Prompt
Assess the compliance approach implemented by Trinity Industries in order to recommend a cost efficient software system.
Specifically, the following critical elements must be addressed:
Bottom-Up ApproachWhat were the strengths and weaknesses of Trinity’s practice-based bottom-up approach? How effective was it?What would you recommend it should have done differently in Year 1? Defend your response.Compare and contrast the strengths and weaknesses of a bottom-up versus a top-downrisk approach to compliance.Which approach is more appropriate in completing a compliance project successfully for Trinity’s first year?How does each approach affect a company’s internal control structure?Identify the chief insights from the pilot project. How does the pilot project for the EDP system compare to SOX requirements?Identify the testing processes Trinity performed and whether Trinity took the appropriate approach in designing their controls.Based on the substantive tests, which testing process proved to be most useful in assessing Trinity’s accounting system?Compose a short memorandum that communicates the results of the first year of testing along with recommendations as to what Trinity should do differently in subsequent years.SOX-Related ExpensesFormulate recommendations for how Trinity could further reduce SOX-related expenses in 2008. Be sure to consider the barriers the company may encounter with each of your recommendations.What are the major sources of cost in Trinity’s compliance maintenance and testing?Rank each of the major sources of cost in terms of value.Compare the choice of Oracle as the selected software system against two other systems of comparable size and scope. Evaluate each software system’s advantages and disadvantages.If you determine that another software system would have been a better choice through your analysis, defend the decision. If Oracle is the choice after analysis, defend that decision. Overview of Trinity Industries
Christine Sarkissian
ACC-675: Control/Audit of Accounting Info Systems
Southern New Hampshire University
Professor John Kuhn
July 16, 2023
Overview
Trinity Industries is known to be a diversified industrial company which is based in Texas,
USA. It was established in 1933 and since then, it has developed to be the leading source of services
and products required in different sectors such as the construction, transportation, energy and
chemical sectors. It is known to operate through various business segments which include Inland
Barge Group, Construction Products Group and even Rail Group. It is known to be traded on the
New York Stock Exchange under TRN symbol.
Size of Organization.
The organization has a market presence that is substantial. The value of all of Trinity’s equity
shares, or market capitalization, is $2.2 billion (Investor Fact Sheet, 2019). The company has 11875
employees on record (Trinity Industries Inc, n.d.). It may be deduced from the company’s speciality
that it operates in the industrial and transportation equipment industries. Overall, Trinity Industry is
a sizable conglomerate that has produced a number of spin-off businesses, and it is the market
leader in the US for the manufacture of railroad equipment.
Sector/Industry and Comparable companies
One of the industries include construction products. Trinity industries produce variety of
construction products such as concrete which are used for infrastructure. Next is the energy
equipment whereby it manufactures equipment such as wind towers which are used in the energy
projects.
Comparable companies
Three of the companies that can be said to be comparable to Trinity are one, we have the
Greenbrier companies,Inc which is a manufacturer of inland barges, railroad freight car equipment
and marine vessels. Second, we have the Westinghouse Air Brake Technologies Group and the third
we have Freightcar America.
Structure/ Line of Business
Trinity Industries is known to operate through the various mentioned business segments
which have been mentioned above. Each of the mentioned segment caters to industries that are
different but the markets are always specific ones. By using the diversified approach, the company
is able to mitigate the risks that are associated with the fluctuations in any sector.
Organizational Structure
Forty-eight executives are listed on Trinity Industries’ organizational chart. Twelve vice
presidents report to Chief Executive Officer and President Jean Savage. Vice presidents are in
charge of taxation, leasing, government relations, company development, and finances, among other
areas. Leldon E. Echols, a non-executive chairman, is one of the board’s five directors. The entire
Trinity is further divided into five categories: rail, management services and railcar leasing, inland
barge, construction services, and services relating to energy equipment. The individuals in charge of
each division of this structure answer to Trinity’s chief executive.
Yearly Performance
As was already established, Trinity Industries continues to be the top corporation in the US
market for transportation equipment. According to Earnings Press Release (2019), the business
generated $3,005.1 million in total revenue last year. The total revenue increased by about 20% in
comparison to 2018. The Westinghouse Air Brake Technologies Group, The Greenbrier Companies,
and Freightcar America are three of its rivals, and their combined sales are compared here.
According to the comparison, Trinity Industries did not have the highest annual revenue.
The revenue of Westinghouse Air Brake Technologies Group reached $8,200,000,000 in 2019 and
increased by more than 100% year over year. The Greenbrier Companies also enjoyed greater
prosperity thanks to their $3,033.59 million in annual revenue. The entire revenue for Freightcar
America in 2019 was $229.96 million. Additionally, compared to 2018, the revenue of the final two
businesses declines dramatically. More specifically, The Greenbrier Companies’ revenue decreased
by 5%, whereas Freightcar America’s overall revenue decreased by nearly 49% (CSIMarket,
n.d.).Trinity Industries hence cannot be referred to as the most profitable company. However, given
that the railcar sector is currently in decline, its Senior Vice President and Chief Financial Officer
Melendy E. Lovett says that a 20% rise in overall revenue is still a noteworthy accomplishment. As
a result, Trinity has the potential to grow even more in the railroad and transportation equipment
sectors.
Management and Culture
Trinity Steel and Dallas Tank were combined to become Trinity Industries, which debuted in
1958. Initially, Trinity had been manufacturing tank rail cars that could move goods like propane
tanks and support towers for wind turbines (Schultze, 2011). The management of the company
works hard to keep it at the top of the list of North American suppliers of railcar goods and services
(Trinity Industries, n.d.). Trinity Industries’ success demonstrates how well the leadership handled
this challenge. Regarding the size of the business, according to Investor Fact Sheet from 2019
Trinity’s market capitalization, which is the sum value of all its stock, is $2.2 billion. The company
has 11875 employees on record (Trinity Industries Inc, n.d.).
References
(n.d.). CSIMarket – Company, Sector, Industry and Market Analysis. https://csimarket.com/
Home | Trinity industries, Inc. (2018, June 6). Trinity Industries,
Inc. https://www.trin.net/home/default.aspx
Lehmann, U. (2003). Schultze, Bernard. Oxford Art
Online. https://doi.org/10.1093/gao/9781884446054.article.t076855
Running head: CASE STUDY
1
Analysis of Trinity Industries’ First Year of Sarbanes-Oxley Compliance
Christine Sarkissian
Southern New Hampshire University
ACC-675: Control/Audit of Accounting Info Systems
07/30/2023
2
CASE STUDY
The Elements that were Critical to the Company’s Decisive Success in its First Year of
Compliance
According to the VP and chief audit executive, the company was a likely candidate for a
material weakness in the first year of SOX compliance. The company was no different from
other companies in as far as compliance to the new SOX was concerned, and this continued to
happen despite the fact that Trinity company was constantly improving and performing well in
the market (Schultze, 2011). Key among the factors that were causing it problems include the
fact that process and control documentation was lacking in the company. Besides, there was no
evidence that it was performing any controls.
From the case study, one of the elements that was critical for the company’s decisive
success during the year of compliance was the standardization of its financial reporting into a
single financial reporting system (Schultze, 2011). This involved centralizing its financial
reporting processes, something that enabled it to save about $.5 million yearly in SOX
compliance expenses. Other elements that were critical were the documentation of the control
environment, performing analysis of control gaps, which included things like the lack of
corrective controls around inventory adjustments. Apart from identifying the gaps, the team
involved was also tasked with suggesting the control activities that would be effective in
mitigating the risk of every control gap and indicate the how impactful those gaps could be.
The Internal Controls that are Important for Preparing Accurate and Reliable Financial
Reports
The specific internal controls that are important for preparing accurate and reliable
financial reports include policies, procedures, and documentation (Chang et al., 2019). For
instance, in the company, the was a team that was solely responsible for documentation, which
3
CASE STUDY
provided guidance and training to make sure there was consistency in their performance. There
were also procedures that they were required to always follow. The company had also created
policies that would help identify and fill control gaps. Other internal controls that are critical for
realizing accurate and reliable financial reports are transaction and activity reviews. For example,
Trinity’s management would constantly review the activities of the team with the intention of
monitoring their performance against the company goals and objectives. The company also used
segregation of duties to ensure accurate and reliable reports since there was a team that were
individuals or teams that were responsible for documenting its controls and ensuring that all the
gaps were identified and filled.
Material Weakness in Terms of SOX Compliance and the Material Weakness that are
Specific to Trinity
In terms of SOX compliance, a material weakness refers to a huge deficiency or a set of
deficiencies in internal controls that increases the likelihood of a material misstatement in a
company’s financial statements will go undetected or unprevented (Chang et al., 2019). The
material weaknesses that are specific to Trinity include the documentation of the controls that are
being conducted within the company. The company’s control environment is designed in such a
manner that the team has do a lot of work to have every control document. In this respect, the
company does not have a set of controls. The other material weakness that is specific to it is the
fact that it lacks proper evidence to show that control has been done. From the case,
reconciliations were being done without a signature showing the exact person who was involved
or whether a manager had reviewed them.
The Standards Addressed in PCAOB Regarding the Concept of Material Weaknesses in
Development of Internal Control Compliance
4
CASE STUDY
According to PCAOB, some of the standards regarding the concept of material weakness
in the development of internal control compliance are standard No. 5 and standard No. 2.
Standard No. 5 creates the requirements proper auditing and guides an auditor on how he or she
should performance the process (Public Company Accounting Oversight Board, n.d.).
Additionally, it directs the auditor on how to audit the management’s assessment of the how
effective internal control is. On the other hand, standard No.2 contains comprehensive
requirements for the auditor have the evaluation processes of the management evaluated.
The Factors that Made Trinity Successful
The factors that made the company successful can best be understood through the use of
an organizational flow process, which begins with the top management due to the important role
they play to ensure all compliance requirements are being met. The top management develops
the guidelines to be followed when documenting controls. These are passed to the management,
which begins the implementation process and making sure that the employees are kept updated
on how the changes will take place. The employees are responsible for ensuring the new business
process controls are well-applied in every department in the company. The employees in the IT
department are to make sure that the changes are reflected on the information systems and
application controls. The management oversees every department and reports back to the top
management. The top management makes changes and keeps the team updated on how the issues
identified are to be addressed based on the outcomes of the discussions between them and the
management.
5
CASE STUDY
References
Chang, Y. T., Chen, H., Cheng, R. K., & Chi, W. (2019). The impact of internal audit attributes
on the effectiveness of internal control over operations and compliance. Journal of
Contemporary Accounting & Economics, 15(1), 1-19.
Public Company Accounting Oversight Board. (n.d.). Auditing Standard No. 5. Default.
https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-auditingstandards-interpretations/details/Auditing_Standard_5
Schultze, U. (2011). The SOX compliance journey at Trinity Industries. Journal of Information
Technology Teaching Cases, 1(2), 91–113. https://doi.org/10.1057/jittc.2011.11
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