Published on August 21, 2007
Slide1: Internal Control and Internal Audit Services Introduction to Rothstein Kass: Introduction to Rothstein Kass Founded in 1959, Rothstein Kass is an international accounting and consulting firm with over 45 years of experience providing professional, technical, consulting, and business services to clients in a wide range of industries. The Firm's expertise extends beyond traditional accounting and auditing with affiliates providing services such as strategic business counseling, risk management and insurance consulting, executive search, and business management for the entertainment industry. Rothstein Kass is ranked as the 20th largest accounting firm in the United States according to Public Accounting Report. Services Provided: Services Provided » Sarbanes-Oxley Section 404 readiness and compliance » Internal audit outsourcing » Internal control self assessment » SAS 70 attestation services » Business process evaluation and improvement Slide4: Sarbanes-Oxley Section 404 Services Sarbanes-Oxley Act of 2002: Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 (SOX) imposes a new level of reporting requirements on public companies and their executives with respect to the oversight of the audit function and certification of financial statements. SOX is one of the most important pieces of legislation affecting companies in recent years. Compliance requirements of SOX include, but are not limited to: » Management is required to assert to and report on the effectiveness of internal controls over financial reporting » A company’s annual report must state management’s responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting Section 404: Section 404 Section 404 of SOX requires management to establish, maintain and assess an internal control structure for financial reporting. An independent accounting firm must audit the internal controls and attest to the assertions made by management. Although increased legislation increases work, a strong internal control structure can provide benefits well beyond compliance with SOX. Strong internal controls can help your company make better business decisions with higher quality, more timely information and prevent loss of resources. In addition, strong internal controls can help your company gain a competitive advantage through streamlined operations and gain or regain investor confidence. Section 404: Section 404 Section 404 requires a substantial commitment of resources and each company’s approach varies. Utilizing practical knowledge combined with financial expertise, Rothstein Kass will work with your management to customize a program that integrates with your company and complements its culture, while fulfilling those objectives to obtain compliance with SOX. Slide8: Section 404 Framework Five Step Methodology: Five Step Methodology Project Scoping and Planning: Project Scoping and Planning Documentation: Documentation Testing: Testing Evaluation of Deficiencies/Reporting : Evaluation of Deficiencies/Reporting IT – General Controls: IT – General Controls IT Concerns and Issues Disaster Recovery Business Resumption Plans BRP Testing Alternate Processing Physical Security Physical Access HVAC Fire Protection UPS Backup/Contingency Planning Data Backups Restore Procedures Offsite Storage Change Management Program Change Controls Defect Tracking Change Approvals IT – Application Controls: IT – Application Controls IT Concerns and Issues Output Controls Reconciliation Distribution Access Processing Controls Audit Trails Interface Controls Control Totals Access Controls User-IDs/Passwords Data Security Network Security Security Administration Access Authorization Input Controls Data Entry Controls System Edits Segregation of Duties Transaction Authorization SOX Effect on Private Companies: SOX Effect on Private Companies Although SOX compliance is required only for companies with reporting obligations to the SEC, the effects are being felt in the private sector. Some private companies are using the standards set forth by SOX to formulate 'best practices' for their own companies. In some instances, it may be beneficial (or even necessary) to adopt these standards as a private company. A private company may want to consider adopting these standards if the company: » Is considering going public or being considered for acquisition by a public company » Is seeking venture capital, insurance or financing » Has a large outside shareholder base or institutional investors » Bids on government contracts Rothstein Kass’ Role: Rothstein Kass’ Role Internal controls over financial reporting must be attested to by an independent registered public accounting firm. That same firm cannot assist with the documenting and testing of internal controls over financial reporting as part of management’s assessment. The complex challenges facing businesses brought about by this new legislation and specifically, the new internal control reporting requirements, create a significant undertaking. Resources and costs required to complete the initial and ongoing necessary work have become a rising concern. Today, executive management, boards of directors and audit committee members face unprecedented levels of legal, regulatory and economic risks. Rothstein Kass’ Role (cont’d): Rothstein Kass’ Role (cont’d) At Rothstein Kass, we are committed to working with you to: » Plan and implement the project » Assess the current environment » Define the controls in place (both at the company and process level) » Perform tests of the controls We work with clients to continue ongoing monitoring and compliance by performing quarterly updates and reviews of the company’s controls so that our clients not only meet the requirements of Section 404, but will also be in a position to obtain further benefits. Slide19: Internal Audit Outsourcing Internal Audit Outsourcing: Internal Audit Outsourcing Due to the pace of change in today’s business climate, developing and maintaining a high-performance internal audit function is a challenge for many organizations. Factors that increase the challenge include: » Mergers/acquisitions/spin-offs » New technologies » E-business/system implementations » Cost pressures » Increased regulatory focus An increasing number of companies are recognizing the benefits of finding a strategic partner to support an existing internal audit team or to provide a fully outsourced solution. Service Alternatives – Full Outsourcing: Service Alternatives – Full Outsourcing Full Outsourcing Most companies agree that internal auditing is not their core competency. Realizing value often requires significant investments in highly specialized personnel, methodologies and technologies. Having access to the right resources at the right time can be difficult and consumes valuable executive management resources. Full outsourcing allows companies to focus their strategic resources on non-audit related business processes, while retaining full control of all aspects of the internal audit process. It provides access to deep internal audit and risk management capabilities with the flexibility to adjust the internal audit model as risks change and needs arise. Service Alternatives – Partnering: Service Alternatives – Partnering Partnering/Co-Sourcing Partnering with Rothstein Kass provides access to highly specialized internal audit and risk management capabilities. We can work with your existing internal audit team to integrate specialized capabilities into the internal audit function. Systems and Technology Internal Auditing Information systems and technology audit capabilities can be integrated into an existing internal audit program to address the risk of rapidly changing technologies on core business processes and controls. Services can include information technology security and control assessments, application controls reviews, e-business diagnostics and computer assisted audit techniques. Benefits: Benefits Outsourcing the internal audit function can offer substantial benefits to your business. Rothstein Kass can customize solutions to meet your needs and can perform the entire internal audit function or work in conjunction with your internal audit team. Benefits you may obtain by outsourcing your internal audit function include: » Ability to focus on your business’ strategic objectives vs. the day-to-day activities » Cost savings related to efficiency improvements » Reduction in staffing and turnover issues » Identification of hidden risks and improved risk assessment » Access to a team of audit professionals with extensive skills, expertise and resources » Access to IT professionals with audit experience » Gain a fresh, independent perspective on your company Slide24: SAS 70 Services SAS 70 Attestation Services: SAS 70 Attestation Services An SAS 70 report communicates a service organization’s internal control structure to its customers and their auditors. These reports are often required by customers that either utilize the service organization for certain transactions or have outsourced specific responsibilities to the organization. Service organizations include, but are not limited to, insurance and claims processors, bank trust departments that invest assets for employee benefit plans, payroll processors, application service providers that provide software applications to enable customers to process financial transactions, and data processors. Service organizations that provide a significant level of services to companies impacted by SOX should consider SAS 70 reporting. In addition to 'best practices,' service organizations can utilize the SAS 70 report as a marketing tool to differentiate itself from competitors. SAS 70 Attestation Services: SAS 70 Attestation Services » SAS 70 readiness assessment » Review of agreed-upon procedures » SAS 70 Audit – Type I Reports on controls placed in operation » SAS 70 Audit – Type II Reports on controls placed in operation and tests operating effectiveness Why Rothstein Kass?: Why Rothstein Kass? At Rothstein Kass, we participate as business advisors and members of the financial team throughout the life cycle of the project and beyond. We are committed to our clients and have the resources available to provide a comprehensive suite of internal control and internal audit related services. Rothstein Kass has: » Experienced principals with 'Big 4' level experience » Extensive experience with middle-market companies » Access to resources (people, knowledge and technical expertise) » Service-oriented approach » Global reach through AGN International » A complementary service approach Management Team: Management Team Professionals at Rothstein Kass have experience serving both private and public companies in a wide range of industries. Our approach combines the talent and technical expertise of seasoned business people with a deep understanding of the subtle nuances of each individual situation. Our members belong to various business and professional organizations such as state accounting associations and internal audit groups. Our involvement ensures that our knowledge base is current regarding regulatory matters, industry trends and general business practices. As we navigate through the rapidly changing business and regulatory environments, our ongoing participation and commitment adds further value to our client relationships. Biographies for select members of our team can be found on the following pages. Management Team: Management Team Kenneth L. Stephens, CPA Ken has many years of experience in public accounting, including four years at the 'Big 4' level. He provides audit, accounting and business consulting to both publicly and privately held businesses in industries including gaming, manufacturing, wholesaling/distributing, technology and communications, real estate and financial services. Ken is extensively involved with the Firm’s Continuing Professional Education Committee and has frequently developed and conducted training seminars. Ken is the lead or concurring principal on a majority of the Firm’s public clients, primarily small and mid-sized registrants. Additionally, he is one of the leading principals in the Firm’s Sarbanes-Oxley Section 404 consulting practice. This experience includes assisting an array of companies in assessing and testing financial reporting infrastructures, developing and implementing an effective execution plan for internal controls and recommending corrective actions as well as completing other phases of the 404 compliance effort. Furthermore, this experience includes ongoing monitoring of internal controls and internal audit outsourcing. Ken is a graduate of Hofstra University with a B.B.A. in accounting and he is a CPA in the states of New Jersey, New York and Connecticut. He is also a member of the Institute of Internal Auditors, the American Institute of Certified Public Accountants, the New Jersey Society of Certified Public Accountants and the New York State Society of Certified Public Accountants. Management Team: Management Team Christopher Mears, CPA Chris is extensively involved with the Firm’s financial and entrepreneurial services practices. He has over 15 years of experience, including 3 years at the 'Big 4' level, in all aspects of client service including advice on initial organizational structure, supervision of audits and ongoing consultation with management regarding many diverse operational and tax matters. Chris serves a variety of clients, which include hedge funds, private equity funds, broker-dealers, distribution, transportation and service companies. He is one of the lead principals in the Firm’s Sarbanes-Oxley Section 404 consulting practice. Chris received a B.S. in accounting from Rutgers University. He is a member of the New Jersey Society of Certified Public Accountants (NJSCPA) and the American Institute of Certified Public Accountants (AICPA). Chris regularly speaks at various recognized conferences on accounting and tax matters affecting middle-market public and privately-owned businesses. Management Team: Management Team Kelly Dreishpoon Kelly has 12 years of accounting and internal control experience in both the auditing and business consulting forums. She spent the early half of her career at one of the 'Big Four' firms concentrating on middle and back office operational and financial controls within the financial services industry. Kelly spent the later part of her career at a major Fortune 100 corporation implementing COSO concepts, completing risk assessments, and documenting and evaluating internal controls within the company. Kelly also has three years of experience in financial system architecture and project management. Since the requirement of the Sarbanes-Oxley Act of 2002, Kelly has been providing readiness and compliance support to companies in the financial services industry. Kelly earned a B.S. in accounting from St. Joseph University in Pennsylvania. She is a member of the Project Management Institute and of the Institute of Internal Auditors. Management Team: Management Team Joseph Prudente, CISA Joe has over 20 years of audit and technology management experience. He has 15 years of financial/operational and information technology audit experience and has extensive experience in the financial services industry in both the capital and consumer markets businesses. Joe is also proficient in finance and administration system audits including the credit, treasury, payroll and human resources functions. He has three years of IT management experience, directing quality assurance, change management and software process improvement groups, and five years experience directing IT consulting projects. Joe has an M.B.A. in business computer information systems from Hofstra University and a B.S. in accounting from St. John’s University. He is a certified information systems auditor (CISA). International Affiliation: International Affiliation Rothstein Kass is a member of Accountants Global Network (AGN) International, a leading global association of 195 accounting and consulting firms located in 80 countries. AGN member firms share knowledge and resources, and meet regularly to renew relationships and discuss developments in their respective practices. Our membership in AGN allows us to offer clients professional services worldwide through our alliances and relationships with other national and international accounting and consulting firms. www.agn.org Industries Served: Industries Served Rothstein Kass provides services to numerous industries including: » Hospitality » Investment partnerships » Manufacturing » Pharmaceutical » Not for profit » Printing » Professional services » Real estate » Retail » Technology » Transportation » Wholesalers » Auto dealers » Biotechnology » Broker-dealers » Construction » E-commerce and Internet » Eldercare » Entertainment » Distributors » Family offices » Financial services » Healthcare » Gaming Contact Us: Contact Us For more information about how we can assist with your internal control and internal audit needs, please contact our office: Ken Stephens (212) 997-0500 x2361 firstname.lastname@example.org Christopher Mears (212) 997-0500 x2910 email@example.com Offices: New York . Roseland . 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