Item 4. Controls and Procedures
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated 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 this evaluation, our management, including our CEO and our CFO, has concluded that, due to the material weakness described below, our disclosure controls and procedures were not effective as of June 30, 2024 at a reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected.
Notwithstanding the material weakness in our internal control over financial reporting described below, our management believes that the unaudited condensed consolidated financial statements and related financial information included in this Quarterly Report for the six months ended June 30, 2024 fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America.
Previously Reported Material Weaknesses
As reported in Part II, Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2023, in connection with our assessment of the effectiveness of internal control over financial reporting, our management identified certain control deficiencies in the area of our Information Technology General Control (“ITGC”) related to (i) user access and segregation of duty controls that restrict user and privileged access to appropriate personnel; (ii) program change management controls; and (iii) certain computer operations controls that, when aggregated, arise to a material weakness.
Management is committed to remediating the material weakness in a timely manner. Our remediation process includes, but is not limited to: (i) increasing timely reviews of information technology system changes made; (ii) rationalizing access privileges for developer system users; (iii) implementing or modifying controls related to program change management and certain computer operations; and (iv) training of relevant personnel on the design and operation of any new or modified ITGCs. These steps are subject to ongoing management review, as well as oversight by the audit committee of our board of directors.
Status of Remediation Efforts
Management has implemented measures designed to remediate the material weakness in fiscal year 2024. The remedial measures implemented include but are not limited to:
• Implementation of a software solution to identify and facilitate review of changes made to our Enterprise Resource Planning (“ERP”) system via newly designed detective controls to supplement our existing preventative controls.
33
Table of Contents
• Implementation of a tool to better monitor access via a secure gateway to our operating systems, as well as better management of credentials across all financially impactful applications and the underlying infrastructure managed internally.
• Enhancement of our user access review procedures to increase precision.
• Reduction of elevated access within our ERP system.
• Redesign and implementation of ITGCs and deployment of additional trainings to further mature the overall control environment.
We have substantially implemented the remedial measures described above relating to the control deficiencies associated with the previously identified material weakness within the IT function. We believe that upon completion of such measures, we will have strengthened our ITGCs to address and successfully remediate the identified material weakness. However, the material weakness will not be considered remediated until the applicable remediated controls are fully implemented and have operated for a sufficient period of time and management has concluded, through formal testing, that these controls are operating effectively. We expect to continue to assess their operating effectiveness throughout fiscal 2024.
Changes in Internal Control over Financial Reporting
Other than the ongoing remediation efforts described above, there were no changes in our internal control over financial reporting during the six months ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
34
Table of Contents
PART II: OTHER INFORMATION
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.