IBM 2009 Annual Report Download - page 64

Report of Management
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
Management Responsibility for
Financial Information
Responsibility for the integrity and objectivity of the financial
information presented in this Annual Report rests with IBM man-
agement. The accompanying financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America, applying certain esti-
mates and judgments as required.
IBM maintains an effective internal control structure. It con-
sists, in part, of organizational arrangements with clearly defined
lines of responsibility and delegation of authority, and compre-
hensive systems and control procedures. An important element
of the control environment is an ongoing internal audit program.
Our system also contains self-monitoring mechanisms, and
actions are taken to correct deficiencies as they are identified.
To assure the effective administration of internal controls,
we carefully select and train our employees, develop and dis-
seminate written policies and procedures, provide appropriate
communication channels and foster an environment conducive
to the effective functioning of controls. We believe that it is
essential for the company to conduct its business affairs in
accordance with the highest ethical standards, as set forth in the
IBM Business Conduct Guidelines. These guidelines, translated
into numerous languages, are distributed to employees through-
out the world, and re-emphasized through internal programs to
assure that they are understood and followed.
PricewaterhouseCoopers LLP, an independent registered
public accounting firm, is retained to audit IBM’s Consolidated
Financial Statements and the effectiveness of the internal control
over financial reporting. Its accompanying report is based on
audits conducted in accordance with the standards of the Public
Company Accounting Oversight Board (United States).
The Audit Committee of the Board of Directors is com-
posed solely of independent, non-management directors, and
is responsible for recommending to the Board the independent
registered public accounting firm to be retained for the coming
year, subject to stockholder ratification. The Audit Committee
meets periodically and privately with the independent registered
public accounting firm, with the company’s internal auditors, as
well as with IBM management, to review accounting, auditing,
internal control structure and financial reporting matters.
Management’s Report on Internal Control
Over Financial Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting of the company.
Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally
accepted in the United States of America.
The company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that trans-
actions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles
generally accepted in the United States of America, and that
receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a mate-
rial effect on the financial statements.
Because of its inherent limitations, internal control over finan-
cial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compli-
ance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effective-
ness of internal control over financial reporting based on the
framework in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management
concluded that the company’s internal control over financial
reporting was effective as of December 31, 2009.
Samuel J. Palmisano
Chairman of the Board,
President and Chief Executive Officer
February 23, 2010
Mark Loughridge
Senior Vice President,
Chief Financial Officer
February 23, 2010
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