Nautilus 2007 Annual Report Download - page 64

Table of Contents
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal
executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required
disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2007 that our
disclosure controls and procedures were effective.
Management
’s Report On Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-
15(f) under
the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the
Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting
includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, 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
With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management has concluded
that the Company did not maintain effective internal control over financial reporting as of December 31, 2007 as a result of a material weakness
in internal controls as described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the Company’
s annual or interim financial statements will not
be prevented or detected on a timely basis.
In connection with the preparation of the Company’s consolidated financial statements for the quarter and year ended December 31, 2007, and
the related audit by the Company’s independent auditors, the Company and its auditors determined that the Company had one internal control
deficiency that constituted a “material weakness” as defined by the Public Company Accounting Oversight Board (“PCAOB”) Auditing
Standard No. 5.
Management determined the controls around the review of significant non-routine transactions and the review of significant management
estimates and reserves did not operate effectively, resulting in audit adjustments to the 2007 consolidated financial statements. These
deficiencies, if left unremediated, could result in the failure to prevent or detect a material misstatement in the Company’s consolidated financial
statements.
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• 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 U.S. GAAP, 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.