Overstock.com 2009 Annual Report Download - page 85

Table of Contents
Internal control over financial reporting is a process designed 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. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of internal control over
financial reporting 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 has assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making our assessment of the
effectiveness of internal control over financial reporting, management used the criteria set forth in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the registrant's annual or interim financial statements will not be prevented or detected on a timely basis.
As a result of our evaluation of our internal control over financial reporting, management identified the following material weaknesses in our internal control
over financial reporting:
We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for and
perform adequate supervisory reviews of significant transactions that resulted in misapplications of GAAP.
Information technology program change and program development controls were inadequately designed to prevent changes in our accounting
systems which led to the failure to appropriately capture and accurately process data.
These material weaknesses resulted in the restatement of the financial statements described in Item 9A(a) and material post closing adjustments which
have been reflected in the financial statements for the year ended December 31, 2009. Additionally, as a result of the material weaknesses, we have concluded
that we did not maintain effective internal control over financial reporting as of December 31, 2009.
The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by KPMG LLP, an independent registered
public accounting firm, as stated in their report which is in Item 9A(d).
(d) Independent Registered Public Accounting Firm's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Overstock.com, Inc.:
We have audited Overstock.com, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Overstock.com, Inc.'s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting (Item 9A(c)). Our responsibility is
to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over
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