# C_2011332EN.01013401.xml

| 14.11.2011 | EN | Official Journal of the European Union | C 332/134 |
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14.11.2011

EN

Official Journal of the European Union

C 332/134

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THE COURT’S STATEMENT OF ASSURANCE PROVIDED TO THE EUROPEAN PARLIAMENT AND THE COUNCIL — INDEPENDENT AUDITOR’S REPORT

2011/C 332/02

| I. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU) the Court has audited:






  (a) | the annual accounts of the European Union which comprise the consolidated financial statements (1) and the consolidated reports on implementation of the budget (2) for the financial year ended 31 December 2010; and |
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I.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU) the Court has audited:

(a)

the annual accounts of the European Union which comprise the consolidated financial statements (1) and the consolidated reports on implementation of the budget (2) for the financial year ended 31 December 2010; and

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| (b) | the legality and regularity of the transactions underlying those accounts. |
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(b)

the legality and regularity of the transactions underlying those accounts.

Management’s responsibility

Management’s responsibility

| II. | In accordance with Articles 310 to 325 of the TFEU and the Financial Regulation, management is responsible for the preparation and fair presentation of the annual accounts of the European Union and the legality and regularity of the transactions underlying them:






  (a) | Management’s responsibility in respect of the annual accounts of the European Union includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, on the basis of the accounting rules adopted by the Commission's accounting officer (3); and making accounting estimates that are reasonable in the circumstances. According to Article 129 of the Financial Regulation, the Commission approves the annual accounts of the European Union after the Commission’s accounting officer has consolidated them on the basis of the information presented by the other institutions and bodies and established a note, accompanying the consolidated accounts, declaring, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the European Union in all material aspects. |
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II.

In accordance with Articles 310 to 325 of the TFEU and the Financial Regulation, management is responsible for the preparation and fair presentation of the annual accounts of the European Union and the legality and regularity of the transactions underlying them:

(a)

Management’s responsibility in respect of the annual accounts of the European Union includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, on the basis of the accounting rules adopted by the Commission's accounting officer (3); and making accounting estimates that are reasonable in the circumstances. According to Article 129 of the Financial Regulation, the Commission approves the annual accounts of the European Union after the Commission’s accounting officer has consolidated them on the basis of the information presented by the other institutions and bodies and established a note, accompanying the consolidated accounts, declaring, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the European Union in all material aspects.

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| (b) | The way in which management exercises its responsibility for ensuring the legality and regularity of underlying transactions depends on the method of implementation of the budget foreseen in the Financial Regulation. Implementation tasks have to comply with the principle of sound financial management, requiring designing, implementing and maintaining effective and efficient internal control including adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. Regardless of the method of implementation applied, the Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Union (Article 317 of the TFEU). |
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(b)

The way in which management exercises its responsibility for ensuring the legality and regularity of underlying transactions depends on the method of implementation of the budget foreseen in the Financial Regulation. Implementation tasks have to comply with the principle of sound financial management, requiring designing, implementing and maintaining effective and efficient internal control including adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. Regardless of the method of implementation applied, the Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Union (Article 317 of the TFEU).

Auditor’s responsibility

Auditor’s responsibility

| III. | The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council with a statement of assurance as to the reliability of the accounts and the legality and regularity of the transactions underlying them. The Court conducted its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require that the Court plans and performs the audit to obtain reasonable assurance whether the annual accounts of the European Union are free from material misstatement and the transactions underlying them are legal and regular. |
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III.

The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council with a statement of assurance as to the reliability of the accounts and the legality and regularity of the transactions underlying them. The Court conducted its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require that the Court plans and performs the audit to obtain reasonable assurance whether the annual accounts of the European Union are free from material misstatement and the transactions underlying them are legal and regular.

| IV. | An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and the legality and the regularity of the transactions underlying them. The procedures are selected based on the auditor's judgment, including an assessment of the risks of material misstatement of the consolidated accounts and of material non-compliance of the underlying transactions with the requirements of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal control relevant to the preparation and fair presentation of the consolidated accounts and supervisory and control systems implemented to ensure legality and regularity of underlying transactions, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated accounts and the annual activity reports. |
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IV.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and the legality and the regularity of the transactions underlying them. The procedures are selected based on the auditor's judgment, including an assessment of the risks of material misstatement of the consolidated accounts and of material non-compliance of the underlying transactions with the requirements of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal control relevant to the preparation and fair presentation of the consolidated accounts and supervisory and control systems implemented to ensure legality and regularity of underlying transactions, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated accounts and the annual activity reports.

| V. | In the context of revenue, the Court’s audit of Value Added Tax- and Gross National Income-based own resources takes as its starting point the receipt by the Commission of the macroeconomic aggregates prepared by the member states, and then assesses the Commission's systems for processing the data until they are included in the final accounts and the contributions by the member states have been received. For traditional own resources, the Court examines the accounts of the customs authorities and analyses the flow of duties until the amounts are recorded in the final accounts and received by the Commission. |
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V.

In the context of revenue, the Court’s audit of Value Added Tax- and Gross National Income-based own resources takes as its starting point the receipt by the Commission of the macroeconomic aggregates prepared by the member states, and then assesses the Commission's systems for processing the data until they are included in the final accounts and the contributions by the member states have been received. For traditional own resources, the Court examines the accounts of the customs authorities and analyses the flow of duties until the amounts are recorded in the final accounts and received by the Commission.

| VI. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
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VI.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Reliability of the accounts

Reliability of the accounts

Opinion on the reliability of the accounts

Opinion on the reliability of the accounts

| VII. | In the Court's opinion, the annual accounts of the European Union present fairly, in all material respects, the financial position of the Union as of 31 December 2010, and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of the Financial Regulation and the accounting rules adopted by the Commission’s accounting officer. |
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VII.

In the Court's opinion, the annual accounts of the European Union present fairly, in all material respects, the financial position of the Union as of 31 December 2010, and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of the Financial Regulation and the accounting rules adopted by the Commission’s accounting officer.

Emphasis of matter in relation to the reliability of the accounts

Emphasis of matter in relation to the reliability of the accounts

| VIII. | Without calling into question the opinion expressed in paragraph VII, the Court draws attention to a change in the Commission’s accounting policy concerning pre-financing payments establishing or contributing to Financial Engineering Instruments which have not yet been used in the form of loans, guarantees or equity investments. This required the Commission to restate the 2009 annual accounts of the European Union on which the Court issued an unmodified opinion (4) (see notes 2.5, 2.9, 2.10 and 3.4 to the 2010 annual accounts of the European Union explaining the adjustments made). |
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VIII.

Without calling into question the opinion expressed in paragraph VII, the Court draws attention to a change in the Commission’s accounting policy concerning pre-financing payments establishing or contributing to Financial Engineering Instruments which have not yet been used in the form of loans, guarantees or equity investments. This required the Commission to restate the 2009 annual accounts of the European Union on which the Court issued an unmodified opinion (4) (see notes 2.5, 2.9, 2.10 and 3.4 to the 2010 annual accounts of the European Union explaining the adjustments made).

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Legality and regularity of the transactions underlying the accounts

Legality and regularity of the transactions underlying the accounts

Revenue

Revenue

Opinion on the legality and regularity of revenue underlying the accounts

Opinion on the legality and regularity of revenue underlying the accounts

| IX. | In the Court’s opinion, revenue underlying the accounts for the year ended 31 December 2010 is legal and regular in all material respects. |
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IX.

In the Court’s opinion, revenue underlying the accounts for the year ended 31 December 2010 is legal and regular in all material respects.

Commitments

Commitments

Opinion on the legality and regularity of commitments underlying the accounts

Opinion on the legality and regularity of commitments underlying the accounts

| X. | In the Court’s opinion, commitments underlying the accounts for the year ended 31 December 2010 are legal and regular in all material respects. |
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X.

In the Court’s opinion, commitments underlying the accounts for the year ended 31 December 2010 are legal and regular in all material respects.

Payments

Payments

Basis for adverse opinion on the legality and regularity of payments underlying the accounts

Basis for adverse opinion on the legality and regularity of payments underlying the accounts

| XI. | The Court concludes that overall the supervisory and control systems are partially effective in ensuring the legality and regularity of payments underlying the accounts. The policy groups Agriculture and Natural Resources and Cohesion, Energy and Transport are materially affected by error. The Court’s estimate for the most likely error rate for payments underlying the accounts is 3,7 %. |
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XI.

The Court concludes that overall the supervisory and control systems are partially effective in ensuring the legality and regularity of payments underlying the accounts. The policy groups Agriculture and Natural Resources and Cohesion, Energy and Transport are materially affected by error. The Court’s estimate for the most likely error rate for payments underlying the accounts is 3,7 %.

Adverse opinion on the legality and regularity of payments underlying the accounts

Adverse opinion on the legality and regularity of payments underlying the accounts

| XII. | In the Court’s opinion, because of the significance of the matters described in the basis for adverse opinion on the legality and regularity of payments underlying the accounts paragraph, the payments underlying the accounts for the year ended 31 December 2010 are materially affected by error. |
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XII.

In the Court’s opinion, because of the significance of the matters described in the basis for adverse opinion on the legality and regularity of payments underlying the accounts paragraph, the payments underlying the accounts for the year ended 31 December 2010 are materially affected by error.

8 September 2011.

Vítor Manuel da SILVA CALDEIRA

President

European Court of Auditors

12, rue Alcide De Gasperi, 1615 Luxembourg

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(1)  The consolidated financial statements comprise the balance sheet, the economic outturn account, the cash flow table, the statement of changes in net assets and a summary of significant accounting policies and other explanatory notes (including segment reporting).

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(2)  The consolidated reports on implementation of the budget comprise the consolidated reports on implementation of the budget and a summary of budgetary principles and other explanatory notes.

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(3)  The accounting rules adopted by the Commission’s accounting officer are derived from International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, in their absence, International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. In accordance with the Financial Regulation, the consolidated financial statements for the 2010 financial year were prepared (as they have been since the 2005 financial year) on the basis of these accounting rules adopted by the Commission’s accounting officer, which adapt accruals based accounting principles to the specific environment of the European Union, while the consolidated reports on implementation of the budget continue to be primarily based on cash movements.

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(4)  OJ C 303, 9.11.2010, p. 10.

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