ADT 2009 Annual Report Download - page 162

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 and those criteria, management
believes that the Company maintained effective internal controls over financial reporting as of
September 25, 2009.
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.
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 existed
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 Sheets. As a result of these deficiencies, it
was 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.
Management accordingly concluded that 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 28, 2007 and September 26, 2008. As of September 25, 2009, the Company has remediated
the material weakness in income tax accounting as a result of corrective actions taken in fiscal 2008 and
fiscal 2009.
During fiscal years 2008 and 2009, we have focused on our internal controls over accounting for
income taxes, and have taken steps to strengthen controls in response to the identified material
weakness. Significant internal control, information systems and process improvements have been
implemented in our tax accounting processes to enhance effectiveness and sustainability including:
• Increased number of tax accounting resources;
• Enhanced policies and procedures relating to tax account reconciliation and analysis;
• Conducted extensive Company-wide training for all company personnel engaged in tax
accounting activities;
• Improved the level and quality of cross-company communication and information flows
regarding the tax accounting process and requirements;
• Improved process for tax effecting consolidating entries; and
• Enhanced monitoring of tax accounting submissions and tax account balances of our legal
entities globally.
We made the above improvements through 2008 and 2009 and in the fourth quarter of 2009,
management concluded that the improved controls had been operating for a sufficient period of time
to allow the effectiveness of the remediation measures to be validated. We conducted extensive
assessments of the effectiveness of the remediated tax accounting and control procedures. After
reviewing the results of these assessments, management concluded that internal controls relating to
accounting for income taxes are designed and operating effectively to prevent a material error from
occurring or to assure that such an error would be detected and corrected in a timely manner.
Our internal control over financial reporting as of September 25, 2009, 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.
Item 9B. Other Information
None.
70 2009 Financials