Remediating a Material Weakness for a Global Technology Company
Challenge
A global technology company had several errors identified in connection with its IPO readiness efforts that resulted in a material weakness on the revenue process. The company’s global revenue process was heavily dependent on manual intensive processes, including frequent transposition of data and non-uniform customer reporting, non-standard contracts, and pricing. Additionally, the company experienced significant turnover within the revenue department, resulting in a loss of knowledge and leadership, and therefore was not poised for remediation of the weakness.Ultimately, the company was able to remediate the material weakness in the revenue process, and Riveron helped the company improve its internal control over financial reporting and become a publicly listed company.
How we helped
Through our long-standing relationship with the company’s management, Riveron was engaged to assist the company with its strategic capital market initiatives. As part of the company IPO readiness initiative, our team was asked to help implement robust processes to remediate the material weakness. With an understanding of the company’s business and complexity of its revenue recognition and the relevant global revenue process, we collaborated with the company’s global key stakeholders and the external auditors to develop, execute, and document a global testing strategy that included review partner reporting, contract agreements, and pricing, and ensure appropriate revenue recognition per the standard, ASC 606. We performed testing for two quarters, followed by training the process owners and internal audit to perform the testing as part of the transition plan.
To guide future use cases, we streamlined workpapers into a global testing template that would aggregate all important inputs in an easy-to-follow manner. We worked closely with the company’s global revenue teams and reviewed their existing global processes. We also assisted the company with audit readiness by outlining a plan for remediation of material weaknesses, performing testing, and compiling results of the testing.
Results
As a result of these efforts, the company was able to remediate its material weakness. Our approach, testing documentation and results were then leveraged by the company’s internal audit team to develop SOX documentation. The company improved its global revenue recognition process and internal control over financial reporting. With our involvement tin the development of plans and execution of the remediation of material weakness efforts, and aligning the approach with the company’s stakeholders, including the external auditors, the company’s management team was able to focus their attention on other competing strategic initiatives. The company also benefited from a streamlined testing approach, cross-functional process improvements, and enhanced collaboration and knowledge transfer across departments.
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