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SIGNATURE STANLEY M. WELLS
TITLE PRESIDENT
ENSIGN INVESTORS, INC.
Report on Internal Control Structure
Required by Rule 17a-5 of the
Securities and Exchange Commission
To the Board of Directors of
Ensign Investors, Inc.
In planning and performing our audit of the consolidated financial statements
and supplemental schedules of Ensign Investors, Inc. for the year ended December
31, 1998 we considered its internal control, including control activities for
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the consolidated financial statements and
not to provide assurance on internal control.
Also, as required by rule 17a-5(g)(1) of the Securities Exchange Commission
(SEC), we have made a study of the practices and procedures followed by the
Company including tests of such practices and procedures that we considered
relevant to the objectives stated in rule 17a-5(g) in making the periodic
computations of aggregate indebtedness (or aggregate debits) and net capital
under rule 17a-3(a)(11) and for determining compliance with the exemptive
provisions of rule 15c3-3. Because the Company does not carry securities
accounts for customers or perform custodial function as relating to customer
securities, we did not review the practices and procedures followed by the
Company in any of the following:
1. Making quarterly securities examinations, counts, verifications, and
comparisons
2. Recordation of differences required by rule 17a-13
3. Complying with the requirements for prompt payment for securities under
Section 8 of Federal Reserve Regulation T of the Board of Governors of the
Federal Reserve System
The management of the Company is responsible for establishing and maintaining
internal control and the practices and procedures referred to in the
preceding paragraph. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and
related costs of controls and of the practices and procedures referred to in
the preceding paragraph and to assess whether those practices and procedures
can be expected to achieve the SEC's above-mentioned objectives. Two of the
objectives of internal control and the practices and procedures are to
provide management with reasonable but not absolute assurance that assets for
which the Company has responsibility are safeguarded against loss from
unauthorized use or disposition and that transactions are executed in
accordance with management's authorization and recorded properly to permit
the preparation of financial statements in accordance with generally accepted
accounting principles. Rule 17a-5(g) lists additional objectives of the
practices and procedures listed in the preceding paragraph.
Because of inherent limitations in internal control or the practices and
procedures referred to above, error or fraud may occur and not be detected.
Also, projection of any evaluation of them to future periods in subject to
the risk that they may become inadequate because of changes in conditions or
that the effectiveness of their design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of the
specific internal control components does not reduce to a relatively low
level the risk that error or fraud in amounts that would be material in
relation to the financial statements being audited may occur and not be detected
within a timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving internal control,
including control activities for safeguarding securities, that we consider to
be material weaknesses as defined above.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the SEC
to be adequate for its purposes in accordance with the Securities Exchange
Act of 1934 and related regulations, and that practices and procedures that
do not accomplish such objectives in all material respects indicate a
material inadequacy for such purposes. Based on this understanding and on
our study, we believe that the Company's practices and procedures were adequate
at December 31, 1998 to meet the SEC'S objectives.
This report is intended solely for the use of the Board of Directors,
management, the SEC, (Designated self-regulatory organization), and other
regulatory agencies that rely on rule 17a-5(g) under the Securities Exchange
Act of 1934 in their regulation of registered brokers and dealers, and should
not be used for any other purpose.
Salt Lake City, Utah
February 25, 1999
