Reserve Bank of Australia Annual Report – 2005 Financial Statements Independent Audit Report

INDEPENDENT AUDIT REPORT

To the Treasurer

Scope

The financial statements and directors' responsibility

The financial statements comprise:

• Directors' Statement
• Statements of Financial Position, Financial Performance and Distribution; and
• Notes to and forming part of the Financial Statements

for both the Reserve Bank of Australia (the Bank) and the consolidated entity, for the year ended 30 June 2005. The consolidated entity comprises both the Bank and the entity it controlled during the year.

The members of the Bank's Board are responsible for preparing the financial statements that give a true and fair view of the financial position and performance of the Bank and the consolidated entity, and that comply with Finance Minister's Orders made under the Commonwealth Authorities and Companies Act 1997, accounting standards and other mandatory financial reporting requirements in Australia. The members of the Bank's Board are also responsible for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial statements.

Audit approach

I have conducted an independent audit of the financial statements in order to express an opinion on them to you. My audit has been conducted in accordance with Australian National Audit Office Auditing Standards, which incorporate Australian Auditing and Assurance Standards, in order to provide reasonable assurance as to whether the financial statements are free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive, rather than conclusive, evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

While the effectiveness of management's internal controls over financial reporting was considered when determining the nature and extent of audit procedures, the audit was not designed to provide assurance on internal controls.

I have performed procedures to assess whether in all material respects the financial statements present fairly, in accordance with Finance Minister's Orders made under the Commonwealth Authorities and Companies Act 1997, accounting standards and other mandatory financial reporting requirements in Australia, a view which is consistent with my understanding of the Bank's and the consolidated entity's financial position and of their performance as represented by the statements of financial performance and cash flows.

The audit opinion is formed on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial statements; and
• assessing the appropriateness of the accounting policies and disclosures used, and the reasonableness of significant accounting estimates made by the Board.

Independence

In conducting the audit, I have followed the independence requirements of the Australian National Audit Office, which incorporate the ethical requirements of the Australian accounting profession.

Audit Opinion

In my opinion, the financial statements of the Reserve Bank of Australia and the consolidated entity:

1. have been prepared in accordance with Finance Minister's Orders made under the Commonwealth Authorities and Companies Act 1997; and
2. give a true and fair view of the Bank's and the consolidated entity's financial position as at 30 June 2005 and of their performance and cash flows for the year then ended, in accordance with:
   1. the matters required by the Finance Minister's Orders; and
   2. applicable accounting standards and other mandatory financial reporting requirements in Australia.

Ian McPhee
Auditor-General

Sydney
10 August 2005

GPO Box 707 CANBERRA ACT 2601
Centenary House 19 National Circuit
BARTON ACT
Phone (02) 6203 7500 Fax (02) 6273 5355
Email ian.mcphee@anao.gov.au