Auditor E&Y dings Asbury’s IT controls but calls Q4 results correct

The insufficient IT controls “limit the level of assurance over the completeness and accuracy of information used in certain automated and business process controls,” it said.

The issue wasn’t serious, according to Glenn Chin, an Asbury analyst at Seaport Research Partners, who said he spoke to Asbury about the Ernst & Young findings.

Chen told Automotive News on Thursday that the conversation confirmed his initial assessment — “a lack of internal controls, while never a good thing, is easily rectifiable (particularly this one, which was the result of a lack of segregation of duties).”

Chen pointed out the issue didn’t affect Asbury’s results.

“Most importantly though, is that the lack of control did not result in a material misstatement of their financials (they received a ‘clean’ audit opinion),” he wrote.

Ernst & Young said Asbury’s financial statements “present fairly, in all material respects, the financial position” of the retailer.

Asbury said it expected to have the controls issue resolved this year.

“For control testing, you must be able to document the design and effectiveness of the controls and have enough history of the process to test to prove effectiveness,” Asbury told Automotive News. “We expect to fully remediate the material weakness in 2023. It will take a little time in 2023 to have enough history to test for compliance.”

Asbury, of Duluth, Ga., ranks No. 5 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 109,910 new vehicles in 2021.

The issue of insufficient internal controls has cropped up before among other major publicly traded franchise auto dealers. Ernst & Young discussed it in Sonic Automotive Inc.’s 2011 annual report, and KPMG noted it in Lithia’s 10-K for 2007. In both cases, the auditors called the company’s overall financial results accurate.