IBM 2004 Annual Report Download - page 12

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
International Business Machines Corporation and Subsidiary Companies
10
ibm annual report 2004
To the Stockholders and Board of Directors of International Business Machines Corporation:
We have completed an integrated audit of International Business Machines Corporation’s
2004 consolidated financial statements and of its internal control over financial reporting
as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements
in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Our opinions, based on our audits and the reports of other auditors, are
presented below.
consolidated financial statements
In our opinion, based on our audits and the report of other auditors, the accompanying
consolidated financial statements appearing on pages 40 through 91 present fairly, in all
material respects, the financial position of International Business Machines Corporation and
its subsidiary companies at December 31, 2004 and 2003, and the results of their opera-
tions and their cash flows for each of the three years in the period ended December 31,
2004 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 did not audit the financial statements of the company’s Business Consulting
Services Reporting Unit (which includes the consulting practice acquired from us as dis-
cussed in note c) for the years ended December 31, 2004, December 31, 2003 and the
three months ended December 31, 2002, which statements reflect total revenues of 14.3
percent, 14.5 percent and 4.3 percent of the related consolidated totals in the years ended
December 31, 2004, 2003 and 2002, respectively. 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 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 and
the report of other auditors provide a reasonable basis for our opinion.
internal control over financial reporting
Also, in our opinion, based on our audit and the report of other auditors, management’s
assessment, included in Management’s Report on Internal Control over Financial Reporting
appearing on page 9, that 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 (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, based on our audit and the report of other auditors,
the company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2004, 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 did not examine the effectiveness
of the controls over the initiation and recording of revenue transactions and the recording
of direct costs at the company’s Business Consulting Services Reporting Unit as of Decem-
ber 31, 2004. The effectiveness of those controls was examined by other auditors whose
report has been furnished to us, and our opinions expressed herein, insofar as they relate
to the effectiveness of those controls, are based solely on the report of the other auditors.
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 stan-
dards 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 under-
standing of internal control over financial reporting, evaluating management’s assessment,
testing and evaluating the design and operating effectiveness of internal control, and per-
forming such other procedures as we consider necessary in the circumstances. We believe
that our audit and the report of the other auditors provide 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 account-
ing 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.
PricewaterhouseCoopers LLP
NEW YORK, NEW YORK
FEBRUARY 22, 2005