2002 accounts
00 Ahold ANNUAL REPORT 2002 11
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
The U.S. Foodservice investigation identified accounting fraud relating to fictitious and overstated vendor allowance
receivables and improper or premature recognition of vendor allowances and an understatement of cost of goods sold. The
investigation found that certain senior officers of U.S. Foodservice and other employees were involved in the fraud. It was
also found that inappropriate vendor allowance accounting had existed at the date of the acquisition of U.S. Foodservice.
The Disco investigation found a series of suspicious transactions, some of which involved the use of fictitious invoices
to conceal or mischaracterize payments, or payments that were otherwise improperly documented. In addition, in some
instances these payments were improperly capitalized rather than expensed.
The investigation into the joint venture letters found that there had been concealment of side letters from Ahold's
Supervisory Board, Audit Committee and our auditors, Deloitte Touche and that the consolidation of these joint ventures
into Ahold's financial statements had been in error.
The additional internal investigations found accounting irregularities at Tops, consisting of intentional improper recognition
of vendor allowances and pervasive earnings management, and at Giant-Carlisle, consisting of pervasive earnings
management, although involving relatively small amounts. The investigations also concluded that certain accounting
irregularities had occurred at the Ahold parent company. In addition, these investigations found 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.
In addition, significant internal control weaknesses were 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.
The task force will oversee the development and implementation of modifications, improvements and other required
changes to address weaknesses identified and to strengthen our internal controls. Certain regional task forces have also
been formed that have been and will be assisting in this process. We intend to implement many of the required changes
to our internal controls that we believe are critical by the end of fiscal 2003 and to implement remaining changes in
fiscal 2004.
The reporting line for Ahold's internal audit department has also been changed. The internal audit department now reports
directly to Ahold's Chief Executive Officer and to the Audit Committee, instead of solely to Ahold's Chief Executive Officer,
as previously was the case. We also intend to implement a plan to redesign the function of the internal audit throughout
the group of operating and real estate companies to centralize it within the Ahold parent company.
Ahold is continuing to cooperate with investigations by law enforcement and regulatory authorities, including the U.S.
Department of Justice, the U.S. Securities and Exchange Commission and Dutch governmental and regulatory authorities.
In the course of the internal forensic investigations, approximately 750 separate items related to internal controls and
accounting issues were uncovered. The thoroughness of the internal investigations and subsequent audit therefore resulted
in several delays to the publication of this annual report and our annual accounts. The audited, consolidated 2002 results
were announced on October 2.
The annual report and financial statements for fiscal 2002 prepared by the Corporate Executive Board and audited by
Deloitte Touche, have been presented to us. We have approved this annual report. We propose to the Annual General
Meeting of Shareholders to adopt the annual accounts and to approve the policies pursued by the Corporate Executive
Board and the supervision exercised by the Supervisory Board.
During the year under review Henny de Ruiter and Lodewijk de Vink were reappointed as Supervisory Board members.
Karel Vuursteen and, in 2003, Jan Hommen were appointed as new Supervisory Board members.
