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Implementing EffectiveAccounting Controls to
Comply with Books and
Records Provisions
(Practical cases)
Pierpaolo Maio
Frankfurt, January 2010
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Sarbanes Oxley
Two basic principles:
Companys documentation (purchase orders,
contracts, invoices, expenses, project closure
forms) must reflect reality
Each and every employee is responsible for this
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Expenses
Must be documented with accurate receipts
Must be lawful under local law
Should be reflected accurately in the companys
books and records
Should be reasonable and in proportion to business
purposes
Avoid discretionary spending
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Traps for the unwary ?
Reflecting a payment to the wrong payee
Submitting false or inaccurate expense account report
Use of travel and expense forms to obtain cash for
improper payments
Unrecorded accounts or transactions
Over invoicing or false invoices
Recording revenues prematurely
Miscellaneous accounts can hide improper payments
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Revenue recognition (principle)
The Revenue recognition principle is a cornerstone
of accrual accounting together with matching principle.
They both determine the accounting period, in
which revenues and expenses are recognized.According to the principle, revenues are recognized when
they are (1) realized or realizable, and are (2) earned
(usually when goods are transferred or services
rendered), no matter when cash is received.In cash accounting - in contrast - revenues are recognized
when cash is received no matter when goods or services
are sold.
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Excerpt from Avaya training course
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USGAAP Revenue
RecognitionMyriad of rules SAB 101 & 104 (SEC interpretative guidance)
EITF 00-21 (Multiple element arrangements)
SFAC No. 5 and 6 (Definition of revenue)
SFASNo 48 (Rights of Return)
SOP 81-1 (Contract Accounting) SOP 97-2 & 98-9 (Software Revenue Recognition)
EITF 03-5 (Non software elements in a software contract)
EITF 99-19 (Principal v Agent)
EITF 01-9 (Contra-Revenue vs. Expense)
FTB 90-1 (Extended Warranty and Service Contracts)
EITF 00-24 (Trade-In Rights)
Multiple bodies issue rules & guidance Financial Accounting Standards Board
Securities and Exchange Commission
Emerging Issues Task Force
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In order to recognize revenues 4 criteria must be met:
Persuasive evidence that an arrangement exists
Delivery has occurred or services have been
rendered
The seller's price to the buyer is fixed ordeterminable
Collectibility is reasonably assured
Principles of Revenue
Recognition Policies
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Code of Conduct and related
policies support Operating with
Integrity and Compliance with Law
Avayas Code of Conduct, Operating with Integrity,
applies to all Directors and employees of Avaya ona worldwide basis.
Because Avaya believes so strongly in ethical behavior,individuals who do not comply with the provisions of this
Code of Conduct and other company policies andinstructions may be disciplined, up to and includingdismissal. Additionally, violations of these standardscould result in criminal penalties and/or civil liabilities
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The Code of Conduct covers
topics such as (1/2):
Promoting Avaya's Interests & Assets
Gifts and Entertainment
Obtain Proper Authorization Before Entering IntoCommitments on Behalf of Avaya (SOA)
Never Utilize Avaya Computing and Networking Resourcesto Access or Disseminate Sexually ExplicitMaterial orOther Content Inconsistent with Avaya Values
Financial Reporting
Requires complete and accurate financial reporting
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The Code of Conduct covers
topics such as (2/2):
Dealing with customers and suppliers
Truthful and AccurateMarketing
SelectSuppliers Solely on Their Ability to Help AvayaMeet
its Business Objectives
Avoid and report conflicts of interest
Commercial Bribery
Dealing with Government Officials and Employees
(Compliance with Foreign Corrupt Practices Acts andother anti bribery laws)
Selecting Agents, Consultants and Other Representatives
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Schedule of authorizations
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Commercial SoA
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