Independent Auditor's report

To the Management of the

European Court of Auditors

We have audited the accompanying financial statements of the European Court of Auditors, which comprise the balance sheet as at 31 December 2007, the economic outturn account, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes.

Management's responsibility for the financial statements

The Management of the European Court of Auditors are responsible for the preparation and fair presentation of these financial statements in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said Council Regulation, and the European Court of Auditors' Accounting Rules. This responsibility 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; and making accounting estimates that are reasonable in the circumstances.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted by the ‘Institut des Réviseurs d'Entreprises’. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management of the European Court of Auditors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, these financial statements give a true and fair view of the financial position of the European Court of Auditors as of 31 December 2007, and of its financial performance and its cash flows for the year then ended in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said Council Regulation and the European Court of Auditors' Accounting Rules.

The accompanying notes form an integral part of these financial statements.

Statement of changes in equity for the year ended 31 December 2007

The accompanying notes form an integral part of these financial statements.

Cash and cash equivalents at the end of the period

Cash and cash equivalents at the beginning of the period

The accompanying notes form an integral part of these financial statements.

The accompanying notes form an integral part of these financial statements.

ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTS

1. Regulations and presentation of the accounts

The European Court of Auditors (hereafter the Court) was established by the Treaty of Brussels of 22 July 1975 and started operating as an external Community audit body in October 1977, with its headquarters in Luxembourg.

The Court is the EU institution established by the Treaty to carry out the audit of EU finances. As the EU's external auditor it contributes to improving EU financial management and acts as the independent guardian of the financial interests of the citizens of the European Union.

The Court renders audit services through which it assesses the collection and spending of EU funds. It examines whether financial operations have been properly recorded and disclosed, legally and regularly executed and managed so as to ensure economy, efficiency and effectiveness. The Court communicates the results of its audits in clear, relevant and objective reports. It also provides its opinion on financial management issues.

The Court promotes accountability and transparency and assists the European Parliament and Council in overseeing the implementation of the EU budget, particularly during the discharge procedure.

The financial year of the Court runs from 1 January to 31 December.

2. Significant accounting policies and presentation of the financial statements

2.1. Basis of presentation

The accounts of the Court are drawn up in accordance with the provisions of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities and with the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said financial Council Regulation.

The financial statements are prepared in accordance with the Accounting Rules of the European Communities, which have been inspired by International Public Sector Accounting Standard (IPSAS). These Accounting Rules are adopted by the Accounting Officer of the Commission after a consultation of the other institutions.

2.2. Valuation of foreign currency balances and transactions

Monetary items denominated in currencies other than EUR are translated into EUR at the exchange rate effective at the reporting date.

Non-monetary items carried at a historical cost denominated in a currency other than EUR are reported using the exchange rate at the date of acquisition.

Non-monetary items carried at a fair value denominated in a currency other than EUR are reported using the exchange rates that existed when the values were determined.

2.3. Intangible and tangible fixed assets

The intangible and tangible fixed assets are stated at historical cost less depreciation/amortisation and impairment. Low value items below EUR 420 are accounted as expenses during the year of acquisition. Assets delivered during the accounting year but not paid at year-end are reported as ‘under construction’.

Depreciation/amortisation is calculated by the straight-line method, starting the month of acquisition and charged over their estimated useful lives, as follows:

Intangible (Licences for computer software) 4 years Buildings 25 years Plant, machinery and tools 4, 8 years Furniture and vehicle fleet 4, 8, 10 years Computer hardware 4 years Fittings specific to leased buildings The duration of the lease Other fixtures and fittings 6 years

2.4. Employee benefit

Employee benefits represent the future pension rights of the Members of the Court. Under Article 19 of Council Regulation (EEC, Euratom, ECSC) No 2290/77 of 18 October 1977 determining the emoluments of the Members of the Court of Auditors (OJ L 268, 20.10.1977, p. 1), the benefits provided for in this pension scheme are entered in the budget of the Communities and the Member States jointly guarantee their payment.

The amounts guaranteed by the Member States are based, on the one hand, on the Accounting Rule No 12 ‘Employee benefits’ adopted by a decision of the Commission's accounting officer pursuant to Article 133 of the Financial Regulation applicable to the general budget of the European Communities, and, on the other hand, on the basis of an actuarial analysis carried out by the experts of the specialised PMO unit at the Commission.

2.5. Provisions for liabilities and charges

Provisions for liabilities and charges are intended to cover losses or debts the nature of which is clearly defined and which, at the date of the balance sheet are either likely to be incurred or certain to be incurred but uncertain as to their amount or as to the date on which they will arise.

3. Notes to the balance sheet

3.1. Tangible fixed assets

The movements in tangible fixed assets during the year 2007 were:

(EUR) Gross book value 1 January 2007 Additions Disposals Gross book value 31 December 2007 Accumulated depreciation 31 December 2007 Net book value 31 December 2007 Land 776 630 — — 776 630 — 776 630 Buildings 52 074 987 — — 52 074 987 –21 887 128 30 187 859 Plant, machinery and tools 1 198 673 126 083 –68 534 1 256 222 – 917 760 338 462 Computer hardware 3 867 333 921 863 – 426 784 4 362 412 –3 268 464 1 093 948 Furniture and vehicle fleet 1 845 083 95 793 – 225 307 1 715 569 –1 179 800 535 769 Other fixtures and fittings 1 043 800 — — 1 043 800 – 782 848 260 952 Assets under construction 199 254 90 047 – 199 254 90 047 — 90 047 Total 61 005 760 1 233 786 – 919 879 61 319 667 –28 036 000 33 283 667

3.2. Short-term receivables

(EUR) 31 December 2007 31 December 2006 Current receivables due to the transfer of national pension rights by staff 628 778 846 304 Deferred charges for building rentals and IT contracts 560 782 296 449 Sundry receivables mainly related to payroll and mission advances 485 079 841 749 Receivable from EC entities (Publications Office) 5 133 8 276 Total 1 679 772 1 992 778

3.3. Cash and cash equivalents

(EUR) 31 December 2007 31 December 2006 Imprest account 1 000 1 000 Bank 2 011 791 1 806 092 Total 2 012 791 1 807 092

3.4. Employee benefits

Since 2006, the calculation for future pension payments obligations is computed net of the taxes recovered on the future pension payments. In the financial statements as at 31 December 2006, all institutions of the Communities had used a tax rate of 12,4 %. As at 31 December 2007, all institutions were instructed to fine-tune the computation based on their own historical data over the last three years. This reassessment of the tax rate for the Court leads to an average tax rate of 17,7 %. Although the general computation method of the pension liability remains the same, the revised tax rate impacts on the variation in 2007 of the pension liability. As indicated in the table below, the pension provision decreases by EUR 2 279 511 instead of an increase of EUR 416 693 had the tax rate remained unchanged.

(EUR) Pension liability and effect of the revised tax rate Financial statements 31.12.2006 (12,4 %) p.m. 31.12.2007 (12,4 %) Financial statements 31.12.2007 (17,7 %) Gross amount 50 396 086 50 871 762 50 871 762 Tax rate (%) 12,40 % 12,40 % 17,70 % Taxes 6 249 115 6 308 098 9 004 302 Net amount 44 146 971 44 563 664 41 867 460 Variation in 2007 of net pension liability – 416 693 2 279 511

3.5. Long-term liabilities

The amount of EUR 175 000 is contractually due at the termination of the rental of the building K9.

3.6. Provision for risks and charges

The amount corresponds to the value, net of taxes, of untaken holidays owed to staff as at 31 December 2007.

3.7. Accounts payable

(EUR) 31 December 2007 31 December 2006 Accrued charges consist of expenses incurred but not yet invoiced of which EUR 1 100 000 was booked in 2007 to cover the expenses incurred for the preparation of the building K3 5 250 342 3 706 745 Sundry payables to staff (statutory rights, staff medical insurance) 522 592 557 087 Current payables to suppliers 484 724 801 070 Accounts payable against consolidated EC entities mainly to the European Parliament and to the Translation Centre 57 291 8 083 Total 6 314 949 5 072 985

4. Notes to the economic outturn account

4.1. It corresponds to the monthly calls for funds made by the Court to the Commission to replenish its bank account.

4.2. For the most part, this heading is made up of deductions from the salaries of Members and staff in respect of tax and social contributions.

4.3. ‘Other operating revenue’ arises among others from the sales of publications by the Publications Office.

4.4. The salaries of Members and staff of the Court represent 96 % of this amount. The rest includes the salaries of the contractual agents and temporary staff.

4.5. The fixed assets related expenses consist of the depreciation/amortisation of the tangible and intangible assets.

4.6. The most significant items in this heading are:

— buildings' rental and associated charges including costs for the K3,

— IT and telecommunications,

— missions expenses,

— cleaning and security services.

4.7. Bank interest earned on the Court's current account.

4.8. Bank charges levied on the Court's current account.

4.9. This amount includes:

(EUR) Pension payments of the year –2 020 041 Variation of Members' net pension liability 2 279 511 Total 259 470

5. Off balance sheet

5.1. Contingent assets

The following bank guarantees have been given by suppliers following contractual obligations:

(EUR) 2007 — Travel agency 50 000 — Car pool leasing 75 000 — Insurance company 1 361 Total 126 361

5.2. Commitments for future funding

In respect of current office rental contracts, the outstanding rental commitments amount to EUR 6 347 948, detailed as follows:

(EUR) 2007 — K8 building 3 243 684 — K9 building 2 894 873 — Brussels ‘Antenne’ 61 833 — Other (Cetrel, parking, Maison de l'Europe) 147 558 Subtotal 6 347 948 Operating lease for cars and copy machines 1 174 806 Commitments against appropriations not yet consumed -RAL-, after deduction of accruals for 2007 2 859 584 Total 10 382 338

5.3. The Court's buildings projects

As concerns its major buildings projects, the Court concluded on 15 December 1999 a framework contract with the Luxembourg State covering the construction of one or more extensions to the Court's building and a first extension has been built (the K2 building).

The Luxembourg State agreed to cede to the Court the right to use the land made available for building this first extension for a period of 49 years and for a price of EUR 1.

Any further building leases on other land needed for the other extensions must not exceed the expiry date of the building lease granted for the first extension.

The Luxembourg State also undertook to sell the land at any time at the market rate determined by a joint expert opinion.

For its part, the Court undertook to do all it can to purchase the land from the Luxembourg State. It would ask the budgetary authority for the necessary funds.

The Court has decided to go ahead with the construction of a second extension (the K3 building) and, because of different arrangements for carrying out the project, the Luxembourg State and the Court have concluded a new framework agreement on 22 February 2008. On signing it, the Court became liable to reimburse the State an amount of EUR 1 058 560 committed on the Court's behalf for the studies of the architect and engineers. Reimbursement will be made on the basis of amounts paid by the State and for which supporting documents are presented. An accrual of EUR 1 100 000 is included in the accounts to cover this liability.

As regards the two pieces of land relative to the two extensions mentioned above, the State will now sell these to the Court for a symbolic 1 euro. For its part, should the Court ever consider ceding one or other of the buildings to a third party other than a Community body or institution, the Court will return the land to the ownership of the State in return for a symbolic 1 euro, the latter disposing also of an option to buy the building at a price to be determined by an independent expert. In case the State decides not to exercise this option, it would provide a right to use the land to the purchasers of the building.

5.4. Potential liability for litigations

None.