The final project for this course is the creation of case study analysis You will use the article The SOX Compliance Journey at Trinity Industries as a resource for this project.

Companies today must ensure that operational processes are performing efficiently and effectively in compliance with current regulations. Accountants must adhere to domestic standards set by organizations such as the Public Company Accounting Oversight Board and the Financial Accounting and Standards

Board as well as global standards, such as the International Financial Reporting Standards, requiring appropriate implementation and assessment of internal controls. Whether developing appropriate processes internally or preparing substantive testing external auditor s must b e able to quickly and completely assess the financial processes, determine weaknesses, and provide recommendations for improvement.

The ability to transcribe formalized or narrative processes into functional workflows allows an auditor to identify potential gaps in accounting systems. These gaps can result in material audit findings necessitating changes in the company ’s control structure.

However, it is not only the process and flow of transactions that requires scrutiny. Companies evolve into sophisticated, computerized systems that require an in depth understanding of administrative rights, electronic process flows and end user reporting.

In this case study, you will apply all of these skills in developing recommendations for Trinity Industries.

Though the Sarbanes Oxley Act of 2002 (promulgated many internal control structure changes, the company is unsure as to whether they are applying too few or too man y internal controls. Unnecessary controls place added burden on staff and cost the comp any thousands of dollars in monitoring and maintenance.

Your role will be to provide an overview of the company and its market industry. From this you will formulate your processes into a comprehensive flow chart that will be used to identify gaps in processes and other threats to potential audit weaknesses.

Demonstrate your mastery of the following course outcomes:

 Transcribe formalized or verbal financial processes into both narrative and process flowcharts for identifying gaps resulting in potential material weaknesses.

 Summarize advantages and disadvantages of various accounting electronic data p rocessing systems with respect to a specific industry’s needs.

 Perform substantive testing of accounting systems to ensure processes described by management are accurately reflected within system transactions

 Formulate recommendations for improvements to financial processes based on outcomes of testing

 Assess the effectiveness of companies’ internal control structures for producing accurate and reliable financial reports

 Interpret standards as outlined in ISACA and the Public Company Accounting Oversight Board as they relate to compliance within specific industries

Prompt

Your role will be to provide an overview of the company and its market industry. From this, you will formulate your processes into a comprehensive flowchart that will be used to identify gaps in processes and other threats to potential audit weaknesses.

By understanding the industry, you will gain valuable insight into the appropriate software systems that will provide industry-specific needs and financial reporting by comparing and contrasting current electronic data processing (EDP) systems with those in the marketplace.

By performing substantive testing, you will audit the transaction flow and determine whether financial information is accurately reflected in the system transactions. This will allow for an assessment and recommendation as to the effectiveness of the company’sinternal control processes, including changes in transaction processing if necessary.

Finally, through interpretation of current audit and internal control standards, you will determine whether Trinity is in compliance within the industry standards and aligned functionally with both efficiency and effectiveness of controls.

Specifically,the following critical elementsmust be addressed:

I. Overview

To adequately prepare for the following questions, you will need to prepare an overview/assessment of Trinity Industries,including background, key market demographics, financial position, and governance policies. You are required to address the following seven subjects:

a) Overview of the organization

b) Size of the organization

c) Sector/industry (along with three other companies that would be comparable)

d) Structure/lineof businesses

e) Organizational structure (organization chart)

f) Yearly performancein terms of revenue (as compared with the three other companies identified)

g) Management andculture (i.e., how long haskey staff been employed, stability of the company over the history, growth in industry)

II. First Year of SOX Compliance

a) The vice president (VP)and chief audit executive described the company as a likely candidate for a material weakness in the first year of SOX compliance. What were the elements critical to the company’s decisive successin its first year of compliance?

b) What internal controlsare important for preparing accurate and reliable financial reports? Support your response using both examples provided in the case study, as well as research into accounting standards (i.e., Public Company Accounting Oversight Board [PCAOB]).

c) Define, using support from accounting standards or other empirical evidence, what a material weaknessis in terms of SOXcompliance.

d) Assess, through reflection on the case study as well as the comparable industries identified in the overview, what material weaknesses are specificto Trinity.

e) Articulate standards addressed in PCAOBregarding the concept of material weaknessesin development of internal control compliance. Ensure that you demonstrate the requirements of SOX from inception in 2002.

f) Describe the factorsthat made Trinitysuccessful by illustrating the flow processes of the organization both in a narrative and process flowchart.

III. Bottom-Up Approach

a) What were the strengths and weaknessesof Trinity’s practice-based bottom-up approach? How effective was it?

b) What would you recommenditshould have done differently in Year 1? Defend your response.

c) Compare and contrast the strengths and weaknesses of a bottom-up versus a top-downrisk approach to compliance.

d) Which approach is more appropriate in completing a compliance projectsuccessfully for Trinity’sfirst year?

e) How does each approach affect a company’s internal control structure?

f) Identify the chief insightsfrom the pilot project. How does the pilot project for the EDP system compare to SOX requirements?

g) Identify the testing processesTrinity performed and whether Trinity took the appropriate approach in designing theircontrols.

h) Based on the substantive tests, which testing process proved to be most usefulin assessing Trinity’s accounting system?

i) Compose a short memorandum that communicatesthe resultsof the first year of testing along with recommendationsas to what Trinity should do differently in subsequent years.

IV. SOX-Related Expenses

a) Formulate recommendations for how Trinity could further reduceSOX-related expenses in 2008. Be sureto considerthe barriers the company may encounter with each of your recommendations.

b) What are the major sources of costin Trinity’s compliance maintenance and testing?

c) Rankeach of the major sources of cost in termsof value.

d) Compare the choice of Oracle as the selected software systemagainst two other systems of comparable size and scope. Evaluate each software system’s advantages and disadvantages.

e) If you determine that another software system would have been a better choice through your analysis, defendthe decision. If Oracle is the choice after analysis, defend that decision.

V. IFRS

a) What are the implications of a changein accounting standards? For example, what kinds of changes to data calculation and information reporting are likely to occur with a transition to a new standard?

b) What changes will be required for Trinity to improveinternal control compliance?

c) What standardswill affect Trinity as a result of IFRS?

d) Discuss each infrastructure’sroleis in supporting a compliance project like IFRS:

1. What constitutes Trinity’s governance infrastructure?

2. What constitutes Trinity’s IT infrastructure?

3. What constitutes Trinity’s process infrastructure?

Answer rating: 100% (QA)

Companies must ensure that operational processes are performing efficiently and effectively in compliance with current regulations Accountant must ensure that the accounting processes adhere to the se... View the full answer