Insights > Remediating a Material Weakness for a Global SaaS Provider

Remediating a Material Weakness for a Global SaaS Provider

Challenge

A global SaaS provider implemented the new revenue recognition standard, ACS 606, in anticipation of going public. There were several errors identified in connection with the implementation of the standard 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 partner 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 material weakness on revenue process was remediated, and Riveron helped the company improve its internal control over financial reporting and file its IPO.

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 initial public offering (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 would review partner reporting, contract agreements, and pricing, and ensure appropriate revenue recognition per 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 also worked directly with the company’s external auditor to explain the documentation and serve as the intermediary between the external auditors and the company’s management team. In addition to working closely with the revenue team, we met with global stakeholders from other departments to review how their workstreams impact revenue reporting and trained their staff on the nuances of ASC 606, such as intellectual property and its impact on revenue recognition.

Results

As a result of these efforts, the material weakness was remediated. Our approach, testing documentation and results were then used by the internal audit team to develop SOX documentation. The company improved its global revenue recognition process and internal control over financial reporting. With our involvement taking the lead on development and execution of the remediation of material weakness efforts, and communicating results to the external auditors, the company’s management team was able to focus 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 previously siloed departments.

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