International Paper 2012 Annual Report Download - page 70

ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
REPORT OF MANAGEMENT ON:
Financial Statements
The management of International Paper Company is
responsible for the preparation of the consolidated
financial statements in this annual report and for
establishing and maintaining adequate internal con-
trols over financial reporting. The consolidated
financial statements have been prepared using
accounting principles generally accepted in the
United States of America considered appropriate in
the circumstances to present fairly the Company’s
consolidated financial position, results of operations
and cash flows on a consistent basis. Management
has also prepared the other information in this
annual report and is responsible for its accuracy and
consistency with the consolidated financial state-
ments.
As can be expected in a complex and dynamic busi-
ness environment, some financial statement
amounts are based on estimates and judgments.
Even though estimates and judgments are used,
measures have been taken to provide reasonable
assurance of the integrity and reliability of the finan-
cial information contained in this annual report. We
have formed a Disclosure Committee to oversee this
process.
The accompanying consolidated financial statements
have been audited by the independent registered
public accounting firm, Deloitte & Touche LLP. Dur-
ing its audits, Deloitte & Touche LLP was given
unrestricted access to all financial records and
related data, including minutes of all meetings of
stockholders and the board of directors and all
committees of the board. Management believes that
all representations made to the independent auditors
during their audits were valid and appropriate.
Internal Control Over Financial
Reporting
The management of International Paper Company is
also responsible for establishing and maintaining
adequate internal control over financial reporting.
Internal control over financial reporting is the proc-
ess designed by, or under the supervision of, our
principal executive officer and principal financial
officer, and effected by our Board of Directors,
management and other personnel to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes. All internal control
systems have inherent limitations, including the
possibility of circumvention and overriding of con-
trols, and therefore can provide only reasonable
assurance of achieving the designed control
objectives. The Company’s internal control system is
supported by written policies and procedures, con-
tains self-monitoring mechanisms, and is audited by
the internal audit function. Appropriate actions are
taken by management to correct deficiencies as they
are identified.
The Company has assessed the effectiveness of its
internal control over financial reporting as of
December 31, 2012. In making this assessment, it
used the criteria described in “Internal Control –
Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway
Commission (COSO). Based on this assessment,
management believes that, as of December 31, 2012,
the Company’s internal control over financial report-
ing was effective.
The Company completed the acquisition of Temple-
Inland in February 2012. Due to the timing of the
acquisition, we have excluded Temple-Inland from
our evaluation of the effectiveness of internal control
over financial reporting. For the period ended
December 31, 2012, Temple-Inland net sales and
assets represented approximately 19% of net sales
and 25% of total assets.
The Company’s independent registered public
accounting firm, Deloitte & Touche LLP, has issued
its report on the effectiveness of the Company’s
internal control over financial reporting. The report
appears on pages 45 and 46.
Internal Control Environment And
Board Of Directors Oversight
Our internal control environment includes an
enterprise-wide attitude of integrity and control
consciousness that establishes a positive “tone at
the top.” This is exemplified by our ethics program
that includes long-standing principles and policies on
ethical business conduct that require employees to
maintain the highest ethical and legal standards in
the conduct of International Paper business, which
have been distributed to all employees; a toll-free
telephone helpline whereby any employee may
anonymously report suspected violations of law or
International Paper’s policy; and an office of ethics
and business practice. The internal control system
further includes careful selection and training of
supervisory and management personnel, appro-
priate delegation of authority and division of
responsibility, dissemination of accounting and
business policies throughout International Paper,
and an extensive program of internal audits with
management follow-up.
The Board of Directors, assisted by the Audit and
Finance Committee (Committee), monitors the
integrity of the Company’s financial statements and
financial reporting procedures, the performance of
the Company’s internal audit function and
independent auditors, and other matters set forth in
its charter. The Committee, which currently consists
of four independent directors, meets regularly with
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