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Revenue Independent Review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues.
The Audit Committee will seek a full understanding of the historic events that required the revenues for these specific transactions to be
restated and will consider any appropriate additional remedial measures, including those involving internal controls and processes. The Audit
Committee has engaged WCPHD to advise it in connection with the Revenue Independent Review.
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R
emedial Measures
At the recommendation of the Audit Committee, the Board of Directors adopted all of the recommendations for remedial measures contained
in the Independent Review Summary. The Board of Directors has directed management to develop a detailed plan and timetable for the
implementation of these recommendations and will monitor their implementation. In addition, we have identified, developed and begun to
implement a number of measures to strengthen our internal control over financial reporting and address the material weaknesses identified
above, including pursuant to recommendations from D&T. These measures are in the process of being reviewed in light of the
recommendations of the Independent Review and certain of these measures may be superseded by the plans for the implementation of the
recommendations of the Independent Review. A summary of these measures, as well as previously announced personnel actions, follows.
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• Personnel Actions in Response to the First Restatement and Independent Review
.
• We terminated for cause our former president and chief executive officer, former chief financial officer and former controller
in April 2004 (the former chief financial officer and former controller having been placed on paid leaves of absence in
March 2004).
• We terminated for cause seven additional senior finance employees with significant responsibilities for our financial reporting
as a whole or for their respective business units and geographic regions in August 2004.
• Renewed Commitment to Best Corporate Practices and Ethical Conduct
.
• In August 2004, we adopted a new strategic plan that includes a renewed commitment to best corporate practices and ethical
conduct, including the establishment of the office of a chief ethics and compliance officer (which has been filled on an interim
basis pending the permanent appointment of Susan E. Shepard, as now announced).
• Over the course of the Second Restatement, our current CEO and current CFO have communicated to employees the
importance of the Second Restatement process, reliable and transparent financial reporting and ethical conduct. Those
communications included formal presentations as part of our annual executive conference in November 2004.
• In June 2004 management recommended, the joint leadership resources committee recommended and the Board of Directors
subsequently approved that financial accountability be included as a key qualitative factor in the individual leadership
performance objectives for determination of incentive cash awards under our annual incentive plan.
• Extended Balance Sheet Reviews
.
• We have developed a plan to extend our balance sheet reviews through the implementation of enhanced review procedures to:
• require greater frequency of timely statutory and segment balance sheet reviews,
• clarify responsibilities within Nortel Networks for organizing balance sheet