Costco 1999 Annual Report Download - page 18

REPORT OF MANAGEMENT
The financial statements and related financial information in this Annual Report have been prepared by
and are the responsibility of the management of Costco. These financial statements have been prepared in
conformity with generally accepted accounting principles and necessarily include certain estimates and
judgments based on the best information available to management.
The Company maintains a system of internal accounting controls, which is supported by an internal audit
program, and is designed to provide reasonable assurance that the Company’s assets are safeguarded and
transactions are properly recorded. This system is continually reviewed and modified in response to
changing business conditions and operations and as a result of recommendations by the external and
internal auditors.
The financial statements of the Company have been audited by Arthur Andersen LLP, independent public
accountants. Their accompanying report is based on an audit conducted in accordance with generally
accepted auditing standards, including the related review of internal accounting controls and financial
reporting matters.
The Audit Committee of the Board of Directors, consisting solely of outside Directors, meets periodically
with the independent public accountants, the internal auditors and representatives of management to
discuss auditing and financial reporting matters. The Audit Committee, acting on behalf of the sharehold-
ers, maintains an ongoing appraisal of the internal accounting controls, the activities of the external
auditors and internal auditors and the financial condition of the Company. Both the Company’s indepen-
dent public accountants and internal auditors have complete access to the Audit Committee.
Richard A. Galanti
Executive Vice President
and Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Costco Wholesale Corporation:
We have audited the accompanying consolidated balance sheets of Costco Wholesale Corporation (a
Washington corporation) and subsidiaries (‘‘Costco’’) as of August 29, 1999 and August 30, 1998, and the
related consolidated statements of income, stockholders’ equity and cash flows for the 52 weeks ended
August 29, 1999, August 30, 1998 and August 31, 1997. These financial statements are the responsibility of
Costco’s management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Costco as of August 29, 1999 and August 30, 1998, and the results of its operations and
its cash flows for the 52 weeks ended August 29, 1999, August 30, 1998 and August 31, 1997 in conformity
with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, the Company changed its method of
accounting for membership fee income from a cash basis to a deferred basis whereby membership fee
income is recognized ratably over the one-year life of the membership.
Seattle, Washington
October 5, 1999
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