Software company Qualtrics disclosed the discovery of a material weakness in its internal control over financial reporting (ICFR) for the 2022 fiscal year.

The weakness concerned “management’s risk assessment process over information technology general controls, including certain controls over logical access and change management, and process level controls, including information used in the execution of those controls, that impacted our financial reporting processes,” the company said in a regulatory filing Friday.

The company’s 2022 financial statements were audited by KPMG, which issued an adverse opinion on the effectiveness of the company’s ICFR, Qualtrics added in its 10-K filing with the Securities and Exchange Commission. The weakness didn’t result in any material misstatements in its financial statements, the company said.

Compliance ramifications: Qualtrics management, led by its chief executive officer and chief financial officer, also evaluated the effectiveness of the company’s disclosure controls and procedures as of Dec. 31, 2022, and concluded they were not effective, the company said.

Qualtrics said it is creating a remediation plan to address the material weakness and has hired a third party to review its risk assessment process, which will include

  • Enhancing controls of new reports and changes to key reports; and
  • Ensuring change management and user controls are completed in a timely manner.

A timeline on how soon it would complete the remediation process was undetermined.

“The material weakness will not be considered remediated until the controls are designed, implemented, and operate for a sufficient period of time and management has concluded, through independent testing, that these controls are operating effectively,” the company said.

Qualtrics didn’t rule out discovering more material weaknesses, which could require it to revise or restate its financial results.

The company did not provide further information in response to a request for comment.

Qualtrics ended its relationship with KPMG on Friday. There was no disagreement between the parties, Qualtrics said. The company hired a German affiliate of BDO, the accounting firm used by parent company SAP, for its fiscal year 2023 reporting.