Financial Accounting: An Integrated Statements Approach, 2nd Edition

Using the Web site http://edgarscan.pwcglobal.com/servlets/edgarscan, enter “Hershey Foods.”

Click on Hershey Foods Corp.and then click on 10-K 2004–12–31. Fetch the entire 10-K filing

by clicking on text rich (724K). Once the 10-K filing appears, find the “Management Report on

Internal Control over Financial Reporting” by searching the document for the key words “in-

ternal control” using the Word “Find” command, and answer the following questions:

1. How many times is “internal control” mentioned in Hershey’s 10-K?


2. Are there any recent changes in internal control over financial reporting?


3. What criteria were used by management to analyze and assess internal control as a basis
   for the “Management Report on Internal Control over Financial Reporting”?


4. Who signed the “Management Report on Internal Control over Financial Reporting” on be-
   half of Hershey’s management?


5. Do Hershey’s internal controls guarantee its financial reporting is complete and accurate?


6. Who is Hershey’s independent public accounting firm?


7. What do 10-K Exhibits 31.1 and 31.2 say about the possible existence of fraud?

eBay Inc.operates an Internet-based community in which buyers and sellers are brought together

to buy and sell almost anything. The eBay online service permits sellers to list items for sale, buy-

ers to bid on items of interest, and all eBay users to browse through listed items in a fully auto-

mated, topically arranged service that is available online seven days a week. Through the PayPal

service, the company enables any business or consumer with e-mail in 38 countries to send and

receive online payments. For the year ending December 31, 2004, eBay reported sales of almost

$3.3 billion and net income of $778 million. For corporations such as eBay, maintaining a strong

control environment is an everyday challenge. One method of maintaining a strong control envi-

ronment is to have a strong Board of Directors that is actively engaged in overseeing the business.

Using the Internet, access the eBay December 30, 2004 10-K filing with the Securities and

Exchange Commission. You can use the PricewaterhouseCoopersWeb site, http://edgarscan

.pwcglobal.com, to search for company filings by name. Based upon the 10-K filing, answer the

following questions:

1. List the members of the Board of Directors of eBay, their age, and their title.


2. Based upon your answer to (1), what percentage of the Board is not part of eBay’s man-
   agement team? Round to one decimal place.


3. Based upon your answer to (1), what is the average age of a Board member of eBay?


4. Based upon your answer to (3), do you think the average age of a Board member of eBay
   is higher or lower than the average age of a Board member of American Express?


5. What are the purpose and policy of the Audit Committee of eBay? Hint:You can find this
   information by going to eBay’s Web site at http://investor.ebay.com/governance/home.cfm
   and clicking on the Charter of the Audit Committee.


6. List the members of the Board of Directors who belong to the Audit Committee.


7. Are any members of the Audit Committee also members of eBay’s management team?


8. Search eBay’s 10-K for the certifications required by the Sarbanes-Oxley Act of 2002. Read
   the certifications. Who signed the Sarbanes-Oxley certifications for eBay?


9. Based upon your answers to (1) through (8), do you believe that eBay has a sound control
   environment?

CVS Corporationis a leader in the retail drugstore industry in the United States, with net sales

of $30.6 billion in fiscal 2004. As of January 1, 2005, CVS operated over 5,375 retail and specialty

pharmacy stores in 36 states and the District of Columbia.

Using the Internet, access the CVS January 1, 2005 10-K filing with the Securities and

Exchange Commission. You can use the PricewaterhouseCoopersWeb site, http://edgarscan

.pwcglobal.com, to search for company filings by name. Based upon the 10-K filing, answer the

following questions:

1. Who is responsible for the integrity and objectivity of the financial statements of CVS?


2. What is the system of internal controls of CVS designed to accomplish?

346 Chapter 7 Sarbanes-Oxley, Internal Control, and Cash

FINANCIAL ANALYSIS AND REPORTING CASES

Case 7-1

Sarbanes-Oxley internal

control report

Case 7-2

Control environment of a

public corporation

Case 7-3

Responsibility for internal

controls of a public

corporation