Rosemont Technologies Inc.
a) Ineffective monitoring of Management as a Result of Ineffective Board of
Directors/Audit Committee Oversight Over the Financial Reporting Process and Internal
Control
b) Complex of Unstable Organizational Structure as Evidenced By High Turnover of
Senior Management, Legal Counsel, or Board Members
c) Aggressive Accounting Policy Choices and Financial Reporting Practices Adopted by
Management
d) Excessive Pressure on Management or Operating Personnel to Meet Financial Targets
Set Up By Board of Directors/Management, Including Sales or Profitability Incentive
Goals
e) Inadequate Segregation of Duties or Independent Checks
f) Inadequate Physical Safeguards Over Assets
g) Disregard For Internal Control Over Misappropriation of Assets By Overriding Existing
Controls/Failing to Correct Known Control Deficiencies
h) Disregard for the need for monitoring or reducing risks related to the misappropriation
of assets
Fraudulent Financial Reporting
There are several factors that are taken into consideration when making this decision. This
will be sorted by possible risk factors and explained using information from the
questionnaire and company description.
a) Ineffective monitoring of Management as a Result of Ineffective Board of
Directors/Audit Committee Oversight Over the Financial Reporting Process and
Internal Control
The monitoring of management appears to be very poor. It appears that there has been a
transition in the management team that left management to operate as they wish. For
example, question 12 of the Board of Directors/Audit Committee section of the
questionnaire states that for the time being, management has complete control of
establishing incentive plans and the compensation committee will be made aware of major
changes. Not only is this ineffective monitoring of management by the board of directors,
but this is also a segregation of duties (see section e – inadequate segregation of duties for
more information regarding this).
In addition to the above, management currently does not have a “tone at the top policy”
due to the recent management team transition (questions 14 – 15). While independent
members of the board are confident that the tone that is set will be appropriate, this would
be something to watch for.
b) Complex of Unstable Organizational Structure as Evidenced By High Turnover of
Senior Management, Legal Counsel, or Board Members
This transition in the management team has led to significant turnover within top
management (question 2, Management’s Philosophy and Operating Style). Whether or not
this is tied to the adoption of new policies is unclear, but the organizational structure has
been deemed appropriate for this company (question 1, Organizational Structure section).
