Computer Associates 2006 Annual Report Download - page 84

• Appointment of a quality review team to assess the adequacy and efficacy of the business processes, IT
Systems and financial oversight for the administration of sales commissions;
• Formalization of policies and procedures including communication and reporting responsibilities among the
Company’s sales, human resources and finance functions to ensure that the administration, payments of and
accounting for commissions expense are coordinated;
• Reconciliation of commission expense accruals to actual commission payments on a quarterly basis; and
• Monitoring of progress on remediation and to provide governance, including organizational alignment, by a
cross functional review committee.
Planned remediation efforts regarding the material weakness in internal control over financial reporting related to
non-routine tax matters include the following:
• Review of the tax department’s policies and procedures including its use of external advisors;
• Establishment of new documentation and analysis requirements for non-routine tax matters to ensure among
other things, that accounting conclusions involving such matters are thoroughly documented and identify the
critical factors that support the basis for such conclusions; and
• Formalization of communication and review of non-routine tax matters between the tax function and senior
finance management.
Remediation efforts regarding the material weakness in internal control over financial reporting related to the
accounting for and disclosure of stock-based compensation relating to stock options issued prior to fiscal year 2002
included the development and implementation of policies and procedures beginning in fiscal year 2002 which have
resulted in the timely communication of stock option grants to employees. During the first quarter of fiscal year
2007, the Company implemented procedures that resulted in the proper recognition and disclosure of stock-based
compensation expense for stock options issued prior to fiscal year 2002. Accordingly, no further remediation is
deemed necessary with respect to this material weakness.
Planned remediation efforts regarding the material weakness in internal control over financial reporting related to
subscription revenue when license agreements have been cancelled and renewed more than once prior to the
expiration date of each successive license agreement include the following:
• Formalization of policies and procedures, as well as provision of training, on the identification,
quantification and recording of the impact on subscription revenue of such license agreements.
Management is committed to the rigorous enforcement of an effective control environment. In addition,
management will continue to monitor the results of the remediation activities and test the new controls as part
of its review of its internal control over financial reporting for fiscal year 2007.
Other changes in internal control over financial reporting
In the first quarter of fiscal year 2007, the Company began migrating certain financial and sales processing systems
to SAP, an enterprise resource planning (“ERP”) system, at its North American operations. This change in
information system platform for the Company’s financial and operational systems is part of its on-going project to
implement SAP at all of the Company’s facilities worldwide, which is expected to be completed over the next few
years. In connection with the SAP implementation, the Company is updating its internal control over financial
reporting, as necessary, to accommodate modifications to its business and accounting procedures. The Company
believes it is taking the necessary precautions to ensure that the transition to the new ERP system will not have a
negative impact on its internal control environment.
Item 9B. Other Information.
Not applicable.
64