What changed in this filing

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Item 4. Controls and Procedures

2021-09-09 compared with 2021-06-08 · 26 added, 15 removed, 36 unchanged (53% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures as of April 30, 2021, the end of the period covered by this Quarterly Report on Form 10-Q.

Management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures as of July 31, 2021, the end of the period covered by this Quarterly Report on Form 10-Q.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

1 unchanged sentence

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on such evaluation, the CEO and CFO have concluded that as of April 30, 2021, the Company’s disclosure controls and procedures were not effective because of the material weaknesses in internal control over financial reporting at the Company’s wholly owned subsidiary, WageWorks, described below.

Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weaknesses in its WageWorks subsidiary, management has concluded that the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America.

Based on such evaluation, the CEO and CFO have concluded that as of July 31, 2021, the Company’s disclosure controls and procedures were not effective because of the material weaknesses in internal control over financial reporting at the Company’s wholly owned subsidiary, WageWorks, described below.

Tabl e of Co ntents

included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America.

In accordance with interpretive guidance issued by SEC staff, companies are allowed to exclude acquired businesses from the assessment of internal control over financial reporting during the first year after completion of an acquisition and from the assessment of disclosure controls and procedures to the extent subsumed in such internal control over financial reporting.

In accordance with this guidance, as the Company acquired Luum on March 8, 2021, management's evaluation and conclusion as to the effectiveness of the Company's disclosure controls and procedures as of April 30, 2021 excluded the portion of disclosure controls and procedures that are subsumed by

internal control over financial reporting of Luum.

Luum’s assets and revenues represented approximately 1%, excluding the effects of purchase accounting, of the Company's consolidated total assets and consolidated total revenues as of and for the fiscal quarter ended April 30, 2021.

In accordance with this guidance, as the Company acquired Luum on March 8, 2021, management's evaluation and conclusion as to the effectiveness of the Company's disclosure controls and procedures as of July 31, 2021 excluded the portion of disclosure controls and procedures that are subsumed by internal control over financial reporting of Luum.

Material Weaknesses in Internal Control over Financial Reporting

12 unchanged sentences

These material weaknesses resulted in material misstatements of WageWorks' historical financial statements, which preceded the acquisition, and could result in a misstatement of our account balances or disclosures that would result in a material misstatement to the annual or interim condensed consolidated financial statements that would not be prevented or detected.

Tabl e of Co ntents

Ongoing Integration and Remediation Efforts

2 unchanged sentences

In response to the COSO Framework component material weaknesses in the WageWorks subsidiary’s internal control over financial reporting, management has taken the following actions:

• performed a risk assessment and scoping of key systems and business processes, including a risk assessment at the financial statement assertion level to ensure that the level of precision of relevant controls is adequate to address the identified risks;

• dedicated certain senior finance, accounting, operational, and IT leadership team members to work on remediation efforts and appointed a third-party internal controls advisor to assist with such efforts;

• developed and have begun to execute a plan to implement a periodic assessment to monitor business changes impacting accounting processes and controls;

• performed its semi-annual risk assessment and scoping of key systems and business processes, including a risk assessment at the financial statement assertion level to ensure that the level of precision of relevant controls is adequate to address the identified risks;

• dedicated certain senior finance, accounting, operational, and IT leadership team members to work on remediation efforts and appointed third-party internal controls advisors to assist with such efforts;

• implemented a periodic assessment to monitor business changes impacting accounting processes and controls;

• incorporated certain WageWorks processes into the Company’s existing entity-level controls;

• established periodic reporting of the remediation plan progress to the Audit and Risk Committee of the Company's board of directors;

• developed and have begun to execute a plan to formalize documentation underlying processes and controls to promote knowledge and information transfer across functions and upon personnel changes.

• continued to execute its plan to formalize documentation underlying processes and controls to promote knowledge and information transfer across functions and upon personnel changes;

• continued to monitor the operating effectiveness of the existing entity-level controls.

In response to the material weakness “A.

2 unchanged sentences

• redesigned certain processes and controls in conjunction with the enterprise resource planning “ERP” system migration described below;

• developed and have begun to execute a plan to assess the relevancy of information and data used in key controls, including a plan to design or augment controls to incorporate the review of the accuracy and completeness of such items.

In addition to the steps above, specifically to address material weaknesses “B” and “C” above, the Company took the following measures:

• developed and have begun to execute a plan to consolidate service platforms related to the contract-to-cash cycle which will reduce a significant number of manual business process controls;

• enhanced the design and have begun to monitor the operating effectiveness of controls related to logical access and change management for relevant WageWorks applications and systems.

• continued to execute its plan to assess the relevancy of information and data used in key controls, including a plan to design or augment controls to incorporate the review of the accuracy and completeness of such items;

• continued to monitor the operating effectiveness of the process-level and redesigned controls.

In response to the material weakness “B.

Contract to Cash Process,” management has taken the following actions:

• continued to execute its plan to consolidate service platforms related to the contract-to-cash cycle, which will reduce a significant number of manual business process controls;

• enhanced the design of existing controls including information and data used in controls, where applicable, and implemented additional controls to further strengthen the control environment.

In response to the material weakness “C.

Information Technology General Controls,” management has taken the following actions:

• continued to execute its plan to consolidate service platforms, which will reduce the number of ITGCs;

• enhanced the design of existing controls, where applicable, and implemented additional controls to further strengthen the control environment;

• continued to monitor the operating effectiveness of controls related to logical access and change management for relevant WageWorks applications and systems.

As we continue to evaluate operating effectiveness and monitor improvements to our internal control over financial reporting, we may take additional measures to address control deficiencies or modify the remediation plans described above.

2 unchanged sentences

We have redesigned certain controls in response to the current risks and continue to monitor the operating effectiveness of the redesigned controls.

Tabl e of Co ntents

Changes in Internal Control Over Financial Reporting

Other than as described above, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended April 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Other than continuing to make progress on the ongoing integration and remediation efforts described above, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended July 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II—Other Information

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