What Does ‘Since’ Mean in The Audit Report?

I thought I would be wrapping up our injection of new metadata into our 10-K filings today. However, I ran into an interesting snag. I discovered that despite an auditor reporting that they have audited the financial statements since some date, their first audit report might be either prior to or after that date.

Here is an example – Core Laboratories N. V.’s current auditor is KPMG. KPMG reports in the FYE 12/31/2020 10-K that they “have served as the Company’s auditor since 2015.” This same phrase is repeated in the 10-K for the FYE 12/31/2018 and 12/31/2019.

Mandatory tenure reporting began in 2018, so prior 10-K’s have no SINCE declaration or statement.

When I read the 10-K, I presumed that KPMG began auditing Core Laboratories’ financial statements in 2015 and that they would have been the signatories of the 12/31/2015 audit report in the 10-K released in early 2016.

This was not the case. The audit report in the 10-K released in 2016 for the 12/31/2015 FYE was signed by PricewaterhouseCoopers LLP. I then wondered if KPMG meant they had re-audited the 12/31/2015 FYE financial statements after becoming Core Laboratories’ auditor. This was also not the case – the first audit report from KPMG explicitly reports that their audit was for the financial statements for the FYE 12/31/2016.

This was confusing to me, so I went to find the 8-K that reported the change of auditor (to find all 8-K reporting on auditor changes use the search (ITEM_4.01 contains(YES)) and (DOCTYPE contains(8K)). ) The 8-K is interesting and helped me understand why KPMG is reporting that they have been the auditor since 2015. Here is a link to the 8-K: Core Laboratories AUCHANGE 8K.

Core Laboratories dismissed PwC on 4/29/2015. However, the dismissal was effective upon the issuance of the reports (financial and ICFR audits) for 12/31/2015. KPMG was appointed (and an engagement letter was signed) on 4/29/2015, with their appointment to be effective 1/1/2016.

I discovered this as I was working on some final touches to impute SINCE values hoping (actually assuming) that we could rely on the SINCE value that was reported from 2018 to the present to populate prior SINCE fields. I was getting ready to punch the button to approve this logic but I decided to test it. Basically, the test was to establish whether the auditors matched the SINCE value – was KPMG the auditor of Core Laboratories in 2015? I would say they were not.

So now, we have to sort this out and make sure we have the right tests to validate the declarations made in the 10-K. It is our intention to have the SINCE value represent the first FY the auditor signed the audit report in the 10-K. Despite KPMG’s declaration that they have audited Core Laboratories since 2015, we will change that value to 2016, the year they of the first audit report they signed..

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