Freddie Mac 2011 Annual Report Download - page 205

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Freddie Mac:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and
comprehensive income, of equity (deficit), and of cash flows present fairly, in all material respects, the financial position
of Freddie Mac, a stockholder-owned government-sponsored enterprise, and its subsidiaries at December 31, 2011 and
2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31,
2011 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion,
the Company did not maintain, in all material respects, effective internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) because material weaknesses in internal control over
financial reporting related to: (1) disclosure controls and procedures that do not provide adequate mechanisms for
information known to the Federal Housing Finance Agency (“FHFA”) that may have financial statement disclosure
ramifications to be communicated to management, and (2) controls and procedures that do not provide adequate
mechanisms for managing information technology changes and monitoring information security existed as of that date. A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will
not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s
Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered these material weaknesses
in determining the nature, timing, and extent of audit tests applied in our audit of the 2011 consolidated financial
statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not
affect our opinion on those consolidated financial statements. The Company’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 management’s report referred to above. Our
responsibility is to express opinions on these financial statements and on the Company’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 financial 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 presentation. 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 effectiveness 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.
We have also audited in accordance with auditing standards generally accepted in the United States of America the
supplemental consolidated fair value balance sheets of the Company as of December 31, 2011 and 2010. As described in
“Note 17: Fair Value Disclosures”, the supplemental consolidated fair value balance sheets have been prepared by
management to present relevant financial information that is not provided by the historical-cost consolidated balance
sheets and is not intended to be a presentation in conformity with accounting principles generally accepted in the United
States of America. In addition, the supplemental consolidated fair value balance sheets do not purport to present the net
realizable, liquidation, or market value of the Company as a whole. Furthermore, amounts ultimately realized by the
Company from the disposal of assets or amounts required to settle obligations may vary significantly from the fair values
presented. In our opinion, the supplemental consolidated fair value balance sheets referred to above present fairly, in all
material respects, the information set forth therein as described in “Note 17: Fair Value Disclosures”.
As discussed in “Note 2: Conservatorship and Related Matters”, in September 2008, the Company was placed into
conservatorship by the FHFA. The U.S. Department of Treasury (“Treasury”) has committed financial support to the
Company and management continues to conduct business operations pursuant to the delegated authorities from FHFA
during conservatorship. The Company is dependent upon the continued support of Treasury and FHFA.
As discussed in “Note 1: Summary of Significant Accounting Policies”, the Company adopted as of January 1, 2010,
amendments to the accounting guidance for transfers of financial assets and the consolidation of variable interest entities,
which changed, among other things, how it evaluates securitization trusts for purposes of consolidation.
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