Lumber Liquidators 2015 Annual Report Download - page 58

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Report of Ernst & Young LLP, Independent Registered Public Accounting Firm,
on Internal Control over Financial Reporting
The Board of Directors and Stockholders of Lumber Liquidators Holdings, Inc.
We have audited Lumber Liquidators Holdings, Inc.’s internal control over financial reporting as of
December 31, 2015, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
Lumber Liquidators Holdings, Inc.’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included
in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, 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 following material
weakness has been identified and included in management’s assessment. Management has identified a material
weakness related to the design and operating effectiveness of user access controls related to the Company’s
enterprise resource planning system that are relevant to the preparation of the consolidated financial statements
and system of internal control over financial reporting. We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of
Lumber Liquidators Holdings, Inc. as of December 31, 2015 and 2014, and the related consolidated statements
of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2015. This material weakness was considered in determining the nature, timing,
and extent of audit tests applied in our audit of the 2015 financial statements, and this report does not affect
our report dated February 29, 2016, which expressed an unqualified opinion on those financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the
objectives of the control criteria, Lumber Liquidators Holdings, Inc. has not maintained effective internal
control over financial reporting as of December 31, 2015, based on the COSO criteria.
/s/ Ernst & Young LLP
Richmond, Virginia
February 29, 2016
48