Corporate Governance Service, Internal Audit/Consulting

Description of Client and the Company:

  • The closely held Company did not originally have a formal board of directors. 
  • An independent board of directors was established to protect the owner’s assets and ensure a good return upon sale of the Company appointed an Audit Committee to assist the Board in fulfilling its oversight responsibilities.
Situation as described by the Audit Committee: 
  • The Company did not have a CFO and the management had been with the Company for many years. The Board desired to ensure its understanding of the various businesses within the Company with respect to quality and integrity of financial reporting, the system of internal financial controls, the audit process and the process for monitoring and ensuring compliance with legal, ethical and regulatory requirements as well as all policies and procedures. In order to do this, the audit committee needed someone who could report directly to the audit committee to perform the necessary inquiries and analysis in a confidential manner. 
Engaged for: Acting Internal Auditor for Company preparing for sale; anticipated term 3-6 months

Situational Appraisal:
  • The Company did not have a CFO and as anticipated, the new board had many questions about the financials, internal controls, policies and procedures. The Board was sensitive to its role of oversight and not management. 
  • Management was inexperienced with the internal audit process and did not cooperate.
  • Formal reports issued on a variety of topics as determined by the Audit Committee. Management comments were included on all findings and recommendations. Numerous recommendations for improved reporting provided basis for improved decision-making. 
  • For audit committee, determined normalized earnings over five year period and reviewed findings with various stakeholders including investment bankers representing management and the Board.

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