Avangrid, Inc. (NYSE:AGR) Files An 8-K Changes in Registrant’s Certifying Accountant
Item4.01 Changes in Registrants Certifying Accountant.
The Audit and Compliance Committee of the Board of Directors of
Avangrid, Inc. (the Company) has approved the selection of KPMG
US, LLP (KPMG) as the Companys new independent registered public
accounting firm for the year ending December31, 2017, effective
as of March10, 2017. In connection with the selection of KPMG,
the Company notified Ernst Young LLP (EY) that it would be
dismissed as the Companys principal independent registered public
accounting firm, effective as of March10, 2017 upon completion of
EYs audit of the Companys consolidated financial statements for
the year ended December31, 2016.
In connection with the audits of the Companys consolidated
financial statements for the years ended December31, 2016 and
2015 and through March10, 2017, there were no disagreements (as
defined in Item304(a)(1)(iv) of Regulation S-K and related
instructions to Item304 of Regulation S-K) with EY on any matter
of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement,
if not resolved to the satisfaction of EY, would have caused EY
to make reference to the subject matter of the disagreement in
its reports on such financial statements.
EYs audit reports on the Companys consolidated financial
statements for the years ended December31, 2016 and 2015 did not
contain an adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or
accounting principle, except that EY issued an adverse audit
report on the effectiveness of the Companys internal control over
financial reporting as of December31, 2016. In addition, during
the Companys two most recent fiscal years ended December31, 2016
and 2015 and during the interim period through March10, 2017,
there were no reportable events as that term is defined in
Item304(a)(1)(v) of Regulation S-K, except that EY advised the
Company of certain deficiencies in the Companys internal control
over financial reporting identified during EYs audits of the
Companys consolidated financial statements for the years ended
December31, 2016 and 2015, that individually or in aggregate
constituted a material weakness.
As disclosed in the Companys annual report on Form 10-K for the
year ended December31, 2016, management identified certain
deficiencies that rose to the level of a material weakness
related to (i)the accounting for the change in the estimated
useful life of certain elements of the wind farms at Avangrid
Renewables, LLC, an indirect wholly-owned subsidiary of the
Company (Renewables), that, together with other smaller
deficiencies related to documentation of internal controls
procedures, and enhancement of review controls at Renewables,
(ii)the preparation of the consolidated financial statements,
specifically the classification and disclosure of financial
information, and (iii)the measurement and disclosure of income
taxes (collectively, the 2016 material weaknesses).
As a result of these material weaknesses, management concluded
that, as of December31, 2016, the Companys internal control over
financial reporting was not effective.
In addition, during EYs audit of the Companys consolidated
financial statements for the year ended December31, 2015, EY
identified errors in certain income tax and depreciation expense
accounts that resulted in the Company making material corrections
to its income tax provision, deferred income tax liabilities,
depreciation expense and accumulated depreciation balances.
Certain of these adjustments related to prior periods and the
Company corrected the financial statements for such prior periods
and disclosed this correction within Note 2 to its audited
consolidated financial statements of its Annual Report on Form
10-K for the year ended December31, 2015. These errors were due
to the Companys accounting personnel having insufficient time and
resources combined with ineffective review controls sufficiently
precise to detect errors in the financial statements and, as a
result, EY concluded that there were material weaknesses in the
Companys internal control over financial reporting.
The Companys management, with oversight from its Audit and
Compliance Committee of the Board of Directors of the Company, is
actively engaged in remediation efforts to address the material
weaknesses identified above. Management has taken and will take a
number of actions to remediate the 2016 material weaknesses
including the following remediation plan:
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Implementing and enhancing additional management review controls; |
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Increasing accounting personnel to devote additional time and internal control resources; |
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Implementing enhanced controls to monitor the effectiveness of the underlying business process controls that are dependent on the data and financial reports generated from the relevant information systems; |
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Continuing to implement controls newly designed during the third and fourth quarters of 2016 that management has determined through testing are more precise; |
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Implementing specific enhanced review procedures in the property, plant and equipment area and income taxes, including, without limitation, the estimation of useful lives; |
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Educating and re-training internal control employees regarding internal control processes to mitigate identified risks and maintaining adequate documentation to evidence the effective design and operation of such processes; and |
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Enhancing the automation of processes and controls to allow for the more timely completion and enhanced review of internal controls surrounding financial information and disclosures. |
These improvements are targeted at strengthening the Companys
internal control over financial reporting and remediating the
2016 material weaknesses. The Company remains committed to a
strong internal control environment and management believes that
these actions, and the improvements management expects to achieve
as a result, will effectively remediate the 2016 material
weaknesses. However, the material weaknesses in the Companys
internal control over financial reporting will not be considered
remediated until the controls operate for a sufficient period of
time and management has concluded, through testing that these
controls operate effectively. The Companys plans to have its
enhanced review procedures and documentation standards in place
and operating in the first quarter of 2017, and expects that the
remediation of the 2016 material weaknesses will be completed by
December31, 2017. The Company believes that it has implemented,
and will continue to implement, the internal controls and
processes necessary for the Company to develop reliable financial
statements and believes that the controls designed were adequate
for financial disclosures required for the preparation of the
Companys annual reports on Form 10-K and quarterly reports on
Form 10-Q.
The Audit and Compliance Committee of the Board of Directors of
the Company discussed the material weaknesses with EY. The
Company has authorized EY to respond fully to the inquiries from
KPMG concerning the material weaknesses. There are no limitations
placed on EY or KPMG concerning the inquiry of any matter related
to the Companys financial reporting.
During the Companys two most recent fiscal years and the
subsequent interim period through March10, 2017, neither the
Company, nor anyone on its behalf, consulted KPMG regarding
either: (i)the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered with respect to the
financial statements of the Company, and no written report or
oral advice was provided to the Company by KPMG that was an
important factor considered by the Company in reaching a decision
as to any accounting, auditing or financial reporting issue; or
(ii)any matter that was either the subject of a disagreement (as
defined in Item304(a)(1)(iv) of Regulation S-K and the related
instructions) or a reportable event (as described in
Item304(a)(1)(v) of Regulation S-K).
The Company provided EY with a copy of this Current Report on
Form 8-K prior to its filing with the Securities and Exchange
Commission (SEC) and requested that EY furnish it with a letter
addressed to the SEC stating whether or not it agrees with the
above statements in Item4.01 and if not, stating the respects in
which it does not agree. A copy of EYs letter, dated March14,
2017, is filed as Exhibit 16.1 to this Current Report on Form
8-K.
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Item9.01 Financial Statements and Exhibits.
(d) Exhibits.
| ExhibitNo. | Description | |
| 16.1 |
Letter from Ernst Young LLP to the Securities and Exchange Commission, dated March 14, 2017. |
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About Avangrid, Inc. (NYSE:AGR)
Avangrid, Inc. is a diversified energy and utility company with more than $30 billion in assets and operations in 25 states. The company operates regulated utilities and electricity generation through two primary lines of business. Avangrid Networks includes eight electric and natural gas utilities, serving approximately 3.1 million customers in New York and New England. Avangrid Renewables operates 6.3 gigawatts of electricity capacity, primarily through wind power, in states across the United States. Iberdrola S.A. (Madrid: IBE), a worldwide leader in the energy industry, owns 81.5% of AVANGRID. Avangrid, Inc. (NYSE:AGR) Recent Trading Information
Avangrid, Inc. (NYSE:AGR) closed its last trading session down -0.01 at 42.11 with 418,951 shares trading hands.