Alcoa 2007 Annual Report Download - page 47

Report of Independent Registered
Public Accounting Firm
To the Shareholders and Board of Directors of Alcoa Inc.:
In our opinion, the accompanying consolidated balance sheets
and the related statements of consolidated income, shareholders'
equity and consolidated cash flows present fairly, in all material
respects, the financial position of Alcoa Inc. and its subsidiaries
(Alcoa) at December 31, 2007 and 2006, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 2007 in conformity with accounting
principles generally accepted in the United States of America.
Also in our opinion, Alcoa maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Alcoa'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 the accompanying Management's
Report on Internal Control over Financial Reporting. Our
responsibility is to express opinions on these financial statements
and on Alcoa's internal control over financial reporting based on
our integrated audits. 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 finan-
cial 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
included 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 pre-
sentation. 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 effec-
tiveness 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.
As discussed in Note A to the consolidated financial state-
ments, Alcoa changed its method of accounting for benefit plans,
stock-based compensation and mine stripping costs in 2006.
As discussed in Note C to the consolidated financial state-
ments, Alcoa changed its method of accounting for conditional
asset retirement obligations in 2005.
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 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 finan-
cial 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.
Pittsburgh, Pennsylvania
February 15, 2008
45