US Airways 2004 Annual Report Download - page 102

Table of Contents
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with U.S. 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 (3) 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.
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement
of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in
management's assessment: As of December 31, 2004, the Company did not maintain effective internal control over financial reporting due to a material
weakness associated with its accounting for AWA's fuel hedging transactions. Management concluded that AWA's fuel hedging transactions did not qualify
for hedge accounting under U.S. generally accepted accounting principles and that the Company's financial statements for prior periods required restatement
to reflect the fair value of fuel hedging contracts in the balance sheets and statements of stockholders equity and comprehensive income of Holdings and
AWA. These accounting errors resulted from the lack of effective reviews of hedge transaction documentation and of quarterly mark-to-market accounting
entries on open fuel hedging contracts by personnel at an appropriate level.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets
of the Company as of December 31, 2004 and 2003, and the related consolidated statements of operations, cash flows and stockholders' equity and
comprehensive income, for the years then ended. The aforementioned material weakness was considered in determining the nature, timing, and extent of audit
tests applied in our audit of the Company's 2004 consolidated financial statements, and this report does not affect our report dated March 11, 2005, which
expressed an unqualified opinion on the Company's consolidated financial statements.
In our opinion, management's assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on criteria established in Internal Control – Integrated Framework issued by COSO. Also, in our opinion, because
of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective
internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated Framework issued by COSO.
/s/ KPMG LLP
Phoenix, Arizona
March 11, 2005
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