American Eagle Outfitters 2004 Annual Report Download - page 76

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Part II
and evaluating the design and operating effectiveness of internal control, and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a
remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or
detected. The following material weakness has been identified and included in management's assessment: In its
assessment as of January 29, 2005, management identified as a material weakness the Company's ineffective controls
over the selection and monitoring of appropriate assumptions and factors affecting the accounting for leases and
tenant allowances. As a result of this material weakness in internal control, American Eagle Outfitters, Inc.
concluded the Company's previously reported fixed assets and deferred lease credits had been understated and that
previously issued annual and interim financial statements should be restated. This material weakness was considered
in determining the nature, timing, and extent of audit tests applied in our audit of the fiscal 2004 financial statements,
and this report does not affect our report dated April 8, 2005 on those financial statements.
In our opinion, management's assessment that American Eagle Outfitters, Inc. did not maintain effective internal
control over financial reporting as of January 29, 2005 is fairly stated, in all material respects, based on the COSO
control criteria. Also, in our opinion, because of the effect of the material weakness described above on the
achievement of the objectives of the control criteria, American Eagle Outfitters, Inc. has not maintained effective
internal control over financial reporting as of January 29, 2005, based on the COSO control criteria.
Ernst & Young LLP
Pittsburgh, Pennsylvania
April 8, 2005