Business Context and Reporting Period
This Form 8-K Current Report was filed by Green Brick Partners, Inc. on August 26, 2016. The filing addresses Item 4.01, detailing a change in the company's certifying accountant. The report covers the period through August 26, 2016, and references financial statements for fiscal years ended December 31, 2015, and 2014.
Key Financial Metrics
This filing does not contain specific financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity figures. The document focuses exclusively on the transition of the independent registered public accounting firm and the status of internal controls over financial reporting.
Material Changes
The primary material change reported is the dismissal of Grant Thornton LLP as the company's independent registered public accounting firm and the immediate engagement of RSM US LLP, effective August 26, 2016. The filing confirms that there were no disagreements with Grant Thornton regarding accounting principles, practices, or audit scope during the relevant periods.
Outlook, Risks, and Contingencies
The filing discloses significant risks related to the effectiveness of the company's internal control over financial reporting. Grant Thornton identified material weaknesses in the fiscal years ended December 31, 2014, and 2015, which remained unresolved as of August 26, 2016. These weaknesses include:
- Inability to obtain a SOC 1 Type 2 report for the third-party ERP service organization, leading to reliance issues on data accuracy for accrued liabilities, vendor changes, and reserves.
- Ineffective controls over the review and approval of manual journal entries and consolidating adjustments.
- Ineffective controls over the identification and disclosure of related party transactions.
- Ineffective controls over period-end accruals, inventory costs, and cost of goods sold.
- Ineffective controls over the classification and disclosure of financial statement amounts.
- Historical weaknesses (2014) included unrestricted access to post journal entries, inappropriate IT access rights, and inconsistent account classifications.
Grant Thornton was not required to provide an attestation report for 2014 due to SEC transition rules. The company has authorized Grant Thornton to respond to inquiries from RSM regarding these matters.
Investor Verification Checklist
- Verify the status of remediation efforts for the disclosed material weaknesses in internal controls.
- Confirm whether RSM US LLP has issued a new opinion on internal controls or financial statements following their engagement.
- Review the attached Exhibit 16.1 (Grant Thornton's letter to the SEC) for any additional commentary on the dismissal or the identified weaknesses.
- Assess the impact of the third-party ERP service organization's control deficiencies on future financial reporting accuracy.