improperly capitalized with respect to certain of these transactions that should have been expensed. The investigation
also identified significant internal control weaknesses.
Other internal investigations
On February 24, 2003, D&T indicated that its opinion on our audited financial statements for the fiscal years ended
December 30, 2001, and December 31, 2000 should no longer be relied upon. D&T suspended its audit of our fiscal
2002 financial statements until completion of necessary investigations. D&T requested that the Audit Committee of
Ahold's Supervisory Board authorize additional investigations into the various joint venture side letters and the
concealment of the side letters. D&T also advised Ahold to consider the need for investigations regarding the potential for
other misrepresentations on behalf of the members of management under investigation. On March 24, 2003, the Audit
Committee ordered the commencement of a series of additional internal investigations to assess whether accounting
irregularities, errors and/or issues existed, the integrity of management, and the adequacy of internal controls. These
investigations were conducted by WCP, assisted by forensic accountants from PwC, at 17 Ahold operating companies and
real estate companies and at the Ahold parent company. The forensic investigations found accounting irregularities at Tops
and at Giant-Carlisle (although involving relatively small amounts). The investigations also concluded that certain accounting
irregularities had occurred at the Ahold parent company. At Tops, these accounting irregularities consisted of intentional
improper recognition of vendor allowances and pervasive earnings management, including the recording of unsupported
vendor allowance income, premature recognition of contract signing fees and vendor allowance billings, over-billings to
vendors and the improper holding of company funds at vendors, as well as other instances of earnings management. At
Giant-Carlisle, the accounting irregularities consisted of pervasive earnings management, including the intentional deferral
of earned vendor allowance receivables and vendor allowance accrued reserves, as well as the improper holding of company
funds at vendors. According to the investigatory findings, accounting irregularities also occurred at the Ahold parent
company involving the misapplication of purchase accounting in respect of the acquisitions of ICA and Superdiplo.
The investigations also resulted in findings of varying degrees of earnings management and/or other accounting errors or
issues at the Ahold parent company and at the other operating and real estate companies reviewed. These errors or issues
most frequently involved improper accounting for reserves through excess provisioning or inappropriate release and the
unnecessary deferral or premature recognition of income from vendor allowances. The investigations also found a number
of internal control weaknesses, especially relating to accounting and monitoring for vendor allowances and contracts,
deviations from Dutch GAAP and US GAAP, and a general lack of sufficient technical knowledge of Dutch GAAP and
US GAAP at many of the companies reviewed.
Various matters raised in the investigations were further reviewed and followed up by us and various outside legal counsel,
and, where appropriate, by PwC, to help determine their impact, if any, on Ahold and its financial statements.
Remedial actions
As discussed above, as a result of the events leading up to and following Ahold's February 24, 2003 announcement, the
Audit Committee ordered numerous, extensive internal investigations by various outside legal counsel and forensic
accounting experts. In total, 19 operating and real estate companies (including USF and Disco) were reviewed, in addition
to the Ahold parent company. In addition, investigations were undertaken with respect to the issues surrounding the
deconsolidation of certain joint ventures. In response to the findings of the internal investigations, the Audit Committee
requested in June 2003 that Ahold management take prompt and effective remedial actions to correct any identified
accounting irregularities and errors, and strengthen internal controls to prevent any reoccurrence of the items found.
Ahold management and the Audit Committee have reviewed all of the accounting issues identified in the internal
investigations and in the course of the audit of Ahold's fiscal 2002 financial statements, including the 470 separate items
identified by PwC. Ahold management has researched and analyzed all of these issues. Management and the Audit
Committee determined, in consultation with D&T and PwC, Ahold's positions with respect to all of these issues and the
adjustments required to be made to our financial statements as a result thereof. Items relating to operating companies were
addressed by management at the respective operating companies, under the overall direction and supervision of Ahold's
senior financial management team. We believe that all such required financial statement adjustments have been made.
Ahold is in the process of taking steps to address the significant internal control weaknesses raised or confirmed in the
internal investigations. Over 275 items relating to internal control weaknesses were identified. A special task force
reporting to the Audit Committee has been formed, now chaired by our current Chief Financial Officer, and composed of
our senior finance, legal and internal audit executives and supplemented by external advisors, to address the accounting
issues and the internal control weaknesses that were identified.
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