Below are a sampling of disclosures made in October that warn of potential problems. Please be aware that the excerpts below are just that: excerpts. The complete SEC filings are available for those who would like to review the complete disclosures in greater detail. For related information on the list below, please refer to the related story from the Nov. 9 edition of Compliance Week.

Company

Date

Description

Pegasystems—

Customer relationship management, marketing and sales software.

2003 Sales: $$99.3m

Auditor:

Deloitte & Touche

Oct. 29

POSSIBLE DEFICIENCIES IDENTIFIED —

No change in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during the fiscal quarter ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Early work in preparation for independent auditor attestation as required under Section 404 of the Sarbanes-Oxley Act of 2002 has indicated that we may have some deficiencies in internal controls over financial reporting, and management is working to remediate those deficiencies as they are identified.

Sterling Financial Corp.—

Regional bank.

2003 Sales: $

176.8m

Auditor:

Ernst & Young

Oct. 29

CEO ACKNOWLEDGES ROOM FOR CONTROLS IMPROVEMENTS —

J. Roger Moyer, Jr., President and Chief Executive Officer of Sterling Financial Corporation, reflecting on 2004’s results stated, “2004 has been an interesting year for Sterling Financial Corporation, as it feels like two distinct initiatives have been running simultaneously. The task of documenting our compliance with Section 404 of Sarbanes-Oxley has been felt throughout the organization. On the plus side, it has resulted in renewed evaluation of our internal control processes, and in some cases, identified areas where efficiencies could be gained. Concurrently, we have been able to grow our company through organic growth, as evidenced by strong loan volumes, and the results of our fee-based affiliates. Sterling’s ability to handle these initiatives simultaneously is a tribute to our team of employees who enjoy the challenges of growing a company, while being respectful of the ever changing regulatory environment that exists today.”

Walter Industries—

Metal fabrication.

2003 Sales: $1.3b

Auditor:

PwC

Oct. 29

CONTROL IMPROVEMENTS NEEDED —

We have invested significant resources to document and analyze our system of internal controls and we are continuing our evaluation of such internal controls versus the standards adopted by the Public Company Accounting Oversight Board ("PCAOB"). In the course of our ongoing evaluation, we have identified areas of our internal controls requiring improvement, and are in the process of designing enhanced processes and controls to address issues identified through this review. We cannot be certain at this time that our efforts will be successful in allowing management or our auditors to complete the procedures, certification and attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in connection with our annual report for the fiscal year ended December 31, 2004.

Erie Indemnity Co.—

Insurance broker.

2003 Sales: $

1.1b

Auditor:

Ernst & Young

Oct. 27

POTENTIAL DEFICIENCIES IDENTIFIED IN TESTING PHASE —

…Substantial testing of the internal control procedures has been completed to date and has identified certain potential deficiencies. These potential deficiencies if uncorrected, individually or when aggregated, may amount to significant deficiencies or material weaknesses in internal controls over financial reporting under definitions established by the Securities and Exchange Commission and Public Company Accounting Oversight Board. Management has adopted a remediation plan to resolve these known deficiencies. The planned improvements include additional information technology system controls, further formalization of policies and procedures, improved segregation of duties and additional monitoring controls. While the Company’s review continues with the goal of completion by the specified deadline, and management reasonably expects to complete this evaluation by this deadline, there is a chance that unforeseen circumstances may impede the Company’s ability to complete all phases of testing by December 31, 2004.

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