DXC Technology Co 10-Q

ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2021 because of the material weakness in our internal control over financial reporting described below. Control Activities As previously disclosed during the third quarter of fiscal 2020, Management concluded there was a material weakness in internal controls over financial reporting related to the design and implementation of effective control activities based on the criteria established in the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Management identified multiple deficiencies that constitute a material weakness in the aggregate related to the establishment and timely reassessment of policies and procedures for complex transactions and processes and the related impacts for control activities. As a result, we have concluded that there is a reasonable possibility that a material misstatement to our Condensed Consolidated Financial Statements would not be prevented or detected on a timely basis and therefore we concluded that the aggregation of these deficiencies represents a material weakness in our internal control over financial reporting as of December 31, 2021. Notwithstanding the identified material weakness, management believes that the Condensed Consolidated Financial Statements and related financial information included in this 10-Q fairly present, in all material respects, our balance sheets, statements of operations, comprehensive income and cash flows as of and for the periods presented. Remediation Plan Management has taken and continues to take significant and comprehensive actions to remediate the material weakness. With the addition of new operations and finance leadership working in concert with the Audit Committee, Management assessed the root cause of the multiple deficiencies that aggregated to the material weakness. The Audit Committee has been fully engaged and supportive of management’s efforts to remediate the Material Weakness. Beginning in the fourth quarter of fiscal 2020, the Audit Committee has received a remediation report at each regularly held meeting and had additional informal meetings specifically to review progress on the remediation. Participants have included the Chief Executive Officer, Chief Financial Officer, Corporate Controller, SOX Leader and Internal Audit to answer questions and take feedback from the Committee. 66 The following activities are designed as part of this remediation plan to (1) address the material weakness in the control activities component of the COSO framework and (2) enhance and improve our control activities and processes: Actions to remediate the material weakness in the controls activities component of COSO: • W e appointed a new Chief Financial Officer during the third quarter of fiscal 2021 with previous experience as a Chief Accounting Officer and substantial experience leading a finance organization through transformation including remediating material weaknesses. Our Chief Financial Officer is leading our remediation efforts and is focused on driving change in our finance organization, control environment and culture. • We appointed a new Corporate Controller and Principal Accounting Officer during the first quarter of fiscal 2022 with previous experience as a Corporate Controller and Chief Accounting Officer remediating material weaknesses. • We evaluated our finance organization and have and will augment our finance team with additional professionals with the appropriate levels of accounting, controls, finance oversight and tax experience. • We hired a dedicated team of controls and process experts to standardize our processes and focus our key controls to address material risks. • We have increased communication and training to employees regarding internal control over financial reporting and disclosure controls and procedures. • We have designed and implemented an enterprise wide process to timely identify, track and appropriately resolve and conclude on complex transactions and disclosures. Additional enhancements to improve our control activities and processes: • We have enhanced our financial cadence and discipline including increased reviews of the underlying performance of the business and related balance sheet accounts. • We have enhanced key enterprise controls including financial operations reviews, working capital reviews, balance sheet reviews and assessment and monitoring of non-routine accounting transactions. • We have assessed relevant policies focusing on ownership and accountability and reviewed and implemented changes to thresholds to focus on risk. • We have refined the financial close process so it executes with the appropriate cadence and rigor to reduce the length of time it takes to close. • We are standardizing processes and rationalizing and strengthening controls to mitigate significant risk, enhance control owner accountability and transparency to address deficiencies in a holistic and timely manner. While we have made meaningful progress on strengthening our internal controls, we have not fully tested all our remediation actions to verify the effectiveness of their design and operation and therefore concluded that our internal control over financial reporting is not designed or operating effectively as of the quarter ended December 31, 2021. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 67 PART II ITEM 1. LEGAL PROCEEDINGS See Note 21 – “Commitments and Contingencies” to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.