BLTI » Topics » Managements Report on Internal Control over Financial Reporting

These excerpts taken from the BLTI 10-K filed Mar 16, 2009.
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
 
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.
 
Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control — Integrated Framework.” Based on our evaluation under COSO Framework, management concluded that our internal control over financial reporting was effective at a reasonable assurance level as of December 31, 2008.
 
BDO Seidman, LLP, our independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, issued an attestation report on our internal control over financial reporting as of December 31, 2008; their report is included herein.
 
Management’s
Report on Internal Control over Financial Reporting



 



Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934. A company’s
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. A company’s internal control over
financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with
authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on
our financial statements.


 



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.


 



Under the supervision and with the participation of management,
including our chief executive officer and chief financial
officer, management conducted an assessment of the effectiveness
of our internal control over financial reporting based on the
framework established by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) entitled
Internal Control — Integrated
Framework
.” Based on our evaluation under COSO
Framework, management concluded that our internal control over
financial reporting was effective at a reasonable assurance
level as of December 31, 2008.


 



BDO Seidman, LLP, our independent registered public accounting
firm that audited the consolidated financial statements included
in this Annual Report on
Form 10-K,
issued an attestation report on our internal control over
financial reporting as of December 31, 2008; their report
is included herein.


 




These excerpts taken from the BLTI 10-K filed Mar 17, 2008.
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
 
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.
 
Under the supervision and with the participation of management, including our chief executive officer and interim chief financial officer, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control — Integrated Framework.”
 
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weakness:
 
As of December 31, 2007, in accordance with FAS 52 — Foreign Currency Translation, we did not maintain effective controls over the recording of realized and unrealized foreign currency transaction gains or losses resulting from the fluctuation in exchange rates on transactions between BIOLASE and its subsidiaries. As a result of our analysis of the treatment of these intercompany balances in the fourth quarter of 2007, we identified that our treatment of recording foreign currency transaction gains or losses to other comprehensive gain was inconsistent with our intent to treat these balances as short term investments. Therefore, we concluded that our controls over the proper recording of transaction gains or losses to the consolidated statement of operations were not effective. This control deficiency resulted in an adjustment to our consolidated financial statements at December 31, 2007.
 
Because of this material weakness, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2007, based on the criteria in Internal Control — Integrated Framework.


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BDO Seidman, LLP, our independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, issued an attestation report on our internal control over financial reporting as of December 31, 2007; their report is included herein.
 
Management’s
Report on Internal Control over Financial Reporting



 



Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934. A company’s
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. A company’s internal control over
financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with
authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on
our financial statements.


 



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.


 



Under the supervision and with the participation of management,
including our chief executive officer and interim chief
financial officer, management conducted an assessment of the
effectiveness of our internal control over financial reporting
based on the framework established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO)
entitled “Internal Control — Integrated
Framework
.”


 



A material weakness is a control deficiency, or combination of
control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.
Management has identified the following material weakness:


 



As of December 31, 2007, in accordance with
FAS 52 — Foreign Currency Translation, we
did not maintain effective controls over the recording of
realized and unrealized foreign currency transaction gains or
losses resulting from the fluctuation in exchange rates on
transactions between BIOLASE and its subsidiaries. As a result
of our analysis of the treatment of these intercompany balances
in the fourth quarter of 2007, we identified that our treatment
of recording foreign currency transaction gains or losses to
other comprehensive gain was inconsistent with our intent to
treat these balances as short term investments. Therefore, we
concluded that our controls over the proper recording of
transaction gains or losses to the consolidated statement of
operations were not effective. This control deficiency resulted
in an adjustment to our consolidated financial statements at
December 31, 2007.


 



Because of this material weakness, management has concluded that
we did not maintain effective internal control over financial
reporting as of December 31, 2007, based on the criteria in
Internal Control — Integrated Framework.





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Table of Contents






BDO Seidman, LLP, our independent registered public accounting
firm that audited the consolidated financial statements included
in this Annual Report on Form 10-K, issued an attestation report
on our internal control over financial reporting as of
December 31, 2007; their report is included herein.


 




This excerpt taken from the BLTI 10-K filed Mar 16, 2007.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

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.

Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control—Integrated Framework.” Based on our evaluation under the COSO Framework, management concluded that our internal control over financial reporting was effective at a reasonable assurance level as of December 31, 2006.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by BDO Seidman, LLP, an independent registered public accounting firm, as stated in their report which appears herein.

 

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Table of Contents
This excerpt taken from the BLTI 10-K filed Mar 16, 2006.

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s internal control over financial reporting is a process designed to provide reasonable assurance

 

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regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

 

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.

 

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria set forth in the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control—Integrated Framework.”

 

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weakness:

 

As of December 31, 2005, we did not maintain effective controls over the recording of inventory transactions and the valuation of our inventory. Specifically, we did not have effective controls to: (i) ensure that our recording of inventory transactions was done timely, (ii) ensure that all transactions relating to inventory were properly recorded in the perpetual inventory system and in the general ledger, (iii) ensure that our inventory was properly recorded at lower of cost or market and (iv) ensure that the appropriate direct labor and overhead rate was applied. This control deficiency did not result in an adjustment to our consolidated financial statements. However, this control deficiency could result in a misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

Because of this material weakness, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2005, based on the criteria in Internal Control—Integrated Framework.

 

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by BDO Seidman, LLP, an independent registered public accounting firm, as stated in their report which appears herein.

 

This excerpt taken from the BLTI 10-K filed Jul 19, 2005.

Management’s Report on Internal Control over Financial Reporting

 

The management of BIOLASE Technology, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

 

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.

 

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth in the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control—Integrated Framework.”

 

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses:

 

  1. As of December 31, 2004, the Company did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with our financial reporting requirements. Specifically, the Company had deficiencies in accounting staff with sufficient depth and skill in the application of U.S. generally accepted accounting principles to meet the objectives that should be expected of these roles. This material weakness contributed to the following individual material weaknesses as of December 31, 2004.

 

  a) The Company did not maintain effective controls over the accounting for taxes other than income taxes. Specifically, the Company’s controls failed to: (i) identify the existence of a liability for penalties and interest on amounts collected from customers that were not timely remitted to the states or have not been remitted to the states, and (ii) account for the gain on the abatement of certain penalties and interest. In addition, the Company’s controls failed to prevent or detect erroneous value added tax refunds that were incorrectly recorded as a receivable. This control deficiency resulted in an understatement of the sales tax and value added tax liabilities and general and administrative expense, which also resulted in the restatement of the Company’s annual 2002 and 2003, and first, second and third quarter 2004 consolidated financial statements.

 

  b) The Company did not maintain effective controls over the identification of events that would trigger the need for an impairment analysis for indefinite-lived and long-lived assets. Specifically, the Company’s controls were ineffective in their design and operation to timely identify and evaluate the impact of a change in circumstances that resulted in the impairment of an acquired trade name. This control deficiency resulted in an adjustment to intangible assets and operating expenses in the Company’s fourth quarter 2004 consolidated financial statements.

 

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  c) The Company did not maintain effective controls over certain aspects of revenue recognition. Specifically, the Company did not have effective controls over: (i) revenue recognized on multiple element arrangements that included spares and consumables not shipped as of the balance sheet date, and (ii) the deferral of revenue on units that were not fully functional at the time revenue was recognized. This control deficiency resulted in premature revenue recognition and an adjustment to deferred revenue and revenue in 2003 and in each of the four quarters of the 2004 consolidated financial statements.

 

  d) The Company did not maintain effective controls over the valuation of our inventory. Specifically, the Company did not have effective controls to: (i) identify slow-moving and obsolete inventory, and (ii) ensure the Company’s inventory was properly recorded at historical cost. This control deficiency resulted in adjustments to inventory and cost of revenue in the Company’s first and fourth quarter 2004 consolidated financial statements.

 

  e) The Company did not maintain effective controls over accounts payable, certain accrued liabilities and the related expense accounts. Specifically, the Company did not have effective controls over the completeness, valuation and existence of accounts payable, accrued commissions and bonuses payable, and the related expense accounts. This control deficiency resulted in adjustments to the Company’s consolidated financial statements for each of the four quarters in 2004.

 

  f) The Company did not maintain effective controls over the accounting for foreign currency translation. Specifically, the Company did not have effective controls over the use of appropriate exchange rates for consolidating the financial statements of the Company’s Germany operations. This control deficiency resulted in adjustments to the Company’s second, third and fourth quarter 2004 consolidated financial statements.

 

Additionally, each of these control deficiencies could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

 

  2. As of December 31, 2004, the Company did not maintain effective controls over the Company’s cash accounts and cash disbursements in Germany. Specifically, the Company did not: (i) maintain a proper segregation of duties over the approval and payment of vendor invoices at the Company’s operations in Germany (i.e., the same individual who had access to bank accounts also authorized purchases and approved cash disbursements, and certain vendor payments, although valid, were executed by unauthorized individuals), and (ii) have effective controls over the review of bank reconciliations and the completeness, accuracy and validity of cash transactions recorded in the general ledger. This control deficiency did not result in an adjustment to the Company’s consolidated financial statements. However, it could result in a misstatement to cash and other financial statement accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

  3. As of December 31, 2004, the Company did not maintain effective controls over the processing of transactions of the Company’s subsidiary in Germany performed by a third party. Specifically, the Company did not have effective controls over the completeness, valuation and existence of certain financial statement accounts in Germany, such as accounts payable, accrued expenses, and the related sales and marketing, and general and administrative expenses, that are maintained by a third party. This control deficiency did not result in an adjustment to the Company’s consolidated financial statements. However, this control deficiency could result in a misstatement to the aforementioned financial statement accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

  4.

As of December 31, 2004, the Company did not maintain effective controls over the restriction of access to financial application programs and data. The Company did not have effective controls over access to application programs and the underlying financial data. Specifically, there were instances in

 

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which certain financial accounting personnel had inappropriate access to financial application programs and data and the activities of these individuals were not subject to independent monitoring. This control deficiency did not result in an adjustment to the Company’s consolidated financial statements. However, this control deficiency could result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

  5. As of December 31, 2004, the Company did not maintain an effective control environment based on criteria established in “Internal Control—Integrated Framework” issued by the COSO. The financial reporting organizational structure was not adequate to support the Company’s activities. Deficiencies, such as an insufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of U.S generally accepted accounting principles have resulted in adjustments to the consolidated financial statements as discussed in Item 1 above. Item 1, together with the material weaknesses described in Items 2, 3, and 4 above indicate that the Company did not maintain an effective control environment as of December 31, 2004. These control deficiencies could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

 

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, based on the criteria in Internal Control—Integrated Framework.

 

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

 

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