Migration of processes to a different country 1646

  • As companies seek to reduce costs, key processes will move and in some cases migrate to a different country altogether. Assuming that it is a clean drag a drop keeping exactly the same processes in place but seeing new process/control owners take up post would you:

    1. redo complete test of design again or accept that the process is still robust as documented and focus just on ensuring the controls operated effectively?
    2. disregard all operating effectiveness testing prior to migration and start again because those processes will not be in place at year end or place some reliance on the previous processes because they operated during a material part of the year that fed the financial statements?

  • If a move came late in the year, I would certainly test those controls operated by new staff in a new location related to balance sheet valuation and reporting. I would likely not retest any transactional controls until the following year if the transactions in the new location were a very small % of total transactions for the year. Similar to making any process change late in the year. %0AExperience has shown that transitioning control activities from one location to another almost always seems to result in a short-term breakdown of controls as the new team gets up to speed. This happens either due to loss of focus by those losing their jobs in the old location or by the staff in the new location being overwhelmed with the work either due to understaffing or short transition time where they are not fully familiar with the day-to-day processes and controls.

  • So you would argue that although a material process has migrated if it has not processed sufficient transactions on the P-and-L it does not have to be tested.
    Therefore if the whole of operations were to migrate two weeks before year end I can sign off and state that all my controls were operating effectively at year end because they did not contribute a material amount to my financials in that two week period even though I now do not know whether my controls are operating effectively at year end?

  • I believe that you need to test some controls, especially those around FS presentation. You also need to test any annual controls that would be executed in the new environment. I would also throw in account reconciliation controls.
    As for transactional controls, I would be comfortable signing off with no additional testing if they transitioned in the last month of the year and they were found to be effective prior to that time. I would also obtain representations from the new control owners that the controls were operating effectively as of year end.
    Additionally, controls need to be in place and operating for a minimum period of time in order to test them anyway. For us, this is 20 days for daily controls, 5 weeks for weekly controls and 2 months for monthly controls.
    With a change of this magnitude, I would also see the need to disclose the fact that this change had been made and that certain of the controls were not operating in the new environment long enough to be reliably tested for operating effectiveness.

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