Nutrisystem 2005 Annual Report Download - page 36

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Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company’s
financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of the Company’s financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with generally accepted accounting principles. Internal control
over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in a
reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in
accordance with generally accepted accounting principles and that the receipts and expenditures of the Company
are being made in accordance with management and board of director authorization; and (iii) provide reasonable
assurance that unauthorized acquisition, use or disposition of the Company’s assets that could have a material
effect on our financial statements would be prevented or detected on a timely basis.
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 evaluated 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 (“COSO”). Based upon that evaluation, management concluded that
the Company’s internal control over financial reporting was effective as of December 31, 2005.
The Company’s independent registered public accounting firm, KPMG LLP, has audited management’s
assessment of the Company’s internal control over financial reporting. This report on management’s assessment
and the effectiveness of the Company’s internal control over financial reporting appears on page 33.
32