23 CAR § 355-906. Annual audit and other reports

(a) Each franchise holder, unless specifically exempted by the Arkansas Racing Commission, shall, at its own expense, cause its annual financial statements to be audited in accordance with generally accepted auditing standards by an independent certified public accountant licensed to practice in the State of Arkansas. (b) The annual financial statements shall be prepared for the current year and shall present financial position and results of operations in conformity with generally accepted accounting principles. (c)(1) The financial statements required by this section shall include a footnote reconciling and explaining any differences between the financial statements included in the franchise holder’s annual report, filed in conformity with 23 CAR § 355-905 of this part, and the audited financial statements. (2) Such footnote shall, at a minimum, disclose the effect of such adjustments on: (A) Revenues from the EGS; (B) Revenues net of complimentary services; (C) Total costs and expenses; (D) Income before extraordinary items; and (E) Net income. (d) Two (2) copies of the annual audited financial statements, together with the report thereon of the franchise holder’s independent certified public accountant, shall be filed with the Arkansas Racing Commission, not later than June 1 following the end of the calendar year. (e) Each franchise holder shall require its independent certified public accountant to render the following additional reports: (1)(A) Report on material weaknesses in internal accounting control. (B) Whenever in the opinion of the independent certified public accountant there exists no material weaknesses in internal accounting control, the report shall so state; (2) Whenever, in the opinion of the independent certified public accountant, the franchise holder has materially deviated from the system of internal accounting control approved by the Arkansas Racing Commission or the accounts, records, and control procedures examined are not maintained by the franchise holder in accordance with this part, the report shall enumerate such deviations and such areas of the system no longer considered effective, and shall make recommendations regarding improvements in the system of internal accounting control; and (3)(A) The franchise holder shall prepare a written response to the independent certified public accountant's reports required by subdivisions (e)(1) and (e)(2) of this section. (B) The response shall indicate, in detail, the corrective actions taken. (C) Such response shall be submitted to the Arkansas Racing Commission within ninety (90) days from receipt of the independent certified public accountant's reports. (f) Two (2) copies of the reports required by subsection (e) of this section, and two (2) copies of any other reports on internal accounting control, administrative controls, or other matters relative to the franchise holder’s accounting or operating procedures rendered by the franchise holder’s independent certified public accountant, shall be filed with the Arkansas Racing Commission by the franchise holder by June 1 following the end of the calendar year or upon receipt, whichever is earlier. (g) If the franchise holder or any of its affiliates is publicly held, the Arkansas Racing Commission may require the affiliate to submit five (5) copies to the Arkansas Racing Commission of any report, including but not limited to forms S-1, 8-K, 10- Q, and 10-K, proxy or information statements, and all registration statements required to be filed by such franchise holder or affiliates with the Securities and Exchange Commission or other domestic or foreign securities regulatory agency, at the time of filing with such agency. (h)(1) If an independent certified public accountant who was previously engaged as the principal accountant to audit the franchise holder’s financial statements resigns or is dismissed as the franchise holder’s principal accountant, or another independent certified public accountant is engaged as principal accountant, the franchise holder shall file a report with the Arkansas Racing Commission within ten (10) days following the end of the month in which such event occurs, setting forth the following: (A) The date of such resignation, dismissal, or engagement; (B)(i) Whether in connection with the audits of the two (2) most recent years preceding such resignation, dismissal, or engagement there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of the former accountant would have caused him or her to make reference in connection with his or her report to the subject matter of the disagreement, including a description of each such disagreement. (ii) The disagreements to be reported include those resolved and those not resolved; and (C)(i) Whether the principal accountant's report on the financial statements for any of the past two (2) years contained an adverse opinion or a disclaimer of opinion or was qualified. (ii) The nature of such adverse opinion, disclaimer of opinion, or qualification shall be described. (2)(A) The franchise holder shall request the former accountant to furnish to the franchise holder a letter addressed to the Arkansas Racing Commission, stating whether he or she agrees with the statements made by the franchise holder in response to subdivision (h)(1)(A) of this section. (B) Such letter shall be filed with the Arkansas Racing Commission as an exhibit to the report required by subdivision (h)(1)(A) of this section.