A leading financial institution needed to restate its previously-issued 10-K after identifying at least 30 accounting policies and practices that were not consistent with GAAP that resulted in nearly $8 billion in adjustments. As a result of an extremely complex restatement, this company needed to drastically reengineer its accounting and close processes. The company’s accounting department assigned to draft the 10-K filing faced a massive, manual effort to gather and consolidate the required accounting data from dozens of business-level accounting groups, each calculating a piece of the accounting results.
Working closely with accounting department leadership and 10-K drafting teams, Baker Tilly developed a top-down approach and strategy to solving the problem. First, 104 10-K reports were identified and approximately 600 data elements contained within the body of the text and put a simple process in place to manage changes. Next, a small team was deployed to identify data owners and to document how 62 data sources were used to populate the approximately 5,500 data elements in the 10-K reporting package. Baker Tilly identified 33 reports that could be fully or partially automated from the General Ledger; Baker Tilly designed and managed the development of these reports in Business Objects and Hyperion ESSBASE. Once fully tested, the reports were included in a consolidated reporting package that could be run on demand and validated by the accounting department. The remaining reports were manually sourced from the business-level accounting groups. To manage this process, Baker Tilly worked with the accounting department to define a procedure and built an MS Access database to centrally manage all data. The MS Access database greatly reduced the turn-around time for populating data into the 10-K; for example, during the manual data collection process, users could identify and track issues and manage the data quality through the use of a QA Checklist. Once the data collection was completed, users could automatically upload the 10-K reports into the formal 10-K document.
As a result of this effort, fewer accounting department and consulting resources were required to manage the manual data collection. Also, management and the company’s external auditor used the sourcing documentation to understand the data flows in the new close process; this information was used to understand risks in the close process and as input to the audit planning. The accounting department will be using the process and tools we developed to manage the close process until the accounting systems can be fully updated.