Client: Abatix Corp.
Line of Business: Regional Distributor
Annual Revenue: $66 million
Services: SOX 404 Compliance
Client Contact: Frank Cinatl, Executive Vice President, 1.888.222.8499
Turns out that it was a fortunate happenstance when Frank Cinatl, executive vice president of Abatix Corp., found himself seated next to Weaver and Tidwell’s Alyssa Martin, executive partner for risk advisory services, at a Public Company Accounting Oversight Board (PCAOB) “town hall” meeting in 2004.
The topic was the anticipated requirements from the Sarbanes-Oxley Act—to which Abatix would have to comply as it was a public reporting company at the time (Abatix has since de-registered, but remains a public company).
“During the question and answer sessions, Alyssa was the most active one in the group, asking very good, pertinent, timely questions of the PCAOB about what they were going to look for in audits and internal controls,” Cinatl recalls. “I was impressed by her questions and particularly by her insights related to Section 404.”
Based on that initial connection, Abatix interviewed Weaver and Tidwell, as well as two other accounting firms, in consideration for providing consulting services to bring the company’s controls into compliance with Sarbanes-Oxley Section 404 (SOX 404).
This section, the a ssessment of internal control, requires company management to maintain a system of internal accounting control over financial reporting and for the company’s external auditor to report on the adequacy of those controls. Dallas-headquartered Abatix—a regional distributor of safety, construction, restoration and environmental remediation products with eight distribution centers located throughout the United States—subsequently engaged Weaver and Tidwell to consult on this section.
“When we looked for a firm to help with our SOX 404 compliance, we paid particular attention to staff expertise and flexibility in that the consultants would find the best solution that met both internal control compliance requirements and the operational needs of our business,” says Cinatl. Also, he points out, being a smaller public company, cost was a consideration too.
“Early on, Weaver and Tidwell indicated that they were going to focus on things that not only met the internal control issue, but also gave us operational benefit—things that were good business practices,” Cinatl notes. “Obviously, that helped in terms of selling the idea and the changes throughout the company. We could demonstrate that it was not just an internal control issue that we’re solving, but also makes good business sense.”
Although the company de-registered in September 2007, making them no longer subject to these compliance requirements, Cinatl says the suggestions made by Martin and her team continue to bring value to Abatix. For example, based on Weaver and Tidwell’s recommendation, Abatix re-structured their inventory cycle counting procedure.
“We were doing daily cycle counting, but in a way that was not controlled,” he explains. “Now, we have an annual physical inventory where we count everything once a year, and quarterly mini-physicals where we select and count a sample of items.”
That process, Cinatl says, achieved both compliance to internal control standards for quarterly reporting, and improved the efficiency and effectiveness of the company’s personnel.
“As it turns out, our people actually like the quarterly mini-physicals better than having to perform daily cycle counts,” he reports. “This method allows us to focus exclusively on the inventory, avoiding interruptions, and it can be timed to when our staff is not as busy so we can knock it out and get it done. That was a methodology Alyssa Martin suggested that we continue, to this day, to follow.”
In addition to the now-concluded SOX 404 consulting work, Weaver and Tidwell also provides tax compliance and consulting services to Abatix.
“We’ve had a great working relationship over the last several years with them,” says Cinatl, who notes that the firm always responds quickly and authoritatively to questions.
“They’re not like a large firm, which might have to run an issue up to their national office and get an opinion,” Cinatl explains. “With Weaver and Tidwell, Alyssa comes out—sometimes with an associate who is an expert in a certain area—we discuss the issue at hand and it’s resolved right then and there.”
Frank Cinatl
Executive Vice President
Abatix Corp.