Philips 2006 Annual Report Download - page 113

Philips Annual Report 2006 113
To the Supervisory Board and Shareholders of Koninklijke Philips
Electronics N.V.:
We have audited the accompanying consolidated balance sheets of
Koninklijke Philips Electronics N.V. and subsidiaries as of December 31,
2006 and 2005, and the related consolidated statements of income,
stockholders’ equity and cash fl ows for each of the years in the three-
year period ended December 31, 2006, appearing on page 114 to 171.
We also have audited management’s assessment, included in the
accompanying Management’s Report on Internal Control over
fi nancial reporting, appearing on the previous page, that Koninklijke
Philips Electronics N.V. and subsidiaries maintained effective internal
control over fi nancial reporting prepared in accordance with accounting
principles generally accepted in the United States of America as of
December 31, 2006, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Koninklijke Philips Electronics N.V. and subsidiaries’ management is
responsible for these consolidated fi nancial statements, for maintaining
effective internal control over fi nancial reporting, and for its assessment
of the effectiveness of internal control over fi nancial reporting. Our
responsibility is to express an opinion on these consolidated fi nancial
statements, an opinion on management’s assessment, and an opinion
on the effectiveness of the Company’s internal control over fi nancial
reporting based on our 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 fi nancial statements are free
of material misstatement and whether effective internal control over
fi nancial reporting was maintained in all material respects. Our audit
of fi nancial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the fi nancial statements,
assessing the accounting principles used and signifi cant estimates
made by management, and evaluating the overall fi nancial statement
presentation. Our audit of internal control over fi nancial reporting
included obtaining an understanding of internal control over fi nancial
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 audits provide a reasonable
basis for our opinions.
A company’s internal control over fi nancial reporting is a process
designed to provide reasonable assurance regarding the reliability
of fi nancial reporting and the preparation of fi nancial statements for
external purposes in accordance with generally accepted accounting
principles in the United States. A company’s internal control over
fi nancial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail,
accurately and fairly refl ect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
fi nancial statements in accordance with generally accepted accounting
principles in the United States 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 fi nancial statements.
Because of its inherent limitations, internal control over fi nancial
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.
Koninklijke Philips Electronics N.V. and subsidiaries acquired Lifeline
Systems, Witt Biomedical Corporation, Intermagnetics General
Corporation, Avent, Bodine and PowerSentry (together “the
Acquired
Companies”) during 2006, and management excluded from
its assessment of the effectiveness of Koninklijke Philips Electronics N.V.
and subsidiaries’ internal control over fi nancial reporting as of
December 31,
2006, the Acquired Companies’ internal control
over fi nancial reporting associated with assets representing 5%
of total consolidated assets of Koninklijke Philips Electronics N.V.
and subsidiaries and sales of less than 1% of total consolidated sales
of Koninklijke Philips Electronics N.V. and subsidiaries as of and for
the year ended December 31, 2006. Our audit of internal control
over fi nancial reporting of Koninklijke Philips Electronics N.V. and
subsidiaries also excluded an evaluation of the internal control
over fi nancial reporting of the Acquired Companies.
In our opinion, the consolidated fi nancial statements referred to above
present fairly, in all material respects, the fi nancial position of Koninklijke
Philips Electronics N.V. and subsidiaries as of December 31, 2006 and
2005, and the results of their operations and their cash fl ows for each
of the years in the three-year period ended December 31, 2006, in
conformity with generally accepted accounting principles in the United
States. Also, in our opinion, management’s assessment that Koninklijke
Philips Electronics N.V. and subsidiaries maintained effective internal
control over fi nancial reporting as of December 31, 2006, is fairly
stated, in all material respects, based on the criteria established in
Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Furthermore, in our opinion, Koninklijke Philips Electronics N.V.
and subsidiaries maintained, in all material respects, effective internal
control over fi nancial 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).
As discussed in note 20 to the consolidated fi nancial statements,
effective December 31, 2006 Koninklijke Philips Electronics
N.V.
and subsidiaries adopted the provisions of SFAS No. 158, ‘Employers’
Accounting for Defi ned Benefi t Pension and Other Postretirement Plans’.
KPMG Accountants N.V.
Amstelveen, February 19, 2007
226 Corporate governance224 Reconciliation of
non-US GAAP information
234 The Philips Group
in the last ten years
236 Investor information
Report of independent registered public accounting fi rm