Identify the processes the organization uses to comply ...
In an age where there seems to be an increasing focus on unethical behavior within public companies from senior managers, it is increasingly critical that organizations establish policies and processes to ensure that it is complying with the rules and regulations put in place by the Securities and Exchange Commission.
Walk Disney Co, is able to meet its reporting requirements through the use of technology, internal disclosure controls, internal controls over financial reporting, and independent accounting auditors who verify that these controls are in place and working as intended.
Technology. The SEC requires that Disney posts all Interactive Data Files required to be submitted ans posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.[i] A quick visit to the Investor Relations tab[ii] of The Walt Disney Company corporate website shows that historical SEC filings are listed by category for a variety of required reports, including forms 10-K, 10-Q, 8-K, 11-K, S-8, 425, S-4, and proxy statements.
Internal Disclosure. Disney’s policy that all SEC filings be signed by a senior member of the management (President, CFO, Managing VP & Internal Counsel) helps ensure that the filings are correct, comply with reporting requirements, and are communicated to the other stakeholders in the management of Disney (Board of Directors and other Senior Members of the management team). In an era where CEOs and CFOs are continually being called before US Congress to testify on the financial situation within their firms, this policy adds a layer of accountability to senior management.
Internal Controls Over Financial Reporting. Company management explicitly acknowledges their accountability for being able to create accurate, reliable, sufficiently detailed, and timely external financial reports. To address this accountability, the firm makes use of a structured internal control framework the Internal Control – Integrated Framework which was issued by the Committee of Sponsoring Organizations of the Treadway Commission[iii]. Using this established framework, management was able to state that their “internal control over financial reporting was effective as of October 3, 2009”.
The purpose of using this framework is to:
i. “Pertain to the maintenance of records that accurately reflect the transactions and dispositions of assets of Disney in reasonable detail.
ii. Provide reasonable assurance that their transactions are recorded in such a way as to permit the preparation of financial statements intended for external use that are in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made in accordance with authorizations of management and directors of the company
iii. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquistion, use , or disposition of the company’s assets that could materially affect the financial statements.”
Independent Accounting Auditors. Disney makes use of PricewaterhouseCoopers as an independent auditing firm to provide a third party analysis of their internal controls over financial reporting. Management reports that PWC confirms that their internal controls appear to be functioning at a level that allows management to make the claim that their internal controls are effective as of October 3, 2009. In addition, PricewaterhouseCoopers’ own report to the Board of Directors and Shareholders of The Walt Disney Company is included in the Annual Report and discusses the process by which Disney’s internal controls over financial reporting are tested and audited to provide a reasonable level of assurance that the controls are working and that external financial reports are being reported based on generally accepted accounting principles as required by U.S. Law.
Additional references:
SEC Government Website Listing of all company filings for Walt Disney Co
2009 Annual Report (pdf)
2009 Annual Report (interactive)
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[i] Page 5 of Walk Disney 10K Annual Report.
[ii] Disney Corporate Investor Relations
[iii] Referenced in the form 10-K, pg 61. Managements Report on Internal Control Over Financial Reporting
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