Autodesk 2007 Annual Report Download - page 199

139
2007 Annual Report
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Audit Committee Voluntary Stock Option Review
As discussed in the Explanatory Note preceding Part I, in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Item 7 and in Note 2 in Notes to Consolidated Financial
Statements of this Form 10-K, on August 17, 2006, Autodesk announced that the Audit Committee of the
Board of Directors, with the assistance of independent outside legal counsel and forensic accounting
experts, was conducting a voluntary review of Autodesk’s historical stock option granting practices and
related accounting issues. As a result of the voluntary review, management concluded, and the Audit
Committee of the Board of Directors agreed, that incorrect measurement dates were used for financial
accounting purposes for certain stock option grants made in prior periods. Therefore, Autodesk has
recorded additional non-cash stock-based compensation expense and related tax effects with regard to
past stock option grants, and we are restating previously filed financial statements in this Form 10-K.
As a result of the voluntary review of Autodesk’s historical stock option grant practices, the Company
identified a material weakness in its internal controls over financial reporting in periods ending prior
to March 2005. For the period between July 2000 and February 2005, Autodesk generally followed an
administrative process for monthly broad based employee grants that resulted in the selection of effective
grant dates that were prior in time to the final preparation of action by written consent for such grants.
Since March 2005, the Company has implemented a number of changes that will resolve past
measurement date errors and deter them from happening in the future.
In March 2005, the Board of Directors modified the delegated authority of the CEO to grant option
grants to require that broad-based employee option grants be made on a fixed date each month, thereby
remediating an internal control deficiency related to monthly option grant processes. Following this
modification, no additional instances of retroactive date selection occurred. In coming to the conclusion,
disclosed in this Item 9A, that our disclosure controls and procedures and our internal control over financial
reporting were effective as of January 31, 2007, management considered, among other things, the impact
of the restatement to the financial statements and the effectiveness of the internal controls in this area
as of the fiscal year ended 2007. Management has concluded that previous control deficiencies resulting
in the restatement of previously issued financial statements did not constitute a material weakness in
disclosure controls and procedures, or internal controls and procedures over financial reporting, as of
January 31, 2006 and as of January 31, 2007.
In addition to the significant improvements implemented in March 2005 discussed above, the
Company discontinued “committee of one” grants in September 2006. Further, the Board of Directors
modified the delegated authority to grant stock options under the Company’s 2006 Stock Option Plan
to provide that only the Compensation Committee or the Board of Directors may grant stock options
under the Plan. In addition to other changes in the first quarter of fiscal 2007, the Company implemented
a series of remedial measures including personnel and process changes, restructuring of the human
resources functions supporting stock compensation, implementing cross functional controls involving
finance, human resources, treasury and legal, as well as related process improvements recommended
by the Audit Committee and approved by the Board designed to improve the Company’s controls with
respect to stock-based compensation. Finally, no Company employees or officers who may have made
discretionary determinations that resulted in measurement date errors in the past has any continuing role
relating to the distribution, administration or accounting for stock based compensation.