This research was conducted in order to understand the challenges related to internal controls over financial reporting that companies faced at the time of their initial registration for new securities (form S-1). We looked at 125 U.S. company IPOs listed on the NYSE or NASDAQ that closed between 1/1/2019 and 12/31/2019. Foreign private issuers were not included in the study. Of the 125 companies studied, 33% disclosed material weaknesses.
Issues contributing to material weaknesses
lack of accounting resources and expertise
inadequate control design or lack of control
inadequate or lack of formal policies and procedures
segregation of duties
systems, technology or IT governance and controls (ITGC)
material/numerous audit or year end adjustments
control not operating effectively
Material weaknesses were often the result of more than one issue.