Fortrea Holdings Inc. 10-Q

Item 4. Controls and Procedures Disclosure Controls and Procedures Disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are our controls and other procedures that are designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the override of controls. Therefore, even those systems determined to be effective can provide only “reasonable assurance” with respect to the reliability of financial reporting and financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of our internal controls may vary over time. Our management evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on this evaluation, our chief executive officer and our chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective to accomplish their objectives at the reasonable assurance level due to the material weaknesses described below. Material Weaknesses in Internal Control over Financial Reporting A material weakness 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 the annual or interim financial statements will not be prevented or detected on a timely basis. As reported in our Form 10-Q for the quarter ended March 31, 2024, as filed with the SEC on May 24, 2024, management identified material weaknesses in our internal controls over financial reporting that existed because the company did not have sufficient resources which in turn led to an inability to effectively perform certain control activities and fulfill its internal control and accounting responsibilities. As of September 30, 2024, the previously identified material weaknesses in our internal controls over financial reporting had not been remediated. Management believes that the condensed consolidated and combined financial statements and related financial information included in this Form 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 Efforts to Address a Material Weaknesses in Internal Control over Financial Reporting Remediation of the identified material weaknesses and strengthening our controls and procedures is a priority. In response to the material weaknesses, we are actively implementing a comprehensive remediation plan. We are hiring, developing and working to retain personnel with appropriate accounting and internal controls expertise. Additionally, we have and will continue to review and update (as appropriate) training programs on relevant internal controls over financial reporting matters. We have also engaged experienced third parties to support our remediation efforts. To further remediate the material weaknesses discussed above, management, including our chief executive officer and chief financial officer, have reaffirmed and re-emphasized the importance of internal controls, control consciousness and a strong control environment. We are committed to maintaining a strong control environment and believe that these remediation efforts represent continued improvement in our control environment. We also expect to continue to review, optimize and enhance our financial reporting controls and procedures. The material weaknesses will not be considered remediated until management completes the remediation plan and keeps it in place for a sufficient period of time. The Company is committed to the improvement of its internal control over financial reporting and, together with its outside consultant(s), will continue to develop, refine and implement its remediation plan for the material weaknesses, including responding as necessary to other internal or external factors that may impact execution of the plan. 43 Table of Contents Changes in Internal Control Over Financial Reporting The Company is in the process of implementing certain changes in its internal controls to remediate the material weaknesses described above. There has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2024 that has materially affected or is reasonably likely to materially affect its internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). PART II – OTHER INFORMATION Item 1. Legal Proceedings See Note 8 - Commitments and Contingent Liabilities to the condensed consolidated and combined financial statements, which is incorporated herein by reference.