Shuffle Master (SHFL)

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates and Non-Standard Revenue Recognition

·      Established procedures related to the evaluation of non-routine events and transactions to ensure appropriate communication of these events and transactions to the subsidiary and corporate accounting and finance departments through executive meetings, accounting staff meetings and close meetings. Established a process to review newly implemented controls relating to non-routine events and transactions.

·      Implemented and documented additional accounting policies and key assumptions for the assessment of transactions and events involving judgments and estimates.

·      Enhanced current policies, practices and controls related to revenue recognition.

·      Recurring training sessions focused on awareness of revenue recognition concepts with emphasis on non-standard contracts have been performed at the corporate office and foreign subsidiaries.

·      Increased the depth and breadth of sub-certifiers throughout the organization, including foreign subsidiaries, particularly relating to the disclosure of non-standard contracts.

·      Reorganized the Las Vegas based Shuffle Master accounting and finance departments into two distinct departments as part of some broader organizational changes of our global headquarters in Las Vegas. Additional positions and/or changes in responsibilities were created within the newly defined accounting and finance departments that provide additional levels of analysis and review of non-routine transactions, appropriate application of generally accepted accounting principles and proper determination of significant estimates and judgments. All positions were filled at fiscal year end by permanent employees or qualified temporary consultants.

As of October 31, 2007, we are able to conclude that the controls related to the evaluation and review of non-routine transactions involving estimates and judgments were operating effectively and that we have remediated this material weakness.

Remediation
of Material Weakness Relating to Evaluation and Review of Non-routine
Transactions involving Judgments and Estimates and Non-Standard Revenue
Recognition

·      Established
procedures related to the evaluation of non-routine events and transactions to
ensure appropriate communication of these events and transactions to the
subsidiary and corporate accounting and finance departments through executive
meetings, accounting staff meetings and close meetings. Established a process
to review newly implemented controls relating to non-routine events and
transactions.

·      Implemented
and documented additional accounting policies and key assumptions for the
assessment of transactions and events involving judgments and estimates.

·      Enhanced
current policies, practices and controls related to revenue recognition.

·      Recurring
training sessions focused on awareness of revenue recognition concepts with
emphasis on non-standard contracts have been performed at the corporate office
and foreign subsidiaries.

·      Increased
the depth and breadth of sub-certifiers throughout the organization, including
foreign subsidiaries, particularly relating to the disclosure of non-standard
contracts.

·      Reorganized
the Las Vegas based Shuffle Master accounting and finance departments into two
distinct departments as part of some broader organizational changes of our
global headquarters in Las Vegas. Additional positions and/or changes in
responsibilities were created within the newly defined accounting and finance
departments that provide additional levels of analysis and review of
non-routine transactions, appropriate application of generally accepted
accounting principles and proper determination of significant estimates and
judgments. All positions were filled at fiscal year end by permanent employees
or qualified temporary consultants.

As of October 31, 2007, we
are able to conclude that the controls related to the evaluation and review of
non-routine transactions involving estimates and judgments were operating
effectively and that we have remediated this material weakness.

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates and Non-Standard Revenue Recognition

•

Established procedures related to the evaluation of non-routine events and transactions to ensure appropriate communication of these events and transactions to the subsidiary and corporate accounting and finance departments through executive meetings, accounting staff meetings and close meetings. Established a process to review newly implemented controls relating to non-routine events and transactions.

•

Implemented and documented additional accounting policies and key assumptions for the assessment of transactions and events involving judgments and estimates.

•

Enhanced current policies, practices and controls related to revenue recognition.

•

Recurring training sessions focused on awareness of revenue recognition concepts with emphasis on non-standard contracts have been performed at the corporate office and foreign subsidiaries.

•

Increased the depth and breadth of sub-certifiers throughout the organization, including foreign subsidiaries, particularly relating to the disclosure of non-standard contracts.

•

Reorganized the Las Vegas based Shuffle Master accounting and finance departments into two distinct departments as part of some broader organizational changes of our global headquarters in Las Vegas. Additional positions and/or changes in responsibilities were created within the newly defined accounting and finance departments that provide additional levels of analysis and review of non-routine transactions, appropriate application of generally accepted accounting principles and proper determination of significant estimates and judgments. All positions were filled at fiscal year end by permanent employees or qualified temporary consultants.

As of October 31, 2007, we are able to conclude that the controls related to the evaluation and review of non-routine transactions involving estimates and judgments were operating effectively and that we have remediated this material weakness.

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates and Non-Standard
Revenue Recognition

•

Established
procedures related to the evaluation of non-routine events and transactions to ensure appropriate communication of these events and transactions to
the subsidiary and corporate accounting and finance departments through executive meetings, accounting staff meetings and close meetings. Established a process to review newly implemented controls
relating to non-routine events and transactions.

•

Implemented
and documented additional accounting policies and key assumptions for the assessment of transactions and events involving judgments and estimates.

•

Enhanced
current policies, practices and controls related to revenue recognition.

•

Recurring
training sessions focused on awareness of revenue recognition concepts with emphasis on non-standard contracts have been performed at the corporate
office and foreign subsidiaries.

•

Increased
the depth and breadth of sub-certifiers throughout the organization, including foreign subsidiaries, particularly relating to the disclosure of
non-standard contracts.

•

Reorganized
the Las Vegas based Shuffle Master accounting and finance departments into two distinct departments as part of some broader organizational changes of our global
headquarters in Las Vegas. Additional positions and/or changes in responsibilities were created within the newly defined accounting and finance departments that provide additional levels of analysis
and review of non-routine transactions, appropriate application of generally accepted accounting principles and proper determination of significant estimates and judgments. All positions
were filled at fiscal year end by permanent employees or qualified temporary consultants.

As
of October 31, 2007, we are able to conclude that the controls related to the evaluation and review of non-routine transactions involving estimates and judgments were operating
effectively and that we have remediated this material weakness.

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates

·       Employing additional finance and accounting staff as well as adding additional qualified personnel, as necessary, to further assist in the remediation and monitoring of internal control deficiencies.

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates

·       Training consistent to that which has occurred in prior quarters and prior years at the corporate office and foreign subsidiaries has recurring sessions scheduled in the remainder of fiscal year 2007 which focus awareness of revenue recognition concepts, with an emphasis on non-standard contracts; and

·       Employing additional finance and accounting staff as well as adding additional qualified personnel, as necessary, to further assist in the remediation and monitoring of internal control deficiencies.

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates

Subsequent to October 31, 2006, the Company has, and will continue to, identify and adopt measures to remedy the material weakness relating to evaluation and review of non-routine transactions described above. Such remedial measures include, but are not limited to, the following actions:

·       Improving the process related to non-routine events and transactions to ensure appropriate communication and evaluation of such events and transactions;

·       Management will review all current policies, practices, and controls related to revenue recognition, and provide additional education and training to our organization to heighten the awareness of revenue recognition concepts, with emphasis on non-standard contracts; and

·       Management will review all current policies, practices, and controls related to evaluating impairment considerations in connection with its equity investments and other non-routine transactions and provide additional education and training as necessary.

Remediation of Material Weakness Relating to Evaluation and Review of Non-routine Transactions involving Judgments and Estimates

·       The improvement of the contract administration process, including approval of distributor agreements, to ensure the approval and circulation of non-standard contracts, arrangements or transactions;

·       Providing additional and on-going training to our finance and accounting staff (including our foreign subsidiaries) on the application of technical accounting pronouncements, especially in the area of revenue recognition. Additionally, we will provide on-going training to our sales organization to heighten the awareness of revenue recognition concepts, with emphasis on non-standard contracts; and

·       Employing additional finance and accounting staff as well as adding additional qualified personnel and consultants, as necessary, to further assist in the remediation and monitoring of internal control deficiencies.