Independent Auditors Report

 
 
 
 
 
Independent auditors’ report
 
The President and Directors of the
Banco Central do Brasil
Brasília - DF
 
1. We have examined the balance sheet of Banco Central do Brasil as of December 31, 2001, and the related statements of income and changes in net equity, for the six-month period from July 1 to December 31, 2001, which are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements. As from the start of 2001, the financial statements of those financial institutions in liquidation, from which the Banco Central do Brasil has credits receivable of R$ 27,613,000 thousand, were examined by other independent auditors. A provision for losses of R$ 7,456,000 thousand was recorded against these credits, based on specific accounting rules adopted by the Banco Central do Brasil. These rules require the net assets of these institutions, available to the Bank, to be calculated after deducting the preferencial creditors, based on their financial statements. Our opinion as to the adequacy of such provision is based solely on the other auditors’ reports on the financial statements utilized as the basis for calculating this provision (Note 7).
 
2. Our examination was conducted in accordance with auditing standards applicable 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 accounting 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 Bank’s management, as well as the presentation of the financial statements taken as a whole.
 
3. As reported in Note 25-e, the Banco Central do Brasil is responsible for the payment of pensions to former employees who have retired since 1991, and who do not participate in the CENTRUS pension plan. Based on the "Sole Legal System" legislation, the monthly pension payments are recorded as an expense on a cash basis, and the resources are provided from the budget appropriation provided in the Administrative Budget. The Banco Central do Brasil did not record the actuarial liability from this obligation in accordance with the regulations stated in Complementary Law 101/2000, which establishes that this liability should be evaluated within the context of the pension liabilities for Brazilian federal public employees as a whole.
 
4. As reported in Note 3, the financial statements were prepared in accordance with accounting practices applicable to the Banco Central do Brasil, based on specific legislation, particularly Law 4595, Decree Law 2376 and Complementary Law 101/2000, which establish accounting practices different from those derived from the Brazilian Corporation Law. Furthermore, the specific legislation defines the accrual basis as the basic concept for preparing financial statements and recording operations. However, an interpretation of the Budgetary Law modifies this concept in relation to certain expenses derived from the Administrative Budget, which is subordinated to the Budgetary Law, particularly with respect to: (i) the recording of liabilities, incurred but not settled, as deferred expenses and (ii) the recording of a provision against contingent liabilities only on the issuance of court ordered debt instruments and not on the basis of an evaluation of the probability of loss.
 
5. In our opinion, based on our audits and the reports of other independent auditors, except for the effects of the matters described in paragraph 3, the aforementioned financial statements present fairly, in all material respects, the financial position of the Banco Central do Brasil, as of December 31, 2001, and the results of its operations for the six-month period then ended, in conformity with accounting practices applicable to the Banco Central do Brasil, described in Note 3.
 
6. The financial statements for the semester ended December 31, 2000, presented for comparison purposes, were examined by us, and we issued a qualified opinion in relation to a limitation in scope since it was not presented to us the audited financial statements of financial institutions in liquidation used as a basis for calculating the provision for losses described in the introductory paragraph above, which was resolved during 2001, and a qualification with respect to the matter presented in paragraph 3.
 
 
 
February 15, 2002
 
 
KPMG Auditores Independentes
CRC-SP-014428/O-6-F
 
Ricardo Anhesini Souza
Accountant CRC-SP-152233/O-S-DF