Trinity Industries is a successful and properly operating company who never had to restate their earning from previous years. However, Don Collum VP of Trinity Industries, had described the company in 2003 as a candidate for material weakness as defined by Sarbanes-Oxley Act (SOX). The company was deficient in internal control process in the area of documentation and evidence that controls had been performed which could lead to material weakness.
Sarbanes-Oxley (SOX) was created in 2002 because of all the accounting fraud that were being reported from publicly held companies. SOX job is to protect investors by preventing financial statement fraud, strengthen internal control, and punishing executives for fraud. To be incompliance with SOX, …show more content…
For example, documents were missing in activities such as management reviews of monthly/quarterly financial statement or reconciliation among various accounts. Also, there was a lack of control around inventory adjustment, insufficient evidence of timely reviews, and change of controls. If these were never performed by management or workers there could be a discrepancy in the accounts which could lead to material weakness. Material weakness could be a result of fraud, error in documentation, carelessness in employee duties, or proper control not in place. If these deficiency are not resolved, it could lead to material misstatement in the company’s financial statement and would not be in compliance with PCAOB.
Trinity Industries had 22 Business units (Bus) which functioned out of 70 plants. These Bus ran on 3 different versions of Business Planning and Control System (BPCS) but on the same AS/400. These system were also manage by seven different IT organizations and were customized to a certain degree to fit the BUs. Trinity Industries was a very diversified and decentralized type of company. They knew where their company had problems, they just need to figure out a plan how to resolve it. Some of the key elements that Trinity Industries needs to tackle to be successful in the SOX compliance
Sarbanes-Oxley (SOX) was created in 2002 because of all the accounting fraud that were being reported from publicly held companies. SOX job is to protect investors by preventing financial statement fraud, strengthen internal control, and punishing executives for fraud. To be incompliance with SOX, …show more content…
For example, documents were missing in activities such as management reviews of monthly/quarterly financial statement or reconciliation among various accounts. Also, there was a lack of control around inventory adjustment, insufficient evidence of timely reviews, and change of controls. If these were never performed by management or workers there could be a discrepancy in the accounts which could lead to material weakness. Material weakness could be a result of fraud, error in documentation, carelessness in employee duties, or proper control not in place. If these deficiency are not resolved, it could lead to material misstatement in the company’s financial statement and would not be in compliance with PCAOB.
Trinity Industries had 22 Business units (Bus) which functioned out of 70 plants. These Bus ran on 3 different versions of Business Planning and Control System (BPCS) but on the same AS/400. These system were also manage by seven different IT organizations and were customized to a certain degree to fit the BUs. Trinity Industries was a very diversified and decentralized type of company. They knew where their company had problems, they just need to figure out a plan how to resolve it. Some of the key elements that Trinity Industries needs to tackle to be successful in the SOX compliance