4 ms·

Former auditor here: The first one is standard. Second one is also a standard statement, but not standard to actually see. Honestly I don't know that I have

Former auditor here: The first one is standard. Second one is also a standard statement, but not standard to actually see. Honestly I don't know that I have ever seen that statement out in the wild. It's like something you study about in school - but rarely see. It could mean anything, with regards to discrepancies found in the financials. The main thing is that, what was found is material - and when you are talking about numbers this big - the discrepancy must have been significant.

toomuchtodo 6y ago
Would you say this is CYA by finance when forced to go public by those with a controlling interest in the company? Because it definitely has that CYA vibe.
- thenewwazoo 6y ago
  One doesn’t admit to a material misstatement if it is at all possible. It is a HUGE deal because it admits that someone fucked up and the error wasn’t caught until the audit.
  - okprod 6y ago
    Auditors typically work with a firm to iron out any issues so as to avoid material statements. The fact DoorDash and the auditor weren't able to resolve this issue/these coming issues and resorting to writing it up definitely is a big deal. But business-wise, yea losses forever isn't what you want to see.
    - Dragonai 6y ago
      This thread has been really informative, thank you for your comment in particular! This tidbit is fascinating.
- sithlord 6y ago
  It is also possible that there is nothing wrong with the financials, but there is wrong with the controls over the financials. IE, can the entire finance department sign off on checks? Or something along those lines. But with the above example, say anyone can process process orders without any oversight (ie no sign off by 2 VPs or something like that) What is potentially stopping some AP clerk from setting up a fake company, and then paying them for services every month? These are also the types of things that controls over financial reporting could mean.
  - jgalt212 6y ago
    > It is also possible that there is nothing wrong with the financials, but there is wrong with the controls over the financials. Is it possible to have one without the other?
    - cosmie 6y ago
      Yes. It's like finding a security vulnerability without any evidence it was exploited. Just because an AP clerk could embezzle money that way, doesn't mean that they've identified evidence of that happening. But now they've reported that lapse in financial controls (which may or may not have been addressed), and warned that there may be others.
eigenvalue 6y ago
It's actually incredibly common. If a company has ever had an issue around reporting, they need to include that. See here how many companies use the same exact language: https://www.sec.gov/edgar/search/#/q=%2522we%2520have%2520identified%2520a%2520material%2520weakness%2522&category=form-cat1 https://www.sec.gov/edgar/search/#/q=%2522we%2520have%2520id...
- TheNorthman 6y ago
  Isn't it more the second part of the statement that is shocking, that is "may identify additional material weaknesses in the future" rather than "we have identified a material weakness". If so, that cuts the results down from 684 to 205, of which many are from the same company, just at different times. https://www.sec.gov/edgar/search/#/q=%2522may%2520identify%2520additional%2520material%2520weaknesses%2520in%2520the%2520future%2522&category=form-cat1 https://www.sec.gov/edgar/search/#/q=%2522may%2520identify%2...
- tptacek 6y ago
  Twilio has had an SEC filing with similar language.
mbesto 6y ago
My guess is that they are operating at such large numbers so rapidly that they're basically saying "if you tried to audit every penny we make it, you're probably going to find discrepancies, we guarantee it". Going from $600M to $1.9B in revenue in a year will stress any system.
- dasil003 6y ago
  Yeah but when they say “material” it means the problem is definitely not about pennies
  - davio 6y ago
    "material" basically meant pulling an Enron when we started SOX
rjyoungling 6y ago
I love this about HN. Learning from experts. Thanks for taking the time to write that.

toomuchtodo 6y ago

Would you say this is CYA by finance when forced to go public by those with a controlling interest in the company? Because it definitely has that CYA vibe.

thenewwazoo 6y ago
One doesn’t admit to a material misstatement if it is at all possible. It is a HUGE deal because it admits that someone fucked up and the error wasn’t caught until the audit.
- okprod 6y ago
  Auditors typically work with a firm to iron out any issues so as to avoid material statements. The fact DoorDash and the auditor weren't able to resolve this issue/these coming issues and resorting to writing it up definitely is a big deal. But business-wise, yea losses forever isn't what you want to see.
  - Dragonai 6y ago
    This thread has been really informative, thank you for your comment in particular! This tidbit is fascinating.
sithlord 6y ago
It is also possible that there is nothing wrong with the financials, but there is wrong with the controls over the financials. IE, can the entire finance department sign off on checks? Or something along those lines. But with the above example, say anyone can process process orders without any oversight (ie no sign off by 2 VPs or something like that) What is potentially stopping some AP clerk from setting up a fake company, and then paying them for services every month? These are also the types of things that controls over financial reporting could mean.
- jgalt212 6y ago
  > It is also possible that there is nothing wrong with the financials, but there is wrong with the controls over the financials. Is it possible to have one without the other?
  - cosmie 6y ago
    Yes. It's like finding a security vulnerability without any evidence it was exploited. Just because an AP clerk could embezzle money that way, doesn't mean that they've identified evidence of that happening. But now they've reported that lapse in financial controls (which may or may not have been addressed), and warned that there may be others.

eigenvalue 6y ago

It's actually incredibly common. If a company has ever had an issue around reporting, they need to include that. See here how many companies use the same exact language: https://www.sec.gov/edgar/search/#/q=%2522we%2520have%2520identified%2520a%2520material%2520weakness%2522&category=form-cat1 https://www.sec.gov/edgar/search/#/q=%2522we%2520have%2520id...

TheNorthman 6y ago
Isn't it more the second part of the statement that is shocking, that is "may identify additional material weaknesses in the future" rather than "we have identified a material weakness". If so, that cuts the results down from 684 to 205, of which many are from the same company, just at different times. https://www.sec.gov/edgar/search/#/q=%2522may%2520identify%2520additional%2520material%2520weaknesses%2520in%2520the%2520future%2522&category=form-cat1 https://www.sec.gov/edgar/search/#/q=%2522may%2520identify%2...
tptacek 6y ago
Twilio has had an SEC filing with similar language.

mbesto 6y ago

My guess is that they are operating at such large numbers so rapidly that they're basically saying "if you tried to audit every penny we make it, you're probably going to find discrepancies, we guarantee it". Going from $600M to $1.9B in revenue in a year will stress any system.

dasil003 6y ago
Yeah but when they say “material” it means the problem is definitely not about pennies
- davio 6y ago
  "material" basically meant pulling an Enron when we started SOX

rjyoungling 6y ago

I love this about HN. Learning from experts. Thanks for taking the time to write that.