|
|
|
Ottawa, 8 April 1998
|
|
Telecom Order CRTC 98-321
|
|
In the matter of a letter dated 9 January 1998 filed by AT&T Canada Long Distance Services Company (AT&T Canada LDS) (formerly Unitel Communications Company) regarding its contribution accounting and reporting practices, pursuant to AT&T Canada - Contribution Accounting and Reporting Practices, Telecom Decision CRTC 97-3, 25 February 1997 (Decision 97-3).
|
|
|
File No.: 95-1133
|
|
I BACKGROUND
|
|
1. By letter dated 14 November 1994, BC TEL filed an application regarding the accounting and reporting practices of AT&T Canada LDS with respect to contribution payable on cross-border circuits. BC TEL stated that, during its review of the levels of contribution paid by AT&T Canada LDS, it found that AT&T Canada LDS had apparently kept two sets of books for the months of December 1993 and January, February and March 1994. Further, BC TEL alleged that AT&T Canada LDS had filed records with the company that under-reported the quantity of its cross-border circuits. BC TEL requested that the Commission initiate an investigation into AT&T Canada LDS' accounting and reporting practices and, if appropriate, order an independent audit of AT&T Canada LDS' contribution records and a technical audit of AT&T Canada LDS' cross-border facilities in order to determine whether or not AT&T Canada LDS' contribution obligations had been accurately reported.
|
2. In Unitel Communications Inc. - Contribution Accounting and Reporting Practices, Telecom Decision CRTC 95-18, 24 August 1995, the Commission directed AT&T Canada LDS to file with the Commission a complete audit plan for its accounting and reporting practices, serving copies on BC TEL, Bell Canada (Bell), Teleglobe Canada Inc. (Teleglobe) and TELUS Communications Inc. (TCI) (formerly AGT Limited).
|
|
3. On 2 October 1995, AT&T Canada LDS filed its proposed audit plan and nominated Ernst & Young as the financial auditor, and Pacomm Consulting Inc. as the technical auditor.
|
|
4. By letter dated 12 January 1996, the Commission issued additional directions to AT&T Canada LDS regarding the filing of its proposed audit plan.
|
|
5. On 6 September 1996, AT&T Canada LDS filed its audit reports comprised of the five following areas: Control Procedures, Prior Disclosed Errors, Billing Requirements, Follow-up Procedures, and Technical Audit. The Follow-up Procedures report dealt with the procedures considered necessary to provide assurance that, in the future, AT&T Canada LDS complies with appropriate accounting and reporting practices relating to contribution. Ernst & Young proposed, and AT&T Canada LDS agreed with, the following recommendations (among others): (1) at least annually, as long as a self-reporting requirement exists for cross-border contribution, AT&T Canada LDS' Internal Audit Department should be required to conduct an evaluation of the internal control procedures relating to cross-border facilities that attract contribution and those that are exempt from contribution and the company's financial processes regarding the calculation, reporting and payment of contribution; and (2) in the first instance of such internal control evaluation, the plan, the working papers and the results would be reviewed by an independent auditor. AT&T Canada LDS agreed to have Ernst & Young conduct such a review.
|
|
6. In Decision 97-3, the Commission found that, on a preliminary basis, based on the audit, the integrity of AT&T Canada LDS' accounting and reporting practices for contribution payable on cross-border circuits has been restored and that the proper corrective and control procedures have been established to ensure that the system can be relied upon in the future. The Commission stated that it will make its final determination following a review of the evidence to be provided in the first review by Ernst & Young of the plan, the working papers and the results.
|
|
II AT&T CANADA LDS' SUBMISSION
|
|
7. By letter dated 9 January 1998, AT&T Canada LDS filed the Ernst & Young report dated 19 December 1997 and submitted that the Commission may now make its final determination since AT&T Canada LDS is in full compliance with the determination made in Decision 97-3.
|
|
8. Ernst & Young stated that compliance with the terms set out in Decision 97-3 is the responsibility of the management of AT&T Canada LDS. Ernst & Young stated that the Internal Audit Department of AT&T Canada LDS conducted the first annual evaluation of the internal control procedures relating to cross-border facilities for the period 1 May 1997 to 31 July 1997. Ernst & Young stated that it also reviewed the annual reconciliation of the trunk groups connected to the voice switches to that recorded on the contribution database which was performed in September 1997. Ernst & Young stated that its responsibility is to review the plan, the working papers and the results of the evaluation as directed by the Commission in Decision 97-3. Ernst & Young stated that its review was made in accordance with generally accepted standards for review engagements and accordingly consisted primarily of enquiry, analytical procedures and discussion related to information supplied to it by AT&T Canada LDS.
|
|
9. Ernst & Young stated that a review does not constitute an audit and consequently it did not express an audit opinion on this matter. Ernst & Young stated that based on its review, nothing has come to its attention that causes it to believe that the company is not in compliance with the above-mentioned provisions under Part II Section D of Decision 97-3.
|
|
10. None of the four parties (BC TEL, Bell, Teleglobe and TCI) filed comments within 30 days of the filing of AT&T Canada LDS' report.
|
|
III CONCLUSIONS
|
|
11. Based on Ernst & Young's report, the Commission is of the view that AT&T Canada LDS is in compliance with the above-mentioned provisions and has restored the integrity of its relevant accounting and reporting practices.
|
|
12. In light of the foregoing, the Commission finds that:
|
|
(i) AT&T Canada LDS is in compliance with the provisions under Part II Section D of Decision 97-3; and
|
|
(ii) on a final basis, the integrity of AT&T Canada LDS' accounting and reporting practices for contribution payable on cross-border circuits has been restored and that the proper corrective and control procedures have been established to ensure that the system can be relied upon in the future.
|
|
Laura M. Talbot-Allan
Secretary General
|
|
This document is available in alternative format upon request.
|
|
|