IBM 2002 Annual Report Download - page 44

Report of Management
42 international business machines corporation and Subsidiary Companies
Report of Independent Accountants
To the Stockholders and Board of Directors of
International Business Machines Corporation:
In our opinion, based on our audits and the report of other
auditors, the accompanying consolidated financial statements
appearing on pages 64 through 104 present fairly, in all mate-
rial respects, the financial position of International Business
Machines Corporation and subsidiary companies at Dec-
ember 31, 2002 and 2001, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
These financial statements are the responsibility of the com-
pany’s management; our responsibility is to express an opinion
on these financial statements based on our audits. We did not
audit the financial statements of the company’s Business
Consulting Services Reporting Unit (which includes the con-
sulting practice acquired from us as discussed in note c) for
the three months ended December 31, 2002, which state-
ments reflect total revenues of 4.3 percent of the related
consolidated total in the period ended December 31, 2002.
Those statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included
for the company’s Business Consulting Services Reporting
Unit is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial state-
ments are free of material misstatement. An audit 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 and the report of
other auditors provide a reasonable basis for our opinion.
PricewaterhouseCoopers llp
New York, New York
January 16, 2003,
except for note y, as to which the date is February 21, 2003
Responsibility for the integrity and objectivity of the financial
information presented in this Annual Report rests with
IBM management. The accompanying financial statements
have been prepared in conformity with generally accepted
accounting principles, applying certain estimates and judg-
ments as required.
IBM maintains an effective internal control structure. It
consists, in part, of organizational arrangements with clearly
defined lines of responsibility and delegation of authority, and
comprehensive systems and control procedures. We believe
this structure provides reasonable assurance that transactions
are executed in accordance with management authorization,
and that they are appropriately recorded in order to permit
preparation of financial statements in conformity with gen-
erally accepted accounting principles and to adequately
safeguard, verify and maintain accountability of assets. An
important element of the control environment is an ongoing
internal audit program.
To assure the effective administration of internal controls,
we carefully select and train our employees, develop and dis-
seminate written policies and procedures, provide appropriate
communication channels, and foster an environment conducive
to the effective functioning of controls. We believe that it is
essential for the company to conduct its business affairs in
accordance with the highest ethical standards, as set forth in
the IBM Business Conduct Guidelines. These guidelines,
translated into numerous languages, are distributed to employ-
ees throughout the world, and reemphasized through internal
programs to assure that they are understood and followed.
PricewaterhouseCoopers LLP, independent accountants,
is retained to examine IBM’s financial statements. Its accom-
panying report is based on an examination conducted in
accordance with generally accepted auditing standards,
including a review of the internal control structure and tests
of accounting procedures and records.
The Audit Committee of the Board of Directors is com-
posed solely of outside directors, and is responsible for
recommending to the Board the independent accounting
firm to be retained for the coming year, subject to stock-
holder approval. The Audit Committee meets periodically
and privately with the independent accountants, with the
company’s internal auditors, as well as with IBM manage-
ment, to review accounting, auditing, internal control
structure and financial reporting matters.
samuel j. palmisano john r. joyce
Chairman of the Board, Senior Vice President
President and Chief Executive Officer Chief Financial Officer