Adaptec 2006 Annual Report Download - page 105

Table of Contents
To remediate the material weakness in the recording of stock option grants described above well prior to December 31, 2006, we have implemented additional
measures since the 1998-2001 period in which most of the options with improper measurement dates were granted. These additional measures include:
• In November 2002, the Chief Financial Officer undertook to review on a prospective basis the Company’s grants of stock options made as the grants
occurred and therefore initiated many of the remedial actions described below.
• The Company formed a Disclosure Committee which operates independently from the Chief Financial Officer and considers the financial statement
disclosure implications of various Company activities, including the accounting for stock options granted.
• The Company increased supervision and review by the Chief Financial Officer of work product of the stock administration group and members of the
human resources staff who are involved with the granting of stock options and the stock grant processes as well as records generated by outside
counsel with respect to stock administration.
• The Company provided additional training for personnel in areas associated with the stock option granting processes to increase competency levels of
the personnel involved.
• In 2004 and 2005 the Company retained an independent public accounting firm to assist in carrying out internal audit activities and in complying with
the requirements to certify its internal control over financial reporting. One of the key business cycles identified was the stock administration function.
Control objectives and related control activities were identified, evaluated and tested, and found to be operating effectively.
In concluding that our disclosure controls and procedures were effective as of December 31, 2006, management considered, among other things, the control
deficiencies related to accounting for stock-based compensation and control environment, which resulted in the need to restate our previously issued financial
statements as disclosed in Note 2 to the Consolidated Financial Statements included in Item 8 of this report. Management concluded that the control deficiencies
that resulted in the restatement of the previously issued financial statements did not constitute a material weakness as of December 31, 2006 because
management determined that as of December 31, 2006 there were effective controls designed and in place to prevent or detect a material misstatement and
therefore the likelihood of stock-based compensation being materially misstated is not more than remote.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our chief executive officer and our chief financial officer evaluated our “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934 as amended (the “Exchange Act”) as of December 31, 2006. They concluded that as of the evaluation date, our disclosure
controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠