This excerpt taken from the IWOV 10-K filed Dec 14, 2007.
Audit Committee Review
As discussed in the Explanatory Note preceding Part I, in Managements Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and in Note 3 in Notes to Consolidated Financial Statements of this Annual Report on Form 10-K, on January 30, 2007, we announced that the Audit Committee of the Board of Directors, with the assistance of independent outside legal counsel and forensic accounting experts, was conducting a voluntary review of our historical stock option granting practices and related accounting. As a result of the Audit Committee review management concluded, and the Audit Committee agreed, that incorrect measurement dates were used for financial accounting purposes for certain stock option grants made in prior periods. Accordingly, we have recorded additional non-cash stock-based compensation expense and related tax effects with regard to past stock option grants, and are restating previously filed consolidated financial statements in this Annual Report on Form 10-K.
In connection with the review of our historical stock option practices, we determined that our historical grant procedures were not adequately designed to ensure the proper accounting for option grants and the contemporaneous documentation of grants. The Audit Committee found these deficiencies occurred predominately during the period from 1999 through 2001.
Beginning in 2001, we implemented improved procedures to provide additional safeguards and greater internal control over stock option granting and administration. These improvements included issuing employee new hire, promotion and merit grants on the last trading day of each month. Also, prior to 2006, we implemented improvements to procedures, processes and systems to provide additional safeguards and greater internal control over the stock option granting and administration functions. These improvements included:
We believe these changes remediated the historical control deficiencies. There was no additional stock-based compensation expense related to grants issued during the years 2004, 2005 and 2006 and we did not identify any material weakness in our stock option grant processes or internal control over financial reporting as of December 31, 2006.
In 2007, the Audit Committee recommended enhancements to our stock option grant procedures to ensure that future granting actions are documented and accounted for properly. In October 2007, we have adopted all of the Audit Committees recommendations, including updating our equity compensation award policy that provides for the methodology of determining the timing and exercise price of all awards and related procedures.