Sunoco 2010 Annual Report Download - page 118

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim
financial statements will not be prevented or detected on a timely basis. Management identified the following
control deficiencies that, in the aggregate, represent a material weakness in the design and operation of its
internal controls over the computation of the income tax provision and determination of the appropriate
classification of income taxes payable and deferred income taxes: (i) management relied on spreadsheets that
were extremely complex and difficult to prepare and review; (ii) a lack of readily available data to facilitate the
accounting for complex, non-routine transactions resulted in a reasonable possibility that adjustments to balances
would not be detected on a timely basis; and (iii) inexperience with the Company’s income tax accounting
processes, procedures and controls due to recent employee turnover resulted in insufficient review of the income
tax accounts.
Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued an opinion
on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, which
is set forth below in this Item 9A.
Remediation of Material Control Weakness
The Company has begun to implement a number of remediation steps to address the material weakness
discussed above and to improve its internal control over income tax accounting. Specifically, the following have
been, are being or are planned to be implemented: hiring additional experienced tax personnel; tax organizational
structure changes which better integrate the tax compliance and accounting functions; enhancement of our
processes and procedures, including implementing new systems and software, for determining, documenting and
calculating our income tax provision; and increasing the level of certain tax review activities during the financial
close process.
The measures described above should remediate the material weakness identified and strengthen our
internal controls over income tax accounting. Management is committed to improving the Company’s internal
control processes. As the Company continues to evaluate and improve its internal control over income tax
accounting, additional measures to address the material weakness or modifications to certain of the remediation
procedures described above may be identified. The Company expects to complete the required remedial actions
during 2011.
Changes in Internal Control over Financial Reporting
There have been no other changes in the Company’s internal control over financial reporting during the
fourth quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
To the Shareholders and Board of Directors,
Sunoco, Inc.
We have audited Sunoco, Inc and subsidiaries’ internal control over financial reporting as of December 31,
2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Sunoco, Inc. and subsidiaries’
management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
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