REPORT OF MANAGEMENT:
The management of American Express Company (the company) is responsible for the preparation and fair presentation of its Consolidated Financial Statements, which have been prepared in conformity with accounting principles generally accepted in the United States, and include amounts based on the best judgment of management. The company’s management is also responsible for the accuracy and consistency of other financial information included in this annual report.
In recognition of its responsibility for the integrity and objectivity of data in the financial statements, the company maintains a system of internal control over financial reporting which is designed to provide reasonable, but not absolute, assurance with respect to the reliability of the company’s financial statements. The concept of reasonable assurance is based on the notion that the cost of the internal control system should not exceed the benefits derived.
The internal control system is founded on an ethical climate and includes: (i) an organizational structure with clearly defined lines of responsibility, policies and procedures; (ii) a Code of Conduct; and (iii) the careful selection and training of employees. Internal auditors monitor and assess the effectiveness of the internal control system and report their findings to management and the Board of Directors throughout the year. The company’s independent auditors are engaged to express an opinion on the year-end financial statement and, with coordinated support of the internal auditors, review the financial records and related data and test the internal control system over financial reporting to the extent they believed necessary to support their report.
The Audit Committee of the Board of Directors, which has only outside directors, meets regularly with the internal auditors, management and independent auditors to review their work and discuss the company’s financial controls and audit and reporting practices. The independent auditors and the internal auditors independently have full and free access to the Audit Committee, without the presence of management, to discuss any matters which they feel require attention.
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
The Shareholders and Board of Directors of American Express Company
(First two paragraphs of standard unqualified report have been omitted.)
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Express Company at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.”
Ernst & Young LLP
New York, New York
January 27, 2003
Q1. What are the purposes of the two reports and who was responsible for writing each?
Q2. What information does the report of management provide to users of financial statements
Q3. Explain the purpose of the audit committee as described in the fourth paragraph of management's report. What is the relevance of the phrase "which has only outside directors"?
Q4. Is the audit report a standard wording unqualified, qualified - except for, or something else? Explain your answer
Q5. How long after the balance sheet date did the CPA firm complete the audit field work?