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REPORT฀OF฀INDEPENDENT฀REGISTERED฀PUBLIC฀ACCOUNTING฀FIRM
To฀the฀Board฀of฀Directors฀and฀Stockholders฀of
Baker฀Hughes฀Incorporated
Houston,฀Texas
We฀have฀audited฀management’s฀assessment,฀included฀in฀the฀accompanying฀Management’s฀Report฀on฀Internal฀Control฀Over฀
Financial฀Reporting,฀that฀Baker฀Hughes฀Incorporated฀and฀subsidiaries฀(the฀“Company”)฀maintained฀effective฀internal฀control฀over฀
financial฀reporting฀as฀of฀December฀31,฀2004,฀based฀on฀criteria฀established฀in฀Internal฀Control฀–฀Integrated฀Framework฀issued฀by฀the฀
Committee฀of฀Sponsoring฀Organizations฀of฀the฀Treadway฀Commission.฀The฀Company’s฀management฀is฀responsible฀for฀maintaining฀
effective฀internal฀control฀over฀financial฀reporting฀and฀for฀its฀assessment฀of฀the฀effectiveness฀of฀internal฀control฀over฀financial฀report-
ing.฀Our฀responsibility฀is฀to฀express฀an฀opinion฀on฀management’s฀assessment฀and฀an฀opinion฀on฀the฀effectiveness฀of฀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฀financial฀reporting,฀evaluating฀management’s฀assessment,฀testing฀and฀evaluating฀the฀design฀and฀operating฀effectiveness฀of฀
internal฀control,฀and฀performing฀such฀other฀procedures฀as฀we฀considered฀necessary฀in฀the฀circumstances.฀We฀believe฀that฀our฀audit฀
provides฀a฀reasonable฀basis฀for฀our฀opinions.
A฀company’s฀internal฀control฀over฀financial฀reporting฀is฀a฀process฀designed฀by,฀or฀under฀the฀supervision฀of,฀the฀company’s฀principal฀
executive฀and฀principal฀financial฀officers,฀or฀persons฀performing฀similar฀functions,฀and฀effected฀by฀the฀company’s฀board฀of฀directors,฀
management,฀and฀other฀personnel฀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฀con-
trol฀over฀financial฀reporting฀includes฀those฀policies฀and฀procedures฀that฀(1)฀pertain฀to฀the฀maintenance฀of฀records฀that,฀in฀reasonable฀
detail,฀accurately฀and฀fairly฀reflect฀the฀transactions฀and฀dispositions฀of฀the฀assets฀of฀the฀company;฀(2)฀provide฀reasonable฀assurance฀
that฀transactions฀are฀recorded฀as฀necessary฀to฀permit฀preparation฀of฀financial฀statements฀in฀accordance฀with฀generally฀accepted฀
accounting฀principles,฀and฀that฀receipts฀and฀expenditures฀of฀the฀company฀are฀being฀made฀only฀in฀accordance฀with฀authorizations฀of฀
management฀and฀directors฀of฀the฀company;฀and฀(3)฀provide฀reasonable฀assurance฀regarding฀prevention฀or฀timely฀detection฀of฀unau-
thorized฀acquisition,฀use,฀or฀disposition฀of฀the฀company’s฀assets฀that฀could฀have฀a฀material฀effect฀on฀the฀financial฀statements.
Because฀of฀the฀inherent฀limitations฀of฀internal฀control฀over฀financial฀reporting,฀including฀the฀possibility฀of฀collusion฀or฀improper฀
management฀override฀of฀controls,฀material฀misstatements฀due฀to฀error฀or฀fraud฀may฀not฀be฀prevented฀or฀detected฀on฀a฀timely฀basis.฀
Also,฀projections฀of฀any฀evaluation฀of฀the฀effectiveness฀of฀the฀internal฀control฀over฀financial฀reporting฀to฀future฀periods฀are฀subject฀to฀
the฀risk฀that฀the฀controls฀may฀become฀inadequate฀because฀of฀changes฀in฀conditions,฀or฀that฀the฀degree฀of฀compliance฀with฀the฀poli-
cies฀or฀procedures฀may฀deteriorate.
In฀our฀opinion,฀management’s฀assessment฀that฀the฀Company฀maintained฀effective฀internal฀control฀over฀financial฀reporting฀as฀of฀
December฀31,฀2004,฀is฀fairly฀stated,฀in฀all฀material฀respects,฀based฀on฀the฀criteria฀established฀in฀Internal฀Control฀–฀Integrated฀Framework฀
issued฀by฀the฀Committee฀of฀Sponsoring฀Organizations฀of฀the฀Treadway฀Commission.฀Also฀in฀our฀opinion,฀the฀Company฀maintained,฀in฀
all฀material฀respects,฀effective฀internal฀control฀over฀financial฀reporting฀as฀of฀December฀31,฀2004,฀based฀on฀the฀criteria฀established฀in฀
Internal฀Control฀–฀Integrated฀Framework฀issued฀by฀the฀Committee฀of฀Sponsoring฀Organizations฀of฀the฀Treadway฀Commission.
We฀have฀also฀audited,฀in฀accordance฀with฀the฀standards฀of฀the฀Public฀Company฀Accounting฀Oversight฀Board฀(United฀States),฀
the฀consolidated฀financial฀statements฀of฀the฀Company฀as฀of฀December฀31,฀2004฀and฀for฀the฀year฀then฀ended,฀and฀the฀financial฀
statement฀schedule฀II;฀and฀our฀report฀dated฀February฀24,฀2005฀expressed฀an฀unqualified฀opinion฀on฀those฀consolidated฀financial฀
statements฀and฀financial฀statement฀schedule.
Houston,฀Texas
February฀24,฀2005
2004฀Form฀10-K฀฀฀฀฀37