Science Applications International Corp
For the period ended Feb 2, 2024. Filed Mar 20, 2024.
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FY2024 · Filed Mar 20, 2024
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Report of Independent Registered Public Accounting Firm
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Science Applications International Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Science Applications International Corporation (the Company) as of February 2, 2024 and February 3, 2023, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended February 2, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 2, 2024 and February 3, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 2, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 20, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
| Revenue recognition based on certain contracts using a cost input measure of progress | |
| Description of the Matter | The Company recognizes a portion of its revenues using a cost input (cost-to-cost) measure of progress. Under the cost-to-cost measure of progress, revenue is recognized based on the ratio of costs incurred to the total estimated costs at completion. As described in Note 1 to the consolidated financial statements, recognizing revenue on long-term contracts involves significant judgments and estimates. Estimating costs at completion for certain contracts is complex due to the nature of the services being performed and the length of the contracts. Changes in estimates (as quantified in Note 3 to the consolidated financial statements) can routinely occur due to a variety of reasons including changes in scope, changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs. Changes in estimates on these contracts, if significant, could have a material effect on the Company’s results of operations. Auditing the Company’s accounting for revenue for certain contracts using the cost input measure of progress was complex due to the judgment involved in estimating the total estimated costs at completion for these contracts. Management estimates total costs at completion by making assumptions regarding the complexity of the work to be performed, the schedule and associated tasks, labor productivity and availability, increases in wages and prices of materials, execution by subcontractors, overhead cost rates, and other variables. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s recognition of revenue using the cost input measure of progress. For example, we tested controls over the significant assumptions applied in determining the estimation of costs to be incurred on the contract and controls evaluating the appropriateness of changes in estimated costs to complete throughout the contract’s period of performance. We also tested internal controls that management executes to validate the data used in determining this revenue was complete and accurate.To test the accuracy of the Company’s estimated costs at completion, our audit procedures included, among others, comparing estimates of labor costs, subcontractor costs, and materials to actual costs incurred to date, comparing estimated margins to margins on similar contracts, and agreeing the key terms to contract documentation and prior management estimates. Our audit procedures also included, among others, evaluating the nature, timing and extent of the amounts of revenue and costs recorded to date, including any changes in estimated costs at completion from the prior period. For example, to test a change in estimate, we inspected underlying evidence for the reason for the change in estimate and the timing of such change, and we recalculated the inception-to-date effect recorded. We also evaluated whether a lack of change in estimate was appropriate, where applicable, on contracts. |
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
| Certain unrecognized tax benefits that, if recognized, would affect the effective income tax rate | |
| Description of the Matter | As discussed in Notes 1 and 11 to the consolidated financial statements, the Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. The Company recognizes liabilities for uncertainty in income taxes when it is more likely than not that a tax position will not be sustained on examination and settlement with various taxing authorities.Auditing these liabilities associated with unrecognized tax benefits that, if recognized, would affect the effective income tax rate was challenging due to the significant judgment in applying the relevant tax laws and inherent uncertainty involved in predicting the ultimate resolution of such matters with the taxing authority. Changes to the liability resulting from ongoing or future audits by the taxing authorities could have a material effect on the Company’s results of operations. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for income taxes, including unrecognized tax benefits. For example, we tested management’s controls over the review of tax positions taken by the Company to determine whether the positions met the threshold for recognition within the consolidated financial statements, as well as determination of the measurement of the unrecognized tax liability.To test the recognition of the Company’s unrecognized tax benefits that, if recognized, would affect the effective tax rate and measurement of these unrecognized tax benefits, we involved tax professionals with specialized skills and knowledge to assess the technical merits of the Company’s material tax positions. We performed audit procedures that included, among others, evaluating communications with relevant taxing authorities, evaluating whether management appropriately considered new information that could significantly change the recognition, measurement, or disclosure of these unrecognized tax benefits, and testing the assumptions used by management in estimating the valuation of any associated liability. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2018.
Tysons, Virginia
March 20, 2024
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