Company: RILY
Filing Date: 2025-12-15
Form Type: 10-Q
Source: 0001464790-25-000029
Chunk: 441

Company: B. Riley Financial, Inc.
Filing Date: 2025-12-15
Form: 10-Q
Item: Part I, Item 8
Chunk 441
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 operations over IT systems and the reports generated from these systems used in the execution of controls that support the Company’s financial reporting processes. As a result, business process automated and manual controls that were dependent on the affected ITGCs could have been adversely impacted. Additionally, the Company did not consistently retain evidence of review, further contributing to the material weakness. 

•The Company identified a material weakness in controls due to its inability to rely on the SOC 1 Type 2 reports associated with two third-party service organizations that support significant elements of its financial reporting processes over B. Riley Retail Solutions, LLC. Specifically, the Company did not have adequate ITGCs in place over the IT systems and related reports at these third-party service providers, which are used in the execution of controls supporting the Company’s financial reporting. As a result, business process automated and manual controls that were dependent on these ITGCs at the service organizations could have been adversely impacted. 

Remediation of Material Weaknesses

Management continues to implement measures designed to ensure that the control deficiencies contributing to the material weaknesses noted above are remediated, such that the controls are designed, implemented, and operating effectively. The remediation actions for the material weaknesses noted above include:

•     Prior to December 31, 2024, the Retail Solutions material weakness was remediated through the divestiture of the business in November 2024. 

•     Implementation and enhancement of its ITGCs and related policies. This includes providing resources, training and support to process owners and reviewers with a specific focus on understanding the risks being addressed by the controls they are performing, as well as requirements for sufficient documentation and evidence in the execution of the controls.

•     Updating of its IT policies and procedures to enhance user access, change management, and IT operations processes to ensure timely and accurate assignment of access rights and prompt removal of access for terminated employees, and to ensure appropriate restriction of access rights based on job responsibilities. 

•     Designing of alternative processes and controls to mitigate the risk of the third-party services providers not producing the SOC 1 Type 2 reports. 

•     Implementation of measures designed to ensure controls are appropriately designed, implemented, and operating effectively as it relates to the material weakness identified in investment valuations, related party transactions, income taxes, goodwill impairment assessment, and journal entries. The remediation actions include the improvement of the precision level of management review controls, documentation retention and additional resources. 

While the foregoing measures are intended