Below is "Part I" of the list of companies disclosing material weaknesses or deficiencies in internal controls in November. The list below is from Nov. 1 through Nov. 14. For "Part II, including the disclosures from Nov. 15 through Nov. 30, please refer to the box at right. Also, 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, as well as inclusion and exclusion criteria, please refer to the related story from the Dec. 7 edition of Compliance Week.
Company
Date
Description
Masco Corp.—
Construction materials.
2003 Sales: $10.9b
Auditor:
PwC
Nov. 12
DEFICIENCIES IDENTIFIED DURING TESTING —
We are in the process of evaluating our internal control system over financial reporting in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Because of our historical growth through acquisition and our decentralized organizational structure with over 50 reporting units and over 600 operating locations worldwide, we estimate that we have well in excess of 20,000 key controls over financial reporting. As part of this initiative, we have invested a substantial amount of time and resources in documenting and testing our system of internal control. During the course of this comprehensive process, we and our independent auditors have identified control deficiencies. We have corrected a number and we are remediating others of these control deficiencies. .
Compass Minerals International—
Chemical manufacturer.
2003 Sales: $600.6m
Auditor:
PwC
Nov. 12
MATERIAL WEAKNESS IDENTIFIED —
…The Company believes that the errors which led to the restatement were the result of a material weakness in internal control over financial reporting related to the Company’s accounting for income taxes. The material weakness was the result of (a) internal control deficiencies relating to the analysis and reconciliation of income tax accounts, (b) resource constraints related to the income tax accounting function and (c) incorrect conclusions reached regarding the accounting for our deferred income tax accounts and related valuation allowance. As a result of the material weakness described above, we concluded that our internal controls and procedures were ineffective as of September 30, 2004…
Mace Security International—
Automotive service & collision repair.
2003 Sales: $49m
Auditor:
Grant Thornton
Nov. 12
MATERIAL WEAKNESS IDENTIFIED —
In connection with the preparation of our consolidated financial statements included in our third quarter report on Form 10-Q, we became aware of a material weakness in our internal controls over inventory, billing procedures, and recording of costs of revenues while performing a routine physical inventory observation at one of our Security Products locations. We believe that this weakness did not affect the accuracy of our financial statements included in this report. However, it represented a material control weakness in our internal controls as of September 30, 2004...
Bookham—
Optical switching & transmission components.
2003 Sales: $159m
Auditor:
Ernst & Young
Nov. 12
MATERIAL WEAKNESS IDENTIFIED —
…As part of their review of our condensed consolidated financial statements included in this quarterly report on Form 10-Q, Ernst & Young LLP, our independent auditors, informed us and our audit committee that we had incorrectly included certain foreign currency translation adjustments in our statement of operations for the three month period ended October 2, 2004 rather than reflecting such adjustments as cumulative translation adjustments within shareholders' equity on our balance sheet for that period in accordance with FAS 52, Foreign Currency Translation. As a result, our net loss for the three month period ended October 2, 2004 was $38.3 million, rather than $37.1 million as previously reported in our earnings press release issued on October 26, 2004. Ernst & Young advised us that this condition is a material weakness in our internal control over financial reporting. We have reviewed the appropriate application of FAS 52 with Ernst & Young and are in the process of implementing procedures designed to assure its proper allocation in the future.
…
Rouse Company—
General growth properties.
2003 Sales: $1.2b
Auditor:
KPMG
Nov. 12
DEFICIENCIES IDENTIFIED —
…However, we, in consultation with our internal and independent auditors, identified, during the course of internal control audits and due diligence procedures related to the planned merger with GGP, significant internal control deficiencies related to our REIT compliance process and information technology general controls over program change management and access security….
Ispat Inland—
Steel production.
2003 Sales:
Subsidiary of $5.4b Ispat Intl
Auditor:
Deloitte & Touche
Nov. 12
DEFICIENCIES IDENTIFIED —
The Company's management identified deficiencies in the process for review of loan agreements for appropriate financial statement classification. The Company will perform a thorough review of all future loan agreements to specifically identify proper classification of debt.
Intermix Media—
Internet content providers.
2004 Sales: $57.3m
Auditor:
Moss Adams
Nov. 12
DEFICIENCIES PERSIST —
In August 2003, the Company restated previously reported financial results for the first three quarters of fiscal year 2003 due to the discovery of accounting errors in the Company’s fiscal year 2003 quarterly financial statements. In response to the identified accounting errors, management significantly expanded the size of the accounting and finance departments and reviewed the adequacy of internal controls over financial reporting. We identified various deficiencies in the design or operation of internal controls in major business processes that could have an impact on financial reporting. Our independent auditors confirmed the continued existence of certain of these deficiencies during their audit of our fiscal year 2004 financial statements…
Carrier Access Corp.—
Copper wire switching & transmission equipment.
2003 Sales: $62.6m
Auditor:
KPMG
Nov. 12
IMPROVEMENTS ADDRESS DEFICIENCIES —
In connection with preparation for its Report on Financial Reporting Controls, during the 2004 third quarter we identified and initiated a number of measures to improve the effectiveness of its internal control over financial reporting. In general, these measures included improved documentation, improved system access controls, additional segregation of duties, and documented reviews and approvals of work performed or procedures executed. These improvements in controls were implemented to address identified control deficiencies and also to strengthen existing controls.
NYMEX Holdings—
Stock exchanges (holding company).
2003 Sales: $
NA
Auditor:
KPMG
Nov. 10
MATERIAL WEAKNESS IDENTIFIED; FINANCIAL STATEMENTS DELAYED —
…During this process, the Company, which is the parent company of the New York Mercantile Exchange, Inc., identified a material weakness in its internal controls relating to the procedures governing the acquisition, tracking, and disposition of its fixed assets. The Company is in the process of completing its remediation, which will include automation of certain manual processes, new asset tagging procedures, and new controls over the disposition of assets….
Alamo Group—
Agricultural Machinery Manufacturing
2003 Sales: $279.1m
Auditor:
Ernst & Young
Nov. 10
DEFICIENCY IDENTIFIED —
Significant Deficiency but Not a Material Weakness: The Company takes physical inventories at the majority of its locations at the end of September each year. The 2004 physical inventory highlighted ineffective operating and control procedures at two locations that resulted in unfavorable inventory adjustments. The procedures in question will be improved and accompanied by additional controls beginning in the fourth quarter of 2004…
Terremark Worldwide—
Data network operators.
2004 Sales: $18.2m
Auditor:
PwC
Nov. 9
MATERIAL WEAKNESSES IDENTIFIED —
In connection with their review of our draft Form 10-Q for the quarter ended June 30, 2004, our independent accountants identified certain adjustments that were required to be recorded within the Form 10-Q. The failure of certain of our internal controls to identify these adjustments led management to conclude that “material weaknesses” exist … As a result of the material weaknesses above, we concluded that our internal controls and procedures were ineffective as of September 30, 2004…
Riggs National Corp.—
Regional bank.
2003 Sales: $346.9m
Auditor:
KPMG
Nov. 9
MATERIAL WEAKNESS IDENTIFIED —
…During the third quarter of 2004, we have identified certain matters involving the design and operation of our internal controls that in the aggregate are considered to be a material weakness in the Company’s internal control over financial reporting…Such matters relate to the need to implement additional controls in our commercial loan system to minimize the risk of errors in the calculation of certain loan fees, the need to implement additional access controls over the Company’s computer systems to minimize the risk of unauthorized access to such systems, the increased level of turnover among employees involved in the operation of the Company’s internal control over financial reporting and the demand on the Company’s internal resources due to the Company’s current circumstances.
SonicWALL—
Network security devices.
2003 Sales: $94.4m
Auditor:
PwC
Nov. 9
MATERIAL WEAKNESS IDENTIFIED —
Our independent auditors have advised us and the Company’s Audit Committee, in connection with the completion of their review of the fiscal third quarter of 2004, that they had identified certain matters involving the operation of our internal controls that they consider to be a material weakness. As a result of the logistical oversight by one of our primary freight carriers, a material shipment of products was not picked up by the carrier in a timely manner on the last day of the calendar quarter. This error was not detected by our internal controls over financial reporting and was noted by our independent auditors. Our independent auditors also noted that a certain sales transaction that occurred during fiscal third quarter of 2004 did not adequately meet criteria that persuasive evidence of an arrangement existed…
StarTek—
Outsourced HR services.
2003 Sales: $231.2m
Auditor:
Ernst & Young
Nov. 9
MATERIAL WEAKNESS IDENTIFIED —
On October 29, 2004, our independent registered public accounting firm, Ernst & Young LLP, notified our Audit Committee that they had identified matters involving internal control over financial reporting and its operation that they consider, in the aggregate, to be a material weakness. These matters relate to the financial statement close process and accounting personnel…
D&E Communications—
Local exchange carrier.
2003 Sales: $173.1m
Auditor:
PwC
Nov. 9
MATERIAL WEAKNESS IDENTIFIED —
During the quarterly review process for the period ended September 30, 2004, the Corporation’s Chief Executive Officer and Chief Accounting Officer identified errors that were the result of the misapplication of the accounting guidance EITF 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments” and EITF 98-14, “Debtor’s Accounting for the Changes in Line-of-Credit or Revolving Debt Arrangements” to a syndicated senior secured debt financing completed on March 5, 2004. The errors were immediately corrected and reported in amended Form 10-Q/A for the quarters ended March 31, 2004 and June 30, 2004. In light of the facts and circumstances relating to the restatement, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the restatement was reflective of a material weakness (as defined under standards established by the Public Company Accounting Oversight Board) in the Company’s disclosure controls. The material weakness was caused by an inadequate control over the review process of the implementation of accounting guidance to new transactions….
WJ Communications—
Wireless communications components.
2003 Sales: $26.2m
Auditor:
Deloitte & Touche
Nov. 9
MATERIAL WEAKNESS IDENTIFIED —
Our audit committee was advised by Deloitte & Touche LLP, our independent registered public accounting firm, that during their performance of review procedures related to our unaudited interim financial statements for the quarter ended September 26, 2004 they identified a “ material weakness” in our internal controls over financial reporting…. The material weakness related to a failure to record an accounting entry for a material severance charge resulting from the modification of two option agreements (extension of the option exercise period). The entry was subsequently recorded and is included in our unaudited interim financial statements for the quarter ended September 26, 2004…
Albany Molecular Research—
Biotechnology research services.
2003 Sales: $144.7m
Auditor:
PwC
Nov. 9
MATERIAL WEAKNESS IDENTIFIED —
In connection with the review of the Company’s financial statements for the third quarter of 2004, the Company identified an accounting error related to the amortization of premiums and discounts on certain bond investments. As a result, the Company’s Chief Executive Officer and Chief Financial Officer determined that a material weakness existed in the design of the Company’s disclosure controls and procedures, and accordingly, that the Company’s disclosure controls and procedures were not effective as of September 30, 2004…
E-Loan—
Mortgage Banking & Related Services
2003 Sales: $153m
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED —
…We have been actively preparing for the implementation of this requirement by, among other things, establishing an ongoing program to document, evaluate and test the systems and processes necessary for compliance. Certain deficiencies have been identified in connection with this program which have been or are in the process of being remediated. If we fail to complete our evaluation, including the necessary testing and remediation, on a timely basis and in a satisfactory manner, our independent auditors may be unable to attest on a timely basis to the adequacy of the Company's internal control…
Seacor Holdings—
Oil & gas field services.
2003 Sales: $406.2m
Auditor:
Ernst & Young
Nov. 9
DEFICIENCIES IDENTIFIED —
Management identified and reported to the Audit Committee of the Board of Directors certain matters involving internal control deficiencies. Although none of the deficiencies, individually, is believed to be a material weakness, if such deficiencies remain uncorrected, they could, in the aggregate, amount to a material weakness in internal controls over financial reporting under definitions established by the Securities and Exchange Commission and the Public Company Accounting Oversight Board…
United Rentals North America—
Industrial equipment leasing.
2003 Sales: $2.8b
Auditor:
Ernst & Young
Nov. 9
MATERIAL WEAKNESS BEING REMEDIATED; LISTED AS RISK FACTOR —
…We are currently in the process of remediating an identified material weakness relating to our financial statement close process as described under “Item 4—Controls and Procedures.” While we expect that we can complete this process in sufficient time to allow the evaluation and testing process to be completed prior to year-end, we cannot be certain that we will not encounter unanticipated delays. Furthermore, the ongoing review and testing process could reveal unanticipated problems or that our remediation of previously identified deficiencies was not fully adequate.
United Stationers—
Office products retail & distribution.
2003 Sales: $3.8b
Auditor:
Ernst & Young
Nov. 9
DEFICIENCIES IDENTIFIED —
The Company’s management, as well as E&Y, the Company’s independent registered public accountants, have identified internal control deficiencies relating to (i) the design and operating effectiveness of internal controls relating to receivables from suppliers for various supplier allowance programs at the Company’s Canadian division, (ii) certain amounts recorded in respect of the Canadian division at June 30, 2004 which were determined to be in error, and (iii) inadequate reviews of various Canadian division receivables balances for collectibility…
LookSmart—
Internet searching services & portals.
2003 Sales: $156.2m
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED; LISTED AS RISK FACTOR —
….We have discovered, and may in the future discover, gaps and deficiencies in our internal controls over financial reporting, including our controls over revenue accounting, accounts payable, billing and reporting, and financial analysis of business results. We have implemented controls to address some of these gaps and deficiencies and are in the process of remediating the remaining gaps and deficiencies that we have identified.
Aspect Communications Corp.—
Messaging, conferencing & communications software.
2003 Sales: $
363.8m
Auditor:
KPMG
Nov. 9
SIGNIFICANT DEFICIENCIES IDENTIFIED —
In the course of our general evaluation of our internal controls and our third quarter close process, we identified seven significant deficiencies in the design and operation of our internal controls some of which we have already addressed and some of which we are now in the process of remediating. We will continue to evaluate our internal control structures and processes. It is possible that as we continue our Section 404 compliance efforts we will identify further significant deficiencies or material weaknesses in the design and operation of our internal controls...
Hooper Holmes—
Medical laboratories & research.
2003 Sales: $300.2m
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED BY INDEPENDENT CONSULTING FIRM —
…With the independent consulting firm’s assistance, the Company has identified a number of significant deficiencies in its internal control over financial reporting relating to (1) change control and the security of its information technology system and (2) the documentation and design of certain processes…
FLYi—
Airline (formerly Atlantic Coast Airlines)
2003 Sales: $876.4m
Auditor:
NA
Nov. 9
MATERIAL WEAKNESSES, DEFICIENCIES IDENTIFIED —
In connection with our recent financial statement preparations and our continuing efforts to evaluate the effectiveness of the
design and operation of our internal control over financial reporting, we have identified internal control deficiencies that constitute
material weaknesses or significant deficiencies. Specifically, management identified a material weakness related to procedures in the
purchasing process, and certain weaknesses in the information technology control environment in addition may be deemed to
constitute a material weakness.
Corvel Corp.—
Medical practive management & services.
2003 Sales: $305.3m
Auditor:
Grant Thornton
Nov. 9
SIGNIFICANT DEFICIENCY IDENTIFIED —
The Company’s independent auditors have advised the audit committee that the following identified internal control deficiencies constitute a significant deficiency in the Company’s internal controls.
Over-reliance on the Chief Financial Officer for key period end accounting and financial reporting functions…
Lack of adequate segregation of duties in the financial reporting functions noted in point one above.
Unizan Financial Corp.—
Regional banks & thrifts.
2003 Sales: $169.5m
Auditor:
NA
Nov. 9
DEFICIENCIES IDENTIFIED —
…Also, due to the extended delay of the merger and due to the loss of personnel, the Company has engaged extensive outside resources to assist with activities related to Section 404 of the Sarbanes-Oxley Act. As part of this process, the Company has been reviewing, documenting and testing key processes and implementing remediation efforts as warranted. At the time of the filing of this report, control deficiencies have been identified, which if not remediated could result in a material weakness. Management is currently pursuing the remediation of control deficiencies that have been identified.
AgCo—
Agricultural Machinery Manufacturing
2003 Sales: $3.4b
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED —
…The Company is currently in the process of completing its documentation, evaluation and testing of its internal controls over financial reporting as required by the Sarbanes-Oxley Act of 2002. As a result of this process, enhancements to the Company’s internal controls over financial reporting are being or have been implemented as management addresses deficiencies that have been identified. The Company has not fully completed its evaluation nor have all control enhancements been completed. Although we do not foresee being unable to complete our evaluation and remediation activities, there can be no assurance that all such control deficiencies will be fully remediated and successfully tested prior to December 31, 2004.
Cumulus Media—
Radio broadcasting & programming.
2003 Sales: $282m
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED —
…Management currently is in the process of documenting, testing and assessing our internal controls. Although this process is not yet complete, management has identified, and has discussed with the Audit Committee and our independent auditors, certain internal control deficiencies, including deficiencies in controls relating to segregation of duties and compatibility of responsibilities, as well as in processes relating to accounts payable, payroll processing, information technology, and fixed-asset record-keeping…
National Western Life Insurance—
Life Insurance.
2003 Sales: $399.3m
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED; IMPROVEMENTS MADE —
The Company is currently in the process of conducting a review and assessment of its internal controls over financial reporting against the COSO criteria in order to comply with the upcoming deadline. As a result of this review and assessment the Company has made periodic improvements to internal controls relating to deficiencies identified in the areas of 1) segregation of duties, 2) access controls, 3) change management, and 4) reconciliation controls. The deficiencies have been or are in the process of being remediated, but in most cases, compensating controls were already in place reducing the risk related to internal controls over financial reporting.
Quidel Corp.—
Diagnostic substances.
2003 Sales: $95.1m
Auditor:
Ernst & Young
Nov. 9
DEFICIENCIES IDENTIFIED; BEING REMEDIATED —
… In the course of this analysis, preliminary tests have identified deficiencies in our internal controls. We have taken, and continue to implement, certain remedial measures with respect to these internal control deficiencies. Management and the Audit Committee believe that the internal control deficiencies, as mitigated by other manual procedures and processes, individually or in the aggregate, did not have a material effect on our financial statements for the period ended September 30, 2004. Our testing and analysis is continuing and we anticipate being completed with our evaluation of our internal control over financial reporting by December 31, 2004.
Profile Technologies—
Oil & gas field services.
2004 Sales: $0.2m
Auditor:
Peterson Sullivan
Nov. 9
WEAKNESS IDENTIFIED BY OUTGOING AUDITOR —
On November 4, 2004, the Company dismissed KPMG LLP ("KPMG") as its independent accountant….During the audit for the year-ended June 30, 2004, KPMG advised the Company's Audit Committee that they identified one material weakness in the Company's internal controls. The material weakness identified related to
the accounting and financial reporting for the non-payment of interest on the convertible debt, causing certain of the notes to be in default as of June 30, 2004. …
Genus—
Semiconductor equipment & materials.
2003 Sales: $56.9m
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED —
The Company is continuing its evaluation of its internal controls and management has identified certain deficiencies. Areas requiring improvement include documentation of controls, timely account reconciliation, and controls and procedures in its subsidiaries. These matters have been discussed with the Company's Audit Committee, and the Company is in the process of making necessary improvements to enhance the reliability of its internal control over financial reporting.
Del Laboratories—
Cosmetics & skin care.
2003 Sales: $386m
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED —
In the course of its ongoing evaluation and testing, management has identified certain deficiencies and implemented remediation plans or is in the process of planning remediation for the deficiencies.
Century Business Services—
Business services.
2003 Sales: $515.3m
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED —
In the course of its on-going evaluation, the Company has identified certain deficiencies at one of its national insurance units. In response, the Company has allocated additional resources to support the operations of this unit, and is in the process of implementing a new system and additional controls. The Company believes that sufficient resources have been deployed at this unit to ensure that disclosure controls and procedures are effective.
Three Five Systems—
Contract electronics manufacturing.
2003 Sales: $
159m
Auditor:
Deloitte & Touche
Nov. 9
DEFICIENCIES IDENTIFIED —
…As a part of this evaluation, we have identified certain deficiencies in the design and/or operating effectiveness of internal controls. While we believe none are material, some may be considered to be significant. We are actively remediating all identified internal control deficiencies, and many have already been corrected.
We currently believe there are no material control weaknesses impacting financial reporting. However, until our evaluation is complete, there can be no assurance that none will be identified.
NTN Communications—
Entertainment
2003 Sales: $29.5m
Auditor:
Haskell & White
Nov. 9
DEFICIENCIES IDENTIFIED —
…We are nearing completion of our documentation and testing of the effectiveness of our internal controls using the COSO framework. In the course of our evaluation, we have identified certain deficiencies, which we are addressing. These have been communicated to our Audit Committee and we are taking appropriate steps to make necessary improvements and enhance the reliability of our internal controls over financial reporting.
AVX Corp.—
Discrete & passive components
2004 Sales: $
1.1b
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED —
…In particular, we are currently undertaking a full documentation, testing and analysis of the Company's internal control over financial reporting. In the course of this process, preliminary documentation and tests have identified certain deficiencies and necessary improvements which we are addressing. Areas requiring improvement include, but are not limited to, documentation of existing financial and information systems controls and issues surrounding segregation of duties and staffing levels. Management will consider these matters when assessing the effectiveness of the Company's internal control over financial reporting at year-end. These matters have been discussed with the Company's Audit Committee.
Tecumseh Products—
Industrial machinery & equipment manufacturing.
2003 Sales: $1.8b
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED —
…In the course of its evaluation, management has identified certain deficiencies, some of which may be significant, in the internal controls over financial reporting, which the Company is addressing through remediation actions. In addition, it is possible that the Company may identify additional deficiencies in the course of completing its Section 404 compliance testing that would require remediation…
Aclara Biosciences—
Medical equipment & supplies.
2003 Sales: $1.5m
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED —
…We have prepared initial documentation of our controls over financial reporting and have recently commenced testing of those controls but have not yet completed this testing. Our documentation and testing to date have identified certain deficiencies in the documentation, design and effectiveness of internal controls over financial reporting that we are in the process of remediating. Although we intend to diligently and vigorously review internal controls over financial reporting, we can provide no assurance as to our conclusions at December 31, 2004 with respect to the effectiveness of our internal controls over financial reporting, or that we will be able to complete the required assessment in a timely manner.
Hexcel Corp.—
Specialty chemicals manufacturing.
2003 Sales: $
897m
Auditor:
PricewaterhouseCoopers
Nov. 9
DEFICIENCIES IDENTIFIED —
During the first nine months of 2004, the Company commenced testing of its internal controls. The Company’s documentation and testing to date have identified certain deficiencies in the documentation, design and effectiveness of internal controls over financial reporting that the Company is in the process of remediating. Given the risks inherent in the design and operation of internal control over financial reporting, the Company can provide no assurance as to its or its independent auditor’s conclusions at December 31, 2004 with respect to the design and effectiveness of its internal controls over financial reporting.
Altiris—
Asset management software.
2003 Sales: $99.3m
Auditor:
KPMG
Nov. 9
DEFICIENCIES IDENTIFIED —
…In connection with our evaluation of changes to our internal control over financial reporting required under SEC rules promulgated pursuant to The Sarbanes-Oxley Act of 2002, and in the process of investigating these systems errors, management identified certain control deficiencies in our internal control over financial reporting relating to the systems errors, including control deficiencies involving the lack of: (i) restrictions on access to effect development level changes to our financial systems and applications in a production environment, and (ii) limitations on user access into our financial systems, applications and data….
Collins & Aikman Corp.—
Auto parts manufacturing.
2003 Sales: $3.9b
Auditor:
KPMG
Nov. 9
CONTROL DEFICIENCIES IDENTIFIED —
During the course of our evaluation, we have identified certain control deficiencies, including reviews of non-routine journal entries, account reconciliations and supporting documentation, reviews of financial data sourced from manual spreadsheets, segregation of duties, system access and user authorization, and business process application controls. Our independent auditors, KPMG LLP, previously identified certain of these items as reportable conditions in connection with the completion of their audit of our 2003 financial information. We believe that these deficiencies are primarily attributable to reduction-in-force cost reduction initiatives and residual process harmonization and personnel integration issues from prior acquisitions.
Crescent Real Estate Equities—
Office REITs
2003 Sales: $1.1b
Auditor:
Ernst & Young
Nov. 9
DEFICIENCIES IDENTIFIED —
Management identified and reported to the Audit Committee of the Company's Board of Trust Managers certain deficiencies in the operations of internal controls at entities in which the Company invests but which are managed by third parties, such as Crescent Resort Development, Inc. ("CRDI") and Ventana Inn & Spa. Management identified deficiencies at CRDI and Ventana Inn & Spa in the course of performing documentation and testing phases of the internal controls of these entities. These deficiencies included the lack of segregation of management and accounting responsibilities, lack of timely reconciliations and deficiencies in the design and operation of general computer controls and, in a number of cases, incomplete account analysis. Management does not believe that these deficiencies had an impact on the accuracy of the Company's financial statements…
Axcelis Technologies—
Semiconductor equipment and materials.
2003 Sales: $322m
Auditor:
Ernst & Young
Nov. 9
REPORTABLE CONDITIONS IDENTIFIED —
In connection with its audit of the Company’s consolidated financial statements for the year ended December 31, 2003, Ernst & Young LLP (“Ernst & Young”), the Company’s independent accountants, advised the Audit Committee and management of reportable conditions with respect to revenue recognition transactions. Specifically, the reportable conditions related to the Company’s processes over evaluation of revenue recognition criteria in accordance with SAB 104, identification and accounting for multiple deliverables and the timing of revenue recognition of certain elements in revenue transactions. While the reportable conditions were addressed by the Company during the first half of 2004, and additional improvements were made in the third quarter, the Company intends to further improve its revenue recognition control processes in these areas during the fourth quarter…
Clean Harbors—
Hazardous waste services.
2003 Sales: $611m
Auditor:
PricewaterhouseCoopers
Nov. 9
WEAKNESSES IDENTIFIED AT ACQUIRED COMPANY —
… In connection with the audit for the year ended December 31, 2003, PricewaterhouseCoopers LLP (“PwC”) advised the Audit Committee of the Company’s Board of Directors, and the Chief Financial Officer and the Corporate Controller advised the Disclosure Committee, that during the course of the audit of the Company’s financial statements for the year ended December 31, 2003, PwC noted a material weakness existed in the reconciliation and calculation of deferred revenue. That material weakness arose in connection with the Company’s acquisition of incineration facilities as part of the CSD assets [Chemical Services Division of Safety-Kleen Corp.] due to the lack of proper integration of legacy incineration management systems into the Company’s billing and waste management system. PwC also noted that reportable conditions existed for environmental and landfill accounting, valuation of unbilled receivables, fixed asset accounting and income tax accounting…
Princeton Review—
Education and training services.
2003 Sales: $104.5m
Auditor:
Ernst & Young
Nov. 9
REPORTABLE CONDITIONS IDENTIFIED —
In July, 2004, our independent auditor, Ernst & Young LLP reported in writing to the company and its audit committee that it had identified two “reportable conditions” (as defined under standards established by the American Institute of Certified Public Accountants) relating to our internal controls over financial reporting. One of these reportable conditions concerned the need for better controls to handle a greater volume of multiple element contracts in our K-12 Services division and address related revenue recognition issues. The other involved the need to strengthen certain review procedures during the monthly closing process within the accounting department...
Dentsply International—
Medical equipment & supplies.
2003 Sales: $1.5b
Auditor:
PricewaterhouseCoopers
Nov. 8
DEFICIENCIES IDENTIFIED —
As of September 30, 2004, we are continuing our assessment of the effectiveness of our internal control procedures related to information systems access controls, financial reporting and certain entity-wide controls related to corporate governance. As of the date of this filing, we have identified deficiencies which are being remediated relating to information systems access controls, documentation of control procedures and segregation of duties. We expect to have these matters fully remediated by the end of 2004.
Sandisk Corp.—
Memory chips & modules.
2003 Sales: $1b
Auditor:
Ernst & Young
Nov. 5
DEFICIENCIES IDENTIFIED; LISTED AS RISK FACTOR —
In connection with our Rule 404 certification process, we have identified a number of deficiencies in our internal controls over financial reporting. We are diligently working to implement enhancements to eliminate these deficiencies prior to the end of fiscal 2004 and our first Rule 404 certification and independent auditor attestation....
Ch2m Hill Companies—
Architectural & Engineering Services
2003 Sales: $2.1b
Auditor:
KPMG
Nov. 5
DEFICIENCIES IDENTIFIED —
In conjunction with our preparation toward compliance with Section 404 of the Sarbanes-Oxley Act of 2002, we identified deficiencies in our internal controls over financial reporting and are in the process of implementing certain enhancements. These deficiencies and enhancements have been disclosed to our independent accountants and discussed with the Audit and Finance Committee of our Board of Directors. We, including the Chief Executive Officer and Chief Financial Officer, expect that these enhancements will be in place by the end of the year. However, the provisions of Section 404 require that such procedures operate for a period of time before we can assess their effectiveness. As a result, these items may have an impact on management’s or our independent accountant’s reports on internal controls over financial reporting issued in connection with our 2004 Annual Report on Form 10-K.
Itron—
Electronic Test & Measurement Instruments
2003 Sales: $317m
Auditor:
Deloitte & Touche
Nov. 5
SIGNIFICANT DEFICIENCIES IDENTIFED —
In preparation for management’s first report on internal controls over financial reporting, we are in the process of evaluating their design and operating effectiveness. While this assessment has been underway for more than a year and is not yet complete, we have identified the following significant deficiencies, which we believe do not constitute a material weakness either individually or in the aggregate, and have made and are planning to make certain improvements as described below that have materially affected, or are likely to material affect, our internal controls over financial reporting:
Revenue recognition…
Policies and procedures…
Segregation of duties…
Credit process…
System complexity…
Manual calculations…
Sauer Danfoss—
Auto parts manufacturing.
2003 Sales: $1.1b
Auditor:
KPMG
Nov. 5
DEFICIENCIES IDENTIFIED —
….In the course of its ongoing evaluation, management has notified the Audit Committee of the Company’s Board of Directors and KPMG, LLP, the Company’s Independent Registered Public Accounting Firm that they have identified several deficiencies, which the Company is addressing. These deficiencies relate to the adequacy of documentation retained to support accounting entries and certain judgmental accounting areas, the lack of segregation of duties, informal policies and procedures, and the lack of a formal closing process/checklist at certain locations. In addition, the Company has noted several deficiencies within the information technology area, including the lack of change, project and problem management controls; the lack of segregation of duties between information security, operations, application development, and system administration; and the lack of proper information security controls around system administration and configuration…
Maxtor Corp.—
Magnetic disk storage.
2003 Sales: $4b
Auditor:
PricewaterhouseCoopers
Nov. 4
TWO SIGNIFICANT DEFICIENCIES IDENTIFIED —
During the third quarter of 2004, the Company’s management and our independent registered public accounting firm advised the Audit Committee that in connection with the review of the Company’s consolidated financial statements for the quarter ended September 25, 2004, two review adjustments were identified related to certain accrued liabilities associated with the Company’s restructuring activities which constitute significant deficiencies in our internal controls over financial reporting as defined by standards established by the Public Company Accounting Oversight Board. The impact of the above conditions was isolated to the quarter ended September 25, 2004, and did not affect the results of any prior periods. The Company has commenced corrective action to remediate these conditions and expects to have these conditions remediated in the fourth quarter of 2004.
SPSS—
Business Intelligence Software
2003 Sales: $208.4m
Auditor:
KPMG
Nov. 4
MATERIAL WEAKNESS IDENTIFIED —
In connection with its audits of the Company's financial statements for 2003, 2002 and 2001, KPMG assessed the internal controls of the Company and its subsidiaries and advised the Company's Audit Committee that certain
identified deficiencies collectively constituted a material control weakness…. In its communications with the SPSS Audit Committee, KPMG stated that these deficiencies were related to:
Certain account reconciliation and review procedures;
Specific procedures in accounting for capitalized software and development costs;
Revenue recognition policies and certain processes;
Certain processes in and documentation of accounting for income taxes;
The complex consolidation process and reconciliation of intercompany accounts;
Accounting and finance resources at two subsidiaries;
Segregation of duties in certain cash application tasks;
Timely completion of statutory filings in two foreign countries;
Document retention policies and procedures; and
Timely approval of stock option grants…
Interpublic Group of Companies—
Advertising and marketing.
2003 Sales: $5.8b
Auditor:
PricewaterhouseCoopers
Nov 4
CFO DISCUSSES WEAKNESS IN CONFERENCE CALL —
“…On slide 16, we have spoken with you in the past about our financial control challenges in a highly centralized company. The mediation efforts to address our company's pre-existing material control weakness and achieve 404 certification continue. In the course of those efforts, we've identified new areas of control weakness during the third quarter in the areas listed on the slide. Revenue recognition policy application, real estate lease expenditure recognition and documentation and control of financial results. These are being addressed by significant work being done internally to support financial disclosure and the integrity of our public filings, including 404 certification, letters from reporting units, pro-rating centralized monitoring and control over financial reporting, and continuing to upgrade our financial staff across all operating units…”
Visteon Corp.—
Auto parts manufacturing.
2003 Sales: $17.6b
Auditor:
PricewaterhouseCoopers
Nov. 4
DEFICIENCIES IDENTIFIED —
We are currently undergoing a comprehensive effort in preparation for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. In the course of its evaluation, management has identified certain deficiencies in internal controls over financial reporting which the company is addressing with remediation actions. Specifically, we are improving the controls and procedures related to the company’s new business processes and systems utilized to record revenue and manage the related accounts receivable associated with sales to Ford…
Baker Hughes—
Oil & gas field equipment.
2003 Sales: $5.2b
Auditor:
Deloitte & Touche
Nov. 3
INVESTIGATION FINDS DEFICIENCIES —
…Our ongoing internal investigations have identified issues regarding the propriety of certain payments and apparent deficiencies in our books and records and internal controls with respect to certain operations in Nigeria, Angola and Kazakhstan, as well as potential liabilities to governmental authorities in Nigeria. The investigation in Nigeria was substantially completed during the first quarter of 2003 and, based upon current information, we do not expect that any such potential liabilities will have a material adverse effect on our results of operations or financial condition….
Fog Cutter Capital Group—
Commercial property investment.
2003 Sales: $39.9m
Auditor:
UHY
Nov. 1
SIGNIFICANT DEFICIENCIES AT ACQUIRED COMPANY —
Prior to the Company's acquisition of Fatburger, the independent auditors, Ernst & Young LLP, determined that Fatburger had significant deficiencies in internal control which may affect its ability to record, process, summarize and report financial data. While not constituting a material weakness, as of December 31, 2003, the deficiencies had not been fully resolved by Fatburger. The issues were as follows:
A lack of sufficient resources in the accounting department to handle the day-to-day transactions and record all adjustments for the financial statements; and
A lack of sufficient controls over the information reported to Fatburger from the franchisees, which may result in a misstatement of royalty income.
Mitsui & Co.—
Energy and utilities.
2004 Sales: $28.6b
Auditor:
Deloitte Touche Tohmatsu
Nov. 1
DEFICIENCIES IDENTIFIED —
In July and August of this year we evaluated the effectiveness of our internal control systems for disclosure and its operations throughout the company, as required under section 302 of the Sarbanes-Oxley Act of 2002. Based on this evaluation, when Mitsui filed its Form 20-F report to the Untied States Securities and Exchange Commission (“SEC”) in September the President and the Chief Financial Officer each certified that Mitsui’s disclosure controls and procedures were effective as of end of the reporting period. In this annual report, we referred to certain internal control deficiencies relating to improper transactions engaged in by an employee of Subaru Benelux, a subsidiary of Mitsui’s 100%-owned Mitsui Automotive Europe, although the deficiencies did not cause our disclosure control and procedures to fail to be effective. The remedial measures implemented and to be implemented at the above subsidiary include strengthening our monitoring of the subsidiary’s operating activities through a newly established administration department and enhancing comprehensive and daily control over its credit management.
Tarpon Industries—
Industrial manufacturing.
2003 Sales: $NA
Auditor:
Grant Thornton
Nov. 1
MATERIAL WEAKNESS IDENTIFIED —
Our Independent Registered Public Accounting Firm has identified a variety of deficiencies in our internal financial reporting procedures. These deficiencies stem in significant part from the acquisition policy which we are following in which private, unrelated companies are being combined. Three of these deficiencies were classified as significant which when aggregated meet the definition of a material weakness in our systems of internal control….
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