Nautilus 2005 Annual Report Download - page 62

Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the
Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, with
participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the fiscal year covered by this Annual Report on Form 10-K. Based upon that evaluation
and the material weaknesses described below under “Management Report on Internal Control Over Financial Reporting,” the Company’
s Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K,
the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were ineffective.
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the Company; and (iii) 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.
Inherent Limitation of Effectiveness of Controls
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its
inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses
in judgment or breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or
improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a
timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting
process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. 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.
Management’s Assessment
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. In making
this assessment, management used the criteria set forth by the Committee of
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