Computer Associates 2006 Annual Report Download - page 83

• The hiring of additional finance personnel, including a new controller for the UK in August 2005;
• The initiation of changes to the roles and responsibilities, as well as reporting lines, of executives in charge
of the EMEA region for more effective segregation of duties throughout fiscal year 2006; and
• Ongoing communications from senior management and provision of training to employees regarding the
importance of the control environment, financial integrity, and the Company’s code of ethics.
Specific remediation actions taken by management during the third quarter of fiscal year 2006 regarding the
material weakness relating to the accounting error in recording revenue from renewals of certain prior business
model license agreements include the following:
• The Company completed an inventory of active prior business model contracts on a worldwide basis and
established a central database to track such contracts;
• The Company revised its revenue recognition checklists to identify the renewal of any prior business model
contracts for proper disposition; and
• The Company began monitoring the renewal of prior business model license agreements to ensure that any
remaining deferred maintenance and unamortized discounts are recognized ratably over the life of the new
subscription based license agreement.
During the fourth quarter of fiscal year 2006, the Company continued documenting, testing and making
improvements to its internal control over financial reporting in light of findings made as a part of the annual
assessment of such internal controls for fiscal year 2006. The process is ongoing and the Company will continue to
address items that require remediation, work to improve internal controls, and educate and train employees on
controls and procedures in order to establish and maintain effective internal control over financial reporting.
Planned remediation of 2006 material weaknesses
Planned remediation efforts regarding the material weakness in internal control over financial reporting related to
an ineffective control environment due to a lack of effective communication policies and procedures that include the
following:
• Personnel and organizational changes:
• Appointment of a new Chief Operating Officer and the appointment of a new Chief Financial Officer to
be effective on or about August 15, 2006;
• Realignment of reporting of the Chief Financial Officer from Chief Operating Officer to the Chief
Executive Officer;
• Reorganization of the Sales Function including:
• Elimination of the position Executive Vice President Worldwide Sales, and establishment of direct
reporting of the field sales organization to the Chief Operating Officer;
• Appointment of a Senior Vice President Sales Operations with direct reporting to the Chief
Operating Officer;
• Implementation of recurring meetings with representation from key departments including legal, finance,
operations and human resources to address operating and financial performance, as well as the identification,
tracking and communication of information of potential significance to financial reporting and disclosure
issues; and
• Provision of focused training relating to ethics, the Company’s Code of Conduct and its core values.
Planned remediation efforts regarding the material weakness in internal control over financial reporting related to
sales commissions include the following:
• Review of commissions accounting procedures by the Internal Audit Department;
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