ADT 2008 Annual Report Download - page 185

Integrated Framework. Management’s assessment included an evaluation of the design of the Company’s
internal control over financial reporting and testing of the operational effectiveness of its internal
control over financial reporting. Management reviewed the results of its assessment with the Audit
Committee of our Board of Directors. Based on our assessment, we believe that our internal controls
over financial reporting were not effective as a result of a material weakness related to certain aspects
of accounting for income taxes as of September 26, 2008.
A material weakness is a deficiency, or combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We have determined that further improvements are required in our tax accounting processes before we
can consider the material weakness remediated. During 2007, management’s procedures and testing
identified errors that, although not material to the Consolidated Financial Statements, led management
to conclude that control deficiencies exist related to tax effecting consolidating entries, analysis and
reconciliation of taxes receivable and taxes payable in non-U.S. jurisdictions, certain aspects of deferred
taxes, and procedures with respect to classification of tax amounts in the Consolidated Balance Sheet.
As a result of these deficiencies, it is reasonably possible that internal controls over financial reporting
may not have prevented or detected errors from occurring that could have been material, either
individually or in the aggregate.
Our internal control over financial reporting as of September 26, 2008, has been audited by
Deloitte & Touche LLP, the independent registered public accounting firm that audited and reported
on the consolidated financial statements included in this Form 10-K, and their report is also included in
this Form 10-K.
Remediation Plan
While a number of corrective actions have been made, several have only recently been
implemented during 2008 and further time is required to assess and ensure the sustainability of these
controls.
Over the next year, we will continue to focus on our internal controls over accounting for income
taxes, and will take further steps to those mentioned earlier to strengthen controls, including the
following planned actions:
• Further enhancements to tax accounting procedures in order to ensure their sustainability;
• Additional training, guidance and communications to information providers regarding tax
accounting requirements;
• Enhanced monitoring of tax accounting submissions and tax account balances of our legal entities
globally; and
• Comprehensive review of our tax accounting process and close procedures to identify areas that
require further improvements.
Item 9B. Other Information
None.
82 2008 Financials