8-KFinancial EventsExhibits & Filings

NETFLIX INC 8-K Report, Auditor Change (Mar 23, 2012)

Filed March 23, 2012For Securities:NFLX

Summary

Netflix, Inc. (NFLX) filed an 8-K report on March 23, 2012, primarily to announce a change in its independent registered public accounting firm. Following a competitive review process, the company's Audit Committee decided to dismiss KPMG LLP and engage Ernst & Young LLP as its auditor for the fiscal year ending December 31, 2012. This change is significant for investors as it involves a transition in the oversight of the company's financial reporting and internal controls. The report clarifies that the dismissal of KPMG and the appointment of Ernst & Young were conducted in accordance with SEC regulations. It states that there were no disagreements or reportable events with KPMG that would have impacted their audit reports for the fiscal years 2010 and 2011. The company also confirmed that it had not consulted with Ernst & Young on any significant accounting matters prior to their appointment. Investors should monitor the initial reports and communications from Ernst & Young for any new insights or emphasis areas in their upcoming audits.

Key Highlights

  • 1Netflix has appointed Ernst & Young LLP as its new independent registered public accounting firm for the fiscal year ending December 31, 2012.
  • 2KPMG LLP has been dismissed as the company's independent auditor.
  • 3The change in auditor followed a competitive review process conducted by the Audit Committee.
  • 4The company stated that there were no disagreements or reportable events with KPMG during the preceding fiscal years or interim period.
  • 5KPMG's prior audit reports for fiscal years 2010 and 2011 contained no adverse, qualified, or disclaimed opinions.
  • 6Netflix had not consulted Ernst & Young on any material accounting or auditing matters prior to their appointment.

Frequently Asked Questions

Netflix is changing its auditor as a result of a competitive review process undertaken by its Audit Committee. The company has decided to transition from KPMG LLP to Ernst & Young LLP for the upcoming fiscal year.

According to the filing, there were no "disagreements" or "reportable events" as defined by SEC regulations between Netflix and KPMG during the fiscal years 2010, 2011, and the subsequent interim period through March 21, 2012. KPMG's audit reports were also not qualified or modified.

A change in auditor can be significant as it introduces a new firm responsible for scrutinizing the company's financial statements and internal controls. Investors may look for continuity in audit quality and potential new perspectives or emphasis areas from the new auditor, Ernst & Young.

The filing states that Netflix had not consulted with Ernst & Young regarding the application of accounting principles, potential audit opinions, or any matters that constituted disagreements or reportable events prior to their engagement.