Family Dollar 2006 Annual Report Download - page 57

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A CONTROLS AND PROCEDURES
Review of Historical Stock Option Grant Procedures
As discussed in Note 10 to the Consolidated Financial Statements included in this Report, a Special Committee of the Board
of Directors has reviewed the Company’s historical stock option granting practices and, as a result of such review, the Company
recorded a charge in the fourth quarter of fiscal 2006 for certain non−cash stock−based compensation expense and related interest
expense. Management has reviewed the Special Committee’s factual findings regarding the Company’s stock option granting
practices, including findings regarding changes in the Company’s stock option granting process instituted in fiscal 2005. The Special
Committee has not made its determinations concerning remediation or what actions the Company should take with respect to the
pending shareholder derivative litigation.
Disclosure Controls and Procedures
Based on an evaluation by management of the Company (with the participation of the Company’s Chief Executive Officer
and Chief Financial Officer), including consideration of the matters set forth in the preceding paragraph, as of the end of the period
covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure
controls and procedures (as defined in Rules 13a−15(e) and 15d−15(e) under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”)) were effective to provide reasonable assurance that information required to be disclosed by the Company in reports
that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms and that such information is accumulated and communicated to the Company’s management,
including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Consistent with the suggestion of the SEC, the Company has formed a Disclosure Committee consisting of key Company personnel
designed to review the accuracy and completeness of all disclosures made by the Company.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for 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 generally accepted accounting
principles. 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 (with the participation of the principal executive officer and principal financial officer) conducted an evaluation
of the effectiveness of the Company’s 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 August 26, 2006.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of August 26,
2006, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their
attestation report which is included under Item 8 of this Report.
46
Source: FAMILY DOLLAR STORES, 10−K, March 28, 2007