eTrade 2005 Annual Report Download - page 101

Table of Contents
ITEM8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of E*TRADE Financial Corporation is responsible for establishing and maintaining adequate internal control over
financial reporting. E*TRADE Financial Corporation’s internal control system was designed to provide reasonable assurance to the
company’s management and board of directors regarding the preparation and fair presentation of published financial statements.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934
as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected
by the company’s board of directors, management and other personnel, 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 and includes those policies and procedures that:
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
the assets of the company;
•
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
•
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. 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.
E*TRADE Financial Corporation’s management assessed the effectiveness of its internal control over financial reporting as of
December31, 2005. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in “Internal Control—Integrated Framework”. Based on our assessment we believe that, as of December31,
2005, E*TRADE Financial Corporation’s internal control over financial reporting is effective based on those criteria.
E*TRADE Financial Corporation’s audited consolidated financial statements include the results of the following entities, but
management’s assessment does not include an assessment of the internal control over financial reporting of these entities because
they were acquired during the fourth quarter of 2005. This approach is consistent with published SEC guidance on the permissible
scope of management’s internal control report.
•
The U.S.-based online discount brokerage business of Harris
direct
, LLC, which was acquired on October6, 2005; and
•
The online discount brokerage business of J.P. Morgan Invest, LLC (“BrownCo”), which was acquired on November30, 2005.
These entities represented 13% of total assets at December31, 2005 and 3% of revenues for year ended December31, 2005.
E*TRADE Financial Corporation’s Independent Registered Public Accounting Firm, Deloitte& Touche LLP, has issued an audit report
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2006. EDGAR Online, Inc.