Sunoco 2011 Annual Report Download - page 118

forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the “COSO criteria”). Based on this assessment, management believes that, as of
December 31, 2011, the Company’s internal control over financial reporting was effective.
During 2011, the Company has taken action to implement remediation steps to address the material
weakness in its internal control over financial reporting related to accounting for income taxes that existed at
December 31, 2010. Management identified the following control deficiencies at December 31, 2010 that, in the
aggregate, represented a material weakness in the design and operation of its internal controls over the
computation of the income tax provision and determination of the appropriate classification of income taxes
payable and deferred income taxes: (i) management relied on spreadsheets that were extremely complex and
difficult to prepare and review; (ii) a lack of readily available data to facilitate the accounting for complex, non-
routine transactions resulted in a reasonable possibility that adjustments to balances would not be detected on a
timely basis; and (iii) inexperience with the Company’s income tax accounting processes, procedures and
controls due to recent employee turnover resulted in insufficient review of the income tax accounts.
Remediation of Material Control Weakness
The Company implemented remediation steps to address the material weakness discussed above and to
improve its internal control over income tax accounting. Specifically, the Company has: hired additional
experienced tax personnel; formalized and implemented tax organizational reporting structure changes which
better integrate the tax accounting and compliance functions and facilitate an increase in the level of certain tax
review activities during the financial close process; utilized personnel from third-party professional services
firms with expertise in accounting for income taxes to assist in the preparation and review of the Company’s
income tax provision; held training sessions covering accounting for income taxes and tax risk management;
updated process documentation to reflect improvements made for internal control compliance, including detailed
tax checklists; enhanced procedures and reviews of key tax accounts, non-routine transactions, and supporting
documentation; and implemented and utilized a computer software package that facilitates the calculation,
documentation and review of the Company’s income tax provision.
Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued an opinion
on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, which
is set forth below in this Item 9A.
Changes in Internal Control over Financial Reporting
Other than the remediation steps discussed above, there have been no changes in the Company’s internal
control over financial reporting during the fourth quarter of 2011 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
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