Tesla 2011 Annual Report Download - page 67

Table of Contents
Our facilities or operations could be damaged or adversely affected as a result of disasters or unpredictable events.
Our corporate headquarters and planned manufacturing facilities are located in California, a region known for seismic activity. If major
disasters such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, computer viruses, pandemics or other events occur, or our
information system or communications network breaks down or operates improperly, our facilities may be seriously damaged, or we may have
to stop or delay production and shipment of our products. In addition, our lease for our Palo Alto facility permits the landlord to terminate the
lease following a casualty event if the needed repairs are in excess of certain thresholds and we do not agree to pay for any uninsured amounts.
We may incur expenses relating to such damages, which could have a material adverse impact on our business, operating results and financial
condition.
In the past material weaknesses in our internal control over financial reporting have been identified. If we fail to remediate any material
weaknesses and maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be
impaired, which could adversely affect our business, operating results, and financial condition.
In connection with the audit of our consolidated financial statements for the year ended and as of December 31, 2007, our independent
registered public accounting firm identified two control deficiencies that represented material weaknesses in our internal control over financial
reporting for the year ended and as of December 31, 2007. In connection with the audit of our consolidated financial statements for the years
ended December 31, 2010, 2009 and 2008, our independent registered public accounting firm did not identify any material weaknesses in our
internal control over financial reporting for the year ended and as of December 31, 2010, 2009 and 2008. Our failure to implement and maintain
effective internal controls in our business could have a material adverse effect on our business, financial condition, results of operations and
stock price. A 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.
The material weaknesses in our internal control over financial reporting as of December 31, 2007, which resulted in audit adjustments,
were as follows:
We have taken steps to remediate our material weaknesses. However, there are no assurances that the measures we have taken to remediate
these internal control weaknesses were completely effective or that similar weaknesses will not recur. Our remediation efforts for the material
weaknesses in our internal control over financial reporting in 2007 have included:
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• We did not maintain adequate controls to ensure the accuracy, completeness and safeguarding of spreadsheets used in our financial
reporting process. Specifically, we maintained many supporting financial schedules on a manual and non-integrated spreadsheet
basis, which increased the risk of compiling inaccurate or incomplete information.
•
We did not maintain effective controls over cut
-
off procedures for expenses. Specifically, we did not have formal cut
-
off procedures
in place to ensure the timely and accurate recording of accruals.
•
an increased level of spreadsheet maintenance and review, as well as continuing exploration of automation opportunities;
• expanded cross-functional involvement and input into period end expense accruals, as well as process improvements in the procure-
to
-
pay cycle and analytics in establishing certain cost center accruals; and
•
increased reporting capabilities from our financial and enterprise resource planning systems to monitor and track financial reporting.