Cisco 2005 Annual Report Download - page 14

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To the Board of Directors and Shareholders of Cisco Systems, Inc.:
We have completed an integrated audit of Cisco Systems, Inc.’s 2005 consolidated financial statements and of its internal control
over financial reporting as of July 30, 2005 and audits of its 2004 and 2003 consolidated financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated Financial Statements
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of shareholders’
equity and of cash flows appearing on pages 40 to 43 present fairly, in all material respects, the financial position of Cisco Systems,
Inc. and its subsidiaries at July 30, 2005 and July 31, 2004, and the results of their operations and their cash flows for each of the
three years in the period ended July 30, 2005 in conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of these statements 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 the financial statements are free of material misstatement. An audit of financial
statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Notes 2 and 3 to the consolidated financial statements, effective January 24, 2004, the Company adopted
Financial Accounting Standards Board Interpretation No. 46(R), “Consolidation of Variable Interest Entities.”
Internal Control Over Financial Reporting
Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over
Financial Reporting, that the Company maintained effective internal control over financial reporting as of July 30, 2005 based
on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of July 30, 2005, based on
criteria established in Internal Control – Integrated Framework issued by the COSO. 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 reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s
internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting 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. An audit of internal control over financial reporting includes 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 consider 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 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
the assets of the company; (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 receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the 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.
San Jose, California
September 16, 2005
Report of Independent Registered Public Accounting Firm