Our client’s need
A global manufacturer and distributor of compressors used in refrigeration and air-conditioning applications needed assistance with Sarbanes-Oxley compliance and internal audit. The Company was using a solution that was not meeting their needs from multiple aspects, including effectiveness of the function, service level, and cost.
The Company had undergone significant restructuring in recent years to focus on their core service line and expand their global footprint with operations in the U.S., Mexico, Canada, India, Brazil, Europe, and China. Management sought to align the control environment with the achieved business changes and ensure that current risks within the company were being addressed.
Baker Tilly solution
Baker Tilly worked closely with the Company’s Audit Committee, management and external auditor during scoping and planning of Sarbanes-Oxley Section 404 compliance in order to align the control framework and testing with the recent business changes.
Baker Tilly completed the following activities:
Created process flowcharts and narratives:
- Workshops were held with individuals from each of the key financial processes to understand the procedures and controls being performed.
- A flowchart and narrative was created for each key process and reviewed with process owners to confirm that the procedures and controls were accurately reflected.
Analyzed the control environment using a top-down, risk-based approach:
- The risks and associated controls for each key process were analyzed to determine if any control gaps existed within the current procedures.
- The current population of key controls was examined to identify areas where testing could be streamlined or reduced as promulgated by the SEC and the PCAOB under AS 5. As a result, Baker Tilly was able to reduce amount of testing performed by roughly 20 percent.
Performed control walkthroughs:
- A sample of one transaction was observed and tested for each control to ensure it appeared to be designed appropriately and was operating as designed.
Performed control testing:
- Testing of key controls was performed at each of the in-scope locations and key processes identified.
Deficiencies or findings were promptly communicated to management.
- Baker Tilly assisted management in identifying proper remediation efforts in order to remediate any control deficiencies identified.
Worked closely with the external auditor:
- Baker Tilly served as an advocate for management to ensure the control environment and testing framework was better aligned to meet the auditor’s expectations.
Baker Tilly also worked closely with management and the audit committee to identify, plan, and execute internal audits that addressed current risks within the company. Baker Tilly executed several domestic and international audits focused on strategic risks, operational risks, financial reporting risks and international compliance. Each audit was planned and staffed based on the specific needs and skill set required to ensure successful completion of the audit. Audit findings were presented to management for comment and reported to the Audit Committee.
As a result of Baker Tilly’s risk consulting services:
- The Company was able to appropriately maintain its compliance with the requirements of the Sarbanes-Oxley Act of 2002 on a global basis and increase its control over risks, while decreasing overall cost.
- The Company was able to realign its global control environment based upon current risks to the company.
- The Audit Committee and Company management were able to more appropriately identify the Company’s risks to financial reporting, strategic and operational objectives and the controls in place to mitigate those risks.