While assessing the materiality of recently discovered accounting misstatements KAR Auction Services (KAR), a provider of used vehicle auction and remarketing services, did not file its annual report on time. The company misstated operating cash flows from continuing and discontinued operations and between operating and financing cash flows.

The errors appear to stem from the sale of KAR’s ADESA auction business to Carvana (CVNA) for $2.2 billion in May 2022.

The errors impacted the nine months ended September 30, 2022. During that period, the corrections revealed included:

—KAR overstated operating cash flow from continuing operations by $89.6 million
—KAR overstated cash used by discontinued operations by $47.1 million
—KAR understated cash from investing activities from discontinued operations by $4 million

Separately, KAR also disclosed while preparing its 2022 annual consolidated financial statements it identified an error in the December 31, 2021 balance sheet. The error was recast and presented in KAR’s 10-Qs filed during 2022 to reflect the classification of the ADESA U.S. physical auctions as discontinued operations.

In the December 31, 2021 balance sheet included in those filings, liabilities of discontinued operations were overstated by $82.5 million with a corresponding understatement of deferred income tax liabilities.