAP regarding the timing of revenue recognition for these agreements.
- Consultation with New Auditor: The Company confirmed it did not consult with McGladrey regarding accounting principles or audit opinions prior to the appointment, nor were there any disagreements or reportable events discussed with the new firm.
Investor Verification Checklist
- Verify the status of remediation efforts for the material weakness in revenue recognition controls identified in 2013.
- Review the letter from BDO USA, LLP (Exhibit 16.1) to confirm their concurrence with the Company's statements regarding the dismissal and lack of disagreements.
- Monitor future filings for any restatements of financial statements related to the previously identified revenue recognition issues.
- Confirm that McGladrey LLP has completed their initial assessment of the Company's internal controls for the 2015 fiscal year.