In its IPO documents, Peloton warned it's got some particular shortcomings as a business that could lead to fraud or financial restatement

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The company found problems in its internal controls, and it hasn't yet fixed them. That's not a good thing.

. Internal controls are the processes, rules, and checklists companies put in place to ensure their financial reports are accurate and to prevent fraud, among other things.Exercise-bike startup Peloton filed for IPO and revealed a long list of risk factors that investors should know

"We have identified material weaknesses in our internal control over financial reporting," the company warned in its."If our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting," it continued,"our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

And that's especially so for a company that, according to some reports, could seek an $8 billion to $10 billion valuation in the public markets.Peloton found flaws in its processes in at least four different areas: its controls over its information technology systems, the way it separates different accounting duties, how it reviews unspecified"journal entries," and how it reconciles and analyzes particular important accounts.

To address the weaknesses it has found, Peloton said it has been hiring people with accounting and finance expertise who have worked at public companies and put in place new processes and controls over its IT systems and accounting operations. Still, it hasn't fully addressed all the problems it found, it acknowledged.

 

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