World Fuel Services 2004 Annual Report Download - page 42

Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the
reports that the Company files or submits under the Securities and Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’ s rules and forms, and that such information is accumulated and
communicated to the Company’ s management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required financial disclosure.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with
the participation of the Company’ s Disclosure Committee and management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Company’ s disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(e). Based upon, and as of the date of, this evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company’ s disclosure controls and procedures were not effective, because of the
material weaknesses discussed below. In light of the material weaknesses described below, the Company performed additional
procedures to ensure that the consolidated financial statements are prepared in accordance with generally accepted accounting
principles. Accordingly, management believes that the financial statements included in this report fairly present in all material
respects the Company’ s financial condition, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control Over Financial Reporting (as restated)
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rule 13a-15(f). The Company’ s 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 generally accepted accounting principles. 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 transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, 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 material effect on the
financial statements.
Because of its inherent limitations, internal control over financial 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 compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of the Company’ s internal control over financial reporting as of December 31,
2004. In making its assessment of internal control over financial reporting, management used the criteria described in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Management’ s assessment identified the following three material weaknesses:
1) As of December 31, 2004, the Company did not maintain effective controls over the recognition of revenue and cost of
sales in the appropriate accounting period. Specifically, the Company was recognizing revenue and cost of sales when
supporting documentation relating to fuel deliveries and related services had been received from third parties utilized by the
Company to provide fuel and related services rather than at the time fuel deliveries were made and related services were
performed as required by generally accepted accounting principles. This control deficiency resulted in the restatement of the
Company’ s financial statements for the year ended December 31, 2003, the nine months ended December 31, 2002, the interim
financial statements for the four quarters in the year ended December 31, 2003, the interim financial statements for the first
three quarters in the year ended December 31, 2004, and audit adjustments to the fourth quarter 2004 financial statements.
Additionally, this control deficiency could result in a misstatement of revenue and cost of sales that would result in a material
misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management
has determined that this control deficiency constitutes a material weakness.
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