Audiovox 2004 Annual Report Download - page 110

warehouses on the last day of the fiscal fourth quarter. The Company
properly recorded this audit adjustment during fiscal 2004;
4. A deficiency in the lack of evidential documentation supporting the
approval of divisional journal entries and the existence of inadequate
segregation of duties as it relates to entering and approving corporate
journal entries existed. The divisional deficiency is a result of the
reconciliation of the manual journal entries to the Company's ERP system
not being signed as evidence of review by the individual performing the
review and the corporate deficiency relates to the reconciliation of the
manual journal entries to the Company's ERP system being performed by the
same individual who processes the journal entries into the system.
Accordingly, management concluded that this matter represents a material
weakness as controls over journal entries may materially impact all
significant accounts and business processes;
5. A deficiency in the design of the controls pertaining to the processing of
non−routine customer sales orders existed. These sales orders, which
represent 1% of consolidated net sales, require the expedited shipment of
the Company's merchandise to the customer. The specific control deficiency
identified relates to the lack of evidence supporting the approval of these
non− routine sales orders. Accordingly, management concluded that this
matter represents a material weakness as it may have a potential material
impact on net sales, accounts receivable and the Company's inventory
balances;
6. A deficiency in the lack of evidential documentation supporting the
oversight and monitoring activities of the financial statements and the
internal control environment of the Company's international subsidiary in
Germany existed. The Germany subsidiary, which was acquired in July 2003,
accounted for approximately 6% of the Company's total consolidated assets
and approximately 10% of consolidated net sales as of and for the year
ended November 30, 2004. The specific control deficiencies identified
relate to the lack of evidence documenting the review of significant
transactions, account analysis and accounting entries by the appropriate
personnel and the lack of evidence documenting the Company's oversight and
monitoring activities of its German operations even though the review
process was indeed performed. Accordingly, management concluded that these
matters represent a material weakness to the Company's overall control
environment.
The Company's testing procedures identified these deficiencies in its internal
control over financial reporting and; accordingly, these control deficiencies
have either been remediated or are in the process of being remediated subsequent
to November 30, 2004, and before the issuance of this report. The Company deems
it relevant to note that the findings outlined above were classified as material
weaknesses in accordance with the rules and regulations of the Securities and
Exchange Commission, as a more than remote possibility that a material
misstatement to the Company's interim or annual financial statements could
occur. However, substantially all the material control findings identified by
management did not cause a material misstatement or have an adverse impact to
the Company's financial position or results of operations as of and for the year
ended November 30, 2004. Refer to the specific remediation steps identified
below.
The Certifications of the Company's Chief Executive Officer and Chief Financial
Officer included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10−K
includes, in paragraph 4 of such certifications, information concerning the
Company's disclosure controls and procedures and internal control over financial
reporting. Such certifications should be read in conjunction with the
information contained in this Item 9A Controls and Procedures, for a more
complete understanding of the matters covered by such certifications.
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