8-KFinancial EventsExhibits & Filings

Extra Space Storage Inc. 8-K Report, Auditor Change (Apr 22, 2005)

Filed April 22, 2005For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) filed an 8-K on April 22, 2005, to report a change in its independent registered public accounting firm. The company dismissed PricewaterhouseCoopers LLP (PwC) as its auditor on April 18, 2005, and subsequently engaged Ernst & Young LLP as its new independent accountants effective April 19, 2005. This change in auditors is a significant event for investors as it can sometimes signal underlying issues with financial reporting or internal controls. However, the filing indicates that there were no disagreements with PwC on accounting principles or financial disclosures. The only previously disclosed issue related to a material weakness in internal control over accounting for certain joint venture arrangements and related party guarantees, identified in connection with the company's IPO in 2004, which impacted the 2002 and 2001 fiscal years. No such material weakness was identified for 2003 or 2004.

Key Highlights

  • 1Extra Space Storage Inc. has changed its independent auditor.
  • 2PricewaterhouseCoopers LLP was dismissed as the auditor on April 18, 2005.
  • 3Ernst & Young LLP has been appointed as the new independent auditor, effective April 19, 2005.
  • 4The company states there were no disagreements with PwC regarding accounting principles, financial statement disclosures, or auditing procedures.
  • 5A previously disclosed material weakness in internal controls related to joint venture accounting for fiscal years 2002 and 2001 was noted.
  • 6No material weaknesses in internal controls were identified by PwC for fiscal years 2003 and 2004.
  • 7The Audit Committee of Extra Space Storage Inc. approved the decision to change accounting firms.

Frequently Asked Questions

The company dismissed PricewaterhouseCoopers LLP as its auditor. While the filing doesn't specify a reason beyond the dismissal itself, it notes that the Audit Committee approved the decision. Typically, auditor changes can occur for various reasons, including strategic alignment, cost considerations, or a periodic review of audit services.

No, the filing explicitly states that there were no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure during the two most recent fiscal years and up to the dismissal date.

A material weakness in internal control means that a deficiency exists in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The filing clarifies this issue was related to the accounting for joint venture arrangements and related party guarantees from fiscal years 2002 and 2001 and was disclosed during the company's IPO in 2004. Importantly, no such material weaknesses were identified for 2003 or 2004 by the former auditors.

While a change in auditor always warrants attention, this filing indicates a clean break with no disagreements with the previous auditor. The previously disclosed internal control weakness is not attributed to the period under the new auditor's watch and was not found in the more recent fiscal years. Investors should monitor the new auditor's reports for any new findings but the immediate information provided suggests a routine change rather than an immediate red flag.