Supercuts 2005 Annual Report Download - page 58

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Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company, including the chief executive officer and chief financial officer, is responsible for establishing and
maintaining adequate internal control over financial reporting, as defined in Rules 13a - 15(f) and 15(d) - 15(f) of the Securities Exchange Act
of 1934, as amended. The Company’s internal control over financial reporting was designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally
accepted accounting principles and 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 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 (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.
Management has excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of
June 30, 2005 certain elements of the internal control over financial reporting of Hair Club for Men and Women (Hair Club). Hair Club was
acquired by the Company in a material purchase business combination in December 2004. Subsequent to the acquisition, certain elements of
the acquired businesses’ internal control over financial reporting and related functions, processes and systems were integrated into the
Company’s existing internal control over financial reporting and related functions, processes and systems. Those elements of the acquired
businesses’ internal control over financial reporting that were not integrated into the Company’s existing internal control over financial
reporting have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of June 30,
2005.
The excluded elements represent controls over accounts representing 14.4 percent of our consolidated assets, 6.5 percent of the
consolidated liabilities, 2.7 percent of the consolidated revenues, 2.3 percent of the consolidated operating expenses and 8.9 percent of
consolidated operating income for the year ended June 30, 2005.
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the
framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating
effectiveness of controls and a conclusion on this evaluation. Based on the evaluation, management has concluded the Company’s internal
control over financial reporting was effective as of June 30, 2005.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2005 has been
audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 of
this Form 10-K.
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