Costco 2006 Annual Report Download - page 40

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Costco Wholesale Corporation:
We have audited management’s assessment, included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting appearing under Item 8, that Costco Wholesale
Corporation and subsidiaries (the Company) maintained effective internal control over financial
reporting as of September 3, 2006, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(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 an opinion on management’s assessment and an opinion on
the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit 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. Our audit included 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 considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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 (1) pertain to the
maintenance of records that, in reasonable detail, 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 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.
In our opinion, management’s assessment that the Company maintained effective internal control over
financial reporting as of September 3, 2006, is fairly stated, in all material respects, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also, in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of September 3, 2006, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
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 September 3, 2006 and
August 28, 2005, and the related consolidated statements of income, stockholders’ equity and
comprehensive income, and cash flows for the 53 weeks ended September 3, 2006, and the 52 weeks
ended August 28, 2005 and August 29, 2004 and our report dated November 16, 2006 expressed an
unqualified opinion on those consolidated financial statements. Our report refers to the Company’s
adoption of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” and
Securities and Exchange Commission Staff Accounting Bulletin No. 108, “Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements”
effective August 29, 2005, the beginning of the Company’s fiscal year ended September 3, 2006.
Seattle, Washington
November 16, 2006
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