Xerox 2006 Annual Report Download - page 110

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REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Shareholders of Xerox
Corporation:
We have completed integrated audits of Xerox
Corporation’s consolidated financial statements and of its
internal control over financial reporting as of
December 31, 2006 in accordance with the standards of
the Public Company Accounting Oversight Board
(United States). Our opinions, based on our audits, are
presented below.
Consolidated financial statements
In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of income,
cash flows and common shareholders’ equity present
fairly, in all material respects, the financial position of
Xerox Corporation and its subsidiaries at December 31,
2006 and 2005, and the results of their operations and
their cash flows for each of the three years in the period
ended December 31, 2006 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 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 provide a reasonable basis for our opinion.
As discussed in Note 1, the Company adopted the
recognition and disclosure provisions of Statement of
Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” as of December 31, 2006.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included
in the accompanying Management’s Report on Internal
Control Over Financial Reporting, that the Company
maintained effective internal control over financial
reporting as of December 31, 2006, 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, the Company maintained, in all material
respects, effective internal control over financial
reporting as of December 31, 2006, 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 conducted our audit of internal
control over financial reporting 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 effective internal control over financial
reporting was maintained in all material respects. An
audit of internal control over financial reporting includes
obtaining an understanding of internal control over
financial reporting, evaluating management’s assessment,
testing and evaluating the design and operating
effectiveness of internal control, and performing such
other procedures as we consider necessary in the
circumstances. We believe that our audit provides 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
accounting 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
108