Re-posting for serious investors. The below are comments taken directly from Hexo's financials filings - they can be found on Sedar as well as Hexo's web page. They're actual comments from the external auditors, not paid for biased opinion or an amateur's clippings of Hexo press releases. Keeler - (7/20/2021 11:16:11 PM) Hexo's External Auditors Comments Despite being in operation since 2013, 8 years ago, Hexo remains unable to implement effective controls related to finances, budget, IT, inventory control, accounting and more.
The below are the headlines from the external auditors review of the deficiencies they found - which are basically the same from the previous years audit. For more detail, see Sedar filing from Oct/20's MD&A - beginning on Page 50.
now a queertard will tell you that SSL has serious plans to implement controls (after 8 years) - but the reality is that it's beyond his abilities.
How in the world is Hexo going to now successfull integrate Zena, 48N and Redecan into anything but a hodgepodge, mess and disaster of an organization - when they haven't fixed their own ship after 8 years? The answer is - they won't.
For anyone with the slightest understanding, it's very significant when an auditor is compeleld to outline the deficiencies listed below:
Material Changes to the Control Environment
The Company continued to experience issues with the existing Enterprise Resource Planning (“ERP”) system and consequently embarked on a major ERP optimization initiative
Identified Material Weaknesses and Remediation Plan
A material weakness in internal control over financial reporting is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls.
Functionality of the Enterprise Resource Planning (ERP) System
The Company identified multiple deficiencies in the ERP’s design and functionality during the year. Specifically, there is a reasonable possibility that IT dependent control activities relating to inventory management, property, plant and equipment, procurement and journal entry postings would not prevent or detect a material misstatement of the Company’s annual or interim statements on a timely basis.
Control Environment
The Company did not adequately design or implement a comprehensive governance program for controls and industry-wide pressures precipitated elevated turnover, resulting in an ineffective control environment
Risk Assessment
The Company did not design or implement an Enterprise Risk Management Program to identify and analyze risks. As a result, financial reporting processes and internal controls were not, in some instances, appropriately designed to address risks specific to the business.
Information Technology General Controls
While the Company had Information Technology General Controls (ITGCs) in place, some were assessed as ineffective
Fixed Assets
The Company did not have a fixed assets subledger within its ERP, instead maintaining this information within complex spreadsheets. This led to increased risk of error regarding the identification, tracking, classification, disposal, and deprecation of fixed assets.
Financial Reporting
The Company did not maintain effective process level and management review controls over financial reporting processes, reconciliations, the application of IFRS, accounting measurements related to complex transactions and compliance with administrative lender requirements. This resulted in adjustments being required to the preliminary consolidated financial statements and a revision to the prior year Consolidated Statement of Financial Position regarding classification between short-term and long-term liabilities.
Procurement
The Company did not have effective controls around the authorization of purchases. This material weakness was initially identified July 31, 2019