Eversource 2002 Annual Report Download - page 34

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Company Report
Management is responsible for the preparation, integrity, and fair
presentation of the accompanying consolidated financial statements
of Northeast Utilities and subsidiaries and other sections of this annual
report. These financial statements, which were audited by Deloitte &
Touche LLP in 2002 and 2001, and Arthur Andersen LLP in 2000, have
been prepared in conformity with accounting principles generally accepted
in the United States of America using estimates and judgments, where
required, and giving consideration to materiality.
The company has endeavored to establish a control environment that
encourages the maintenance of high standards of conduct in all of its
business activities. Management is responsible for maintaining a system
of internal control over financial reporting, which is designed to provide
reasonable assurance, at an appropriate cost-benefit relationship, to the
company’s management and Board of Trustees regarding the preparation
of reliable, published financial statements. The system is supported by
an organization of trained management personnel, policies and procedures,
and a comprehensive program of internal audits. Through established
programs, the company regularly communicates to its management
employees their internal control responsibilities and policies prohibiting
conflicts of interest.
The Audit Committee of the Board of Trustees is composed entirely
of independent trustees. The Audit Committee meets regularly with
management, the internal auditors and the independent auditors to
review the activities of each and to discuss audit matters, financial
reporting matters, and the system of internal control. The Audit
Committee also meets periodically with the internal auditors and the
independent auditors without management present.
Because of inherent limitations in any system of internal controls, errors
or irregularities may occur and not be detected. The company believes,
however, that its system of internal accounting control and control
environment provide reasonable assurance that its assets are safeguarded
from loss or unauthorized use and that its financial records, which are
the basis for the preparation of all financial statements, are reliable.
Additionally, management believes that its disclosure controls and
procedures are in place and operating effectively. Disclosure controls
and procedures are designed to ensure that information included in
reports such as this annual report is recorded, processed, summarized,
and reported within the time periods required and that information
disclosed is accumulated and reviewed by management for discussion
and approval.
Independent Auditors’ Report
To the Board of Trustees and Shareholders of Northeast Utilities:
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Northeast Utilities and
subsidiaries (a Massachusetts trust) (the “Company”) as of December 31,
2002 and 2001, and the related consolidated statements of income,
comprehensive income, shareholders’equity, cash flows and income
taxes for the years then ended. The consolidated financial statements of
the Company as of December 31, 2000, and for the year then ended
were audited by other auditors who have ceased operations. Those
auditors expressed an unqualified opinion on those financial statements
in their report dated January 22, 2002. 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 in accordance with auditing standards generally
accepted in the United States of America. 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 includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the 2002 and 2001 consolidated financial statements
present fairly, in all material respects, the financial position of Northeast
Utilities and subsidiaries (a Massachusetts trust) as of December 31,
2002 and 2001, and the results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 1C to the consolidated financial statements, effective
January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended. In 2002, the
Company adopted Emerging Issues Task Force Issue 02-3, “Accounting
for Contracts Involved in Energy Trading and Risk Management
Activities,” and, retroactively, restated the 2001 consolidated financial
statements. Also, as discussed in Note 5, the Company adopted SFAS
No. 142, “Goodwill and Other Intangible Assets,” as of January 1, 2002.
As discussed above, the consolidated financial statements of the
Company as of December 31, 2000 and for the year then ended were
audited by other auditors who have ceased operations. As described in
Note 5, the 2001 and 2000 consolidated financial statements have been
revised to include the transitional disclosures required by SFAS No. 142,
which was adopted by the Company as of January 1, 2002. Our audit-
procedures with respect to the disclosures in Note 5 with respect to
2000 included i) agreeing the previously reported net income to the
previously issued consolidated financial statements and the adjustments
to reported net income representing amortization expense (including
any related tax effects) recognized in that period related to goodwill and
intangible assets that are no longer being amortized as a result of
initially applying SFAS No. 142 (including any related tax effects) to the