Freddie Mac 2010 Annual Report Download - page 175

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Freddie Mac:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of
equity (deficit), and of cash flows present fairly, in all material respects, the financial position of Freddie Mac, a stockholder-
owned government-sponsored enterprise, and its subsidiaries at December 31, 2010 and 2009, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with
accounting principles generally accepted in the United States of America. Also, in our opinion, the Company did not
maintain, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) because a material weakness in internal control over financial reporting related to disclosure
controls and procedures that do not provide adequate mechanisms for information known to the Federal Housing Finance
Agency (“FHFA”) that may have financial statement disclosure ramifications to be communicated to management, existed as
of that date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in
Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered this material
weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2010 consolidated financial
statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not
affect our opinion on those consolidated financial statements. The Company’s management is responsible for these financial
statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in management’s report referred to above. Our responsibility is to express
opinions on these financial statements and on the Company’s internal control over financial reporting based on our audits
(which were integrated audits in 2010 and 2009). We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board (United
States) the supplemental consolidated fair value balance sheets of the Company as of December 31, 2010 and 2009. As
discussed in “Note 20: Fair Value Disclosures”, the supplemental consolidated fair value balance sheets have been prepared
by management to present relevant financial information that is not provided by the historical-cost consolidated balance
sheets and is not intended to be a presentation in conformity with accounting principles generally accepted in the United
States of America. In addition, the supplemental consolidated fair value balance sheets do not purport to present the net
realizable, liquidation, or market value of the Company as a whole. Furthermore, amounts ultimately realized by the
Company from the disposal of assets or amounts required to settle obligations may vary significantly from the fair values
presented. In our opinion, the supplemental consolidated fair value balance sheets referred to above present fairly, in all
material respects, the information set forth therein as described in “Note 20: Fair Value Disclosures”.
As explained in “Note 3: Conservatorship and Related Matters”, in September 2008, the Company was placed into
conservatorship by the FHFA. The U.S. Department of Treasury (“Treasury”) has committed financial support to the
Company and management continues to conduct business operations pursuant to the delegated authorities from FHFA during
conservatorship. The Company is dependent upon the continued support of Treasury and FHFA.
As discussed in “Note 2: Change in Accounting Principles”, the Company adopted as of January 1, 2010, amendments
to the accounting guidance for transfers of financial assets and the consolidation of variable interest entities, which changed,
among other things, how it evaluates securitization trusts for purposes of consolidation. Also, as discussed in “Note 2:
Change in Accounting Principles” in 2009 the Company adopted an amendment to the accounting guidance for investments
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