Independent Auditors' Report
Independent auditors’ report
To
The President and the Board
of Directors
Banco
Central do Brasil
Brasília - DF
1. We have
examined the balance sheet of Banco Central do Brasil as of December 31, 2002
and the related statements of income and changes in shareholders’ equity, for
the period from July 1 to December 31, 2002, which are the responsibility of
its Management. Our responsibility is
to express an opinion on these financial statements. The financial statements of the financial institutions in
liquidation, with which Banco Central do Brasil holds credits receivable, in
the amount of R$ 27,880,891 thousand, were examined by other independent
auditors. A provision for losses in the
amount of R$ 8,969,737 thousand was recorded for these credits, on the basis of
specific accounting rules adopted by Banco Central do Brasil. These rules require the determination of the
net assets of these institutions available to the Bank as being the total
assets reduced by the preferred liabilities, obtained from those financial
statements. Our opinion on the
sufficiency of the provision for losses on credits with the institutions in
liquidation is based on the opinions of those auditors on the financial
statements used as a basis for their calculation (Note 7).
2. With the
exception of that reported in paragraphs 3 and 4, our examination was conducted
in accordance with auditing standards generally applied in Brazil and included:
(a) planning of the audit work, considering the materiality of the balances,
the volume of transactions and the accounting systems and internal controls of
the Bank; (b) verification, on a test basis, of the evidence and records which
support the amounts and accounting information disclosed; and (c) evaluation of
the most significant accounting policies and estimates adopted by the
management of Banco Central do Brasil, as well as the presentation of the
financial statements taken as a whole.
3. As reported in
Note 13, Banco Central do Brasil now evaluates legal contingencies for purposes
of recording a provision for losses, based on the expectation of
occurring. This evaluation process
determines that a provision should only be recorded for those actions with an
unfavorable decision based on merit, transited in rem judicatam, and
those with court order debts payable issued.
Consequently, a provision of R$ 572,423 thousand has been
recognized. The evaluation process
should be extended to actions pending judgment, but at the balance sheet
closing date, this evaluation had not been concluded. Therefore, it was not practicable to extend our audit procedures
to conclude as to their effects on the financial statements.
4. As reported in Note 9d, Banco Central do Brasil has recorded balances
receivable and payable, arising from the settlement of accounts to be made
between the Bank, its employees, the National Institute of Social Security -
INSS and the Internal Revenue Service - SRF, for a net amount receivable of R$
344,332 thousand, in accordance with Law 9650.
This Law, with the changes introduced by Provisional Measure 45, of June
25, 2002, determined, among other provisions, the method for calculating of the
aforementioned settlement of accounts.
However, this Provisional Measure was rejected by the National Congress
on November 12, 2002, resulting in its effects suspended. Although the calculation of adjustments had
been concluded during the period of the
aforementioned Provisional Measure, was valid, the Project for Legislative
Decree was in process in the National Congress, which has the competence
authority to change the previously established situation. Therefore, only after the publication of the
decree, will it be possible to proceed with the effective settlement of
accounts.
5. As stated in
Note 17, Banco Central do Brasil is responsible for paying the retirement
pensions to its employees, who have retired since 1991 land do not participate
in the CENTRUS pension plan. This
obligation, justified by the legislation that establishes the “Sole Legal
System” - RJU, is settled on a monthly basis, from the budgetary appropriation
provided in the Administrative Budget.
Banco Central do Brasil did not record this obligation as a liability,
based on their understanding of the rules contained in Supplementary Law
101/2000, which provides that this actuarial obligation should be evaluated
within the context of the social security situation for the federal public
servants as a whole.
6. The financial statements
for the semester ended December 31, 2002 were prepared in accordance with the
accounting practices described in Note 3, which do not differ significantly
from the accounting practices adopted in Brazil. During 2002, with the approval of the National Monetary Council,
and in order to approximated to best international practices, Banco Central do
Brasil implemented certain changes in these accounting practices, mainly in
relation to: (i) Allocation of all expenses related to the obligations from
covering actuarial reserves with CENTRUS - Note 8; and (ii) Identification and
segregation of the portfolio of securities held to maturity, with consequent
adaptation of its criteria of valuation to corrected cost - Note 6.
7. In our opinion, based on
our examinations and on the opinion of other independent auditors, as stated in
paragraph 1, and except for the adjustments which might result from the matters
discussed in paragraphs 3, 4 and 5, the above-mentioned financial statements
present fairly, in all material respects, the financial position of Banco
Central do Brasil as of December 31, 2002, and the results of its operations
for the period from July 1 to December 31, 2002, in accordance with the
accounting practices adopted in Brazil, complemented by the specific rules
applicable to Banco Central do Brasil, described in Note 3.
8. The financial
statements for the semester ended December 31, 2001, presented for comparison
purposes, were examined by us, and we issued an opinion with shared
responsibility with the independent auditors for the matter discussed in
paragraph 1, and with a qualification with respect to the matter discussed in
paragraph 5.
February
10, 2003
KPMG
Auditores Independentes
CRC SP014428/O-6-F-DF
Ricardo
Anhesini Souza
Accountant CRC SP152233/O-S-DF