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Item 4. Controls and Procedures

2023-05-04 compared with 2022-11-03 · 28 added, 29 removed, 16 unchanged (78% of the section changed)

3 unchanged sentences

In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by Rule 13a-15(b) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures are not effective at September 30, 2022 due to the material weaknesses in internal control over financial reporting described below, which were previously disclosed in Item 9A.

As required by Rule 13a-15(b) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective as of March 31, 2023 due to the material weaknesses in internal control over financial reporting described below, which were previously disclosed in Item 9A.

“Controls and Procedures”

5 unchanged sentences

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a‑15(f) under the Exchange Act.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2022 based on the guidelines established in Internal Control —

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a‑15(f) and 15d-15(f) under the Exchange Act.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2023 based on the guidelines established in Internal Control —

Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of September 30, 2022 due to the material weaknesses described below.

Material Weaknesses in Internal Control

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

We continue to have previously identified control deficiencies that are not remediated as of September 30, 2022 related to an ineffective control environment, ineffective risk assessment, and ineffective information and communication resulting from an insufficient number of trained resources with expertise in implementation and operation of internal control over financial reporting and information technology systems.

As a result, the Company had ineffective control activities related to the design and operation of process-level controls and general information technology controls across all financial reporting processes.

These control deficiencies constitute material weaknesses in our internal control over financial reporting as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

We are executing our remediation plans to remediate the material weaknesses relating to our internal control over financial reporting, as described below.

These plans include a detailed risk and controls assessment, key process walkthroughs and flowchart documentation, training, and execution of determined key controls.

There were no material changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Remediation Plans

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2023 due to the material weaknesses in internal control over financial reporting identified and further described below.

A material weakness (as defined in Rule 12b-2 under the Exchange Act) 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 a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We continue to have previously identified control deficiencies that are not remediated as of March 31, 2023 related to user access controls related to an information technology system which resulted from insufficient risk assessment and ineffective operation of process level controls over revenue recognition, which resulted from insufficient training.

As a result of the user access control deficiencies, process level controls at certain entities that use information from the affected system cannot be relied upon.

These control deficiencies constitute material weaknesses in our internal control over financial reporting as of March 31, 2023.

Ongoing Remediation Plan

Management has undertaken various steps to continue remediating such control deficiencies and has seen improved results versus December 31, 2022.

Given an effort of this magnitude, management believes that full remediation will most likely continue to extend over the next couple of years.

The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded through testing that these controls are effective.

We are monitoring the effectiveness of our remediation plans and will make the changes management determines to be appropriate.

Steps taken by us during the three months ended September 30, 2022 include the following:

internal audit continued to assess and document the adequacy of internal control over financial reporting, document steps to improve control processes, conduct testing of controls, and implement continuous reporting for internal control over financial reporting;

continued hiring additional members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, technical accounting, and application of U.S.

enhanced controls, procedures, and processes in our financial consolidation and reporting processes;

enhanced controls over critical processes, including revenue recognition, purchase accounting and financial reporting, and the related information technology systems;

identified and designed controls to address segregation of duties issues.

We plan to continue our efforts to improve, design and implement integrated processes to enhance our internal control over financial reporting, including:

providing additional training and education programs for personnel responsible for the performance of newly implemented processes and controls to enhance our control environment;

adding additional qualified resources to our accounting and finance teams with appropriate qualified experience to enhance our control environment and risk assessment processes;

refining and enhancing certain existing controls and adding new controls to strengthen our risk assessment process;

continue our efforts to improve our financial systems and enhance our information and communication controls.

Steps taken by us during the three months ended March 31, 2023 include the following:

Reduced privileged access to those accounts necessary to carry on system activities;

Established weekly and monthly monitoring of privileged access activity.

We plan to continue our efforts to strengthen our internal control over financial reporting and are committed to ensuring that such controls are operating effectively.

We are implementing process and control improvements to address the above material weakness as follows:

We will conduct additional training with control owners and reviewers within operations and finance with a specific focus on sufficient documentation and evidence in the execution of the controls;

We will conduct an evaluation of information technology general controls ("ITGCs") and related policies, with a focus on risk assessment procedures and controls related to access to information technology ("IT") systems and implement an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes.

As anticipated, a remediation effort of this magnitude takes multiple years to complete and we have made significant progress with the Company’s multi-year remediation plans.

Based on this progress, management believes full remediation of current material weaknesses can be achieved by year end.

In addition, under the direction of the Audit Committee of the Board of Directors, we will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as to refine policies and procedures to improve the overall effectiveness of internal control over financial reporting of the Company.

The material weaknesses in our internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls will be met, and no evaluation of controls can provide absolute assurance that all control deficiencies or material weaknesses have been or will be detected.

There is no assurance that the remediation will be fully effective.

As described above, these material weaknesses have not been remediated as of the filing date of this quarterly report.

If these remediation efforts do not prove effective and control deficiencies and material weaknesses persist or occur in the future, the accuracy and timing of our financial reporting may be adversely affected.

Changes in Internal Control over Financial Reporting

We are executing our remediation plans to remediate the material weaknesses relating to our internal control over financial reporting, as described above.

Other than changes described above, there have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHE R INFORMATION

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 4. Controls and Procedures