Avon 2008 Annual Report Download - page 44

PART II
accumulated and communicated to management to allow timely
decisions regarding disclosure.
Management’s Report on Internal Control
over Financial Reporting
Avon’s management is responsible for establishing and maintain-
ing adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Exchange Act.
Internal control over financial reporting is defined as a process
designed by, or under the supervision of, Avon’s principal execu-
tive and principal financial officers and effected by Avon’s board
of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial report-
ing and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles, and includes those policies and procedures that:
• pertain to the maintenance of records that, in reasonable
detail accurately and fairly reflect the transactions and
dispositions of the assets of Avon;
• provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of Avon are being made only in
accordance with authorizations of management and directors
of Avon; and
• provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
Avon’s assets that could have a material effect on the financial
statements.
Internal control over financial reporting cannot provide absolute
assurance of achieving financial reporting objectives because of
its inherent limitations. Internal control over financial reporting is
a process that involves human diligence and compliance and is
subject to lapses in judgment and breakdowns resulting from
human failures. Internal control over financial reporting also can
be circumvented by collusion or improper override. Because of
such limitations, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limi-
tations are known features of the financial reporting process,
and it is possible to design into the process safeguards to reduce,
though not eliminate, this risk.
Under the supervision and with the participation of our manage-
ment, including its principal executive and principal financial
officers, we assessed as of December 31, 2008, the effectiveness
of our internal control over financial reporting. This assessment
was based on criteria established in the framework in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based
on our assessment using those criteria, our management con-
cluded that our internal control over financial reporting as of
December 31, 2008, was effective.
PricewaterhouseCoopers LLP, the independent registered public
accounting firm that audited the financial statements included in
this 2008 Annual Report on Form 10-K, has audited the effec-
tiveness of Avon’s internal control over financial reporting as of
December 31, 2008. Their report is included on page F-2 of this
2008 Annual Report on Form 10-K.
Changes in Internal Control over Financial
Reporting
Management has evaluated, with the participation of our
principal executive and principal financial officers, whether any
changes in our internal control over financial reporting that
occurred during our last fiscal quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting. Based on the evaluation we
conducted, management has concluded that no such changes
have occurred.
We are implementing an enterprise resource planning (“ERP”)
system on a worldwide basis, which is expected to improve the
efficiency of our supply chain and financial transaction processes.
The implementation is expected to occur in phases over the next
several years. The implementation of a worldwide ERP system
will likely affect the processes that constitute our internal control
over financial reporting and will require testing for effectiveness.
We completed implementation in certain significant markets and
will continue to roll-out the ERP system over the next several
years. As with any new information technology application we
implement, this application, along with the internal controls over
financial reporting included in this process, were appropriately
tested for effectiveness prior to the implementation in these
countries. We concluded, as part of our evaluation described in
the above paragraph, that the implementation of ERP in these
countries has not materially affected our internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.