Nutrisystem 2006 Annual Report Download - page 39

REP
O
RT
O
F INDEPENDENT RE
G
I
S
TERED P
U
BLI
C
A
CCOU
NTIN
G
FIR
M
Th
e Boar
d
o
f
D
i
rectors an
d
Stoc
kh
o
ld
ers Nutr
i
System, Inc.
:
We have audited mana
g
ement’s assessment, included in the accompan
y
in
g
Mana
g
ement’s Report on Internal
C
ontro
l
over F
i
nanc
i
a
l
Report
i
n
g
,
t
h
at Nutr
i
System, Inc. ma
i
nta
i
ne
d
e
ff
ect
i
ve
i
nterna
l
contro
l
over
fi
nanc
i
a
l
reportin
g
as of December 31, 200
6
, based on criteria established in
I
nterna
l
Contro
l
—Integrate
d
Framewor
k
issued b
y
The Committee o
f
Sponsoring Organizations o
f
the Treadway Commission (COSO)
.
N
utriS
y
stem,
I
nc.’s management
i
s respons
ibl
e
f
or ma
i
nta
i
n
i
ng e
ff
ect
i
ve
i
nterna
l
contro
l
over
fi
nanc
i
a
l
report
i
ng an
df
or
i
t
s
a
ssessment o
f
t
h
ee
ff
ect
i
veness o
fi
nterna
l
contro
l
over
fi
nanc
i
a
l
report
i
n
g
. Our respons
ibili
t
yi
s to express an
o
pinion on mana
g
ement’s assessment and an opinion on the effectiveness of the Compan
y
’s internal control ove
r
fi
nanc
i
a
l
report
i
ng
b
ase
d
on our au
di
t.
We con
d
ucte
d
our au
di
t
i
n accor
d
ance w
i
t
h
t
h
e stan
d
ar
d
so
f
t
h
ePu
bli
c Compan
y
Account
i
n
g
Overs
igh
t Boar
d
(United States). Those standards re
q
uire that we
p
lan and
p
erform the audit to obtain reasonable assurance about
w
h
et
h
er e
ff
ect
i
ve
i
nterna
l
contro
l
over
fi
nanc
i
a
l
report
i
ng was ma
i
nta
i
ne
di
na
ll
mater
i
a
l
respects. Our au
di
t
i
nc
l
u
d
e
d
o
b
ta
i
n
i
n
g
an un
d
erstan
di
n
g
o
fi
nterna
l
contro
l
over
fi
nanc
i
a
l
report
i
n
g
, eva
l
uat
i
n
g
mana
g
ement’
s
a
ssessment, testin
g
and evaluatin
g
the desi
g
n and operatin
g
effectiveness of internal control, and performin
g
suc
h
o
t
h
er proce
d
ures as we cons
id
ere
d
necessary
i
nt
h
ec
i
rcumstances. We
b
e
li
eve t
h
at our au
di
t prov
id
es a
reasona
bl
e
b
as
i
s
f
or our op
i
n
i
on.
A compan
y
’s internal control over financial reportin
g
is a process desi
g
ned to provide reasonable assuranc
e
regar
di
ng t
h
ere
li
a
bili
ty o
ffi
nanc
i
a
l
report
i
ng an
d
t
h
e preparat
i
on o
ffi
nanc
i
a
l
statements
f
or externa
l
purposes
in
a
ccor
d
ance w
i
t
hg
enera
lly
accepte
d
account
i
n
g
pr
i
nc
i
p
l
es. A compan
y
’s
i
nterna
l
contro
l
over
fi
nanc
i
a
l
report
i
n
g
includes those
p
olicies and
p
rocedures that (1)
p
ertain to the maintenance of records that, in reasonable detail
,
a
ccurate
l
yan
df
a
i
r
l
yre
fl
ect t
h
e transact
i
ons an
ddi
spos
i
t
i
ons o
f
t
h
e assets o
f
t
h
e company; (2) prov
id
e reasona
ble
a
ssurance t
h
at transact
i
ons are recor
d
e
d
as necessar
y
to perm
i
t preparat
i
on o
ffi
nanc
i
a
l
statements
i
n accor
d
ance
with
g
enerall
y
accepted accountin
g
principles, and that receipts and expenditures of the compan
y
are bein
g
mad
e
o
n
l
y
i
n accor
d
ance w
i
t
h
aut
h
or
i
zat
i
ons o
f
management an
ddi
rectors o
f
t
h
e company; an
d
(3) prov
id
e reasona
ble
a
ssurance re
g
ar
di
n
g
prevent
i
on or t
i
me
ly d
etect
i
on o
f
unaut
h
or
i
ze
d
acqu
i
s
i
t
i
on, use, or
di
spos
i
t
i
on o
f
t
h
e
compan
y
’s assets that could have a material effect on the financial statements
.
B
ecause o
fi
ts
i
n
h
erent
li
m
i
tat
i
ons,
i
nterna
l
contro
l
over
fi
nanc
i
a
l
report
i
ng may not prevent or
d
etect
m
i
sstatements. A
l
so, pro
j
ect
i
ons o
f
an
y
eva
l
uat
i
on o
f
e
ff
ect
i
veness to
f
uture per
i
o
d
s are su
bj
ect to t
h
er
i
s
k
t
h
at
controls ma
y
become inadequate because of chan
g
es in conditions, or that the de
g
ree of compliance with th
e
po
li
c
i
es or proce
d
ures may
d
eter
i
orate.
I
n our op
i
n
i
on, mana
g
ement’s assessment t
h
at Nutr
i
S
y
stem, Inc. ma
i
nta
i
ne
d
e
ff
ect
i
ve
i
nterna
l
contro
l
ove
r
f
inancial reportin
g
as of December 31, 2006, is fairl
y
stated, in all material respects, based on criteria established
in
Interna
l
Contro
l
—Inte
g
rate
d
Framewor
k
i
ssue
db
y COS
O
.
A
l
so,
i
n our op
i
n
i
on, Nutr
i
System, Inc.
maintained, in all material respects, effective internal control over financial reportin
g
as of December 31, 200
6
,
based o
n
c
ri
te
ri
a estab
li
s
h
ed
i
n
I
nternal Control—Inte
g
rated Framework issued b
y
COSO
.
We a
l
so
h
ave au
di
te
d
,
i
n accor
d
ance w
i
t
h
t
h
e stan
d
ar
d
so
f
t
h
ePu
bli
c Company Account
i
ng Overs
i
g
h
t Boar
d
(United States), the consolidated balance sheets of NutriS
y
stem, Inc. and subsidiaries as of December 31, 200
6
a
nd 200
5
, and the related consolidated statements of operations, stockholders’ equit
y
, and cash flows for each of
the years in the three-year period ended December 31, 200
6
, and our report dated February 27, 2007 expressed a
n
u
nqua
lifi
e
d
op
i
n
i
on on t
h
ose conso
lid
ate
dfi
nanc
i
a
l
statement
s
.
/
s/ KPMG LL
P
P
hil
a
d
e
l
p
hi
a, Pennsy
l
van
ia
Fe
b
ruar
y
27, 200
7
33