The Certificate of the Comptroller and Auditor General to the House of Commons

I certify that I have audited the financial statements on pages 88 to 141 under the Government Resources and Accounts Act 2000. These financial statements have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and stocks and the accounting policies set out on pages 97 to 103.

Respective responsibilities of the Accounting Officer and Auditor

As described on page 71, the Accounting Officer is responsible for the preparation of the financial statements in accordance with the Government Resources and Accounts Act 2000 and Treasury directions made thereunder and for ensuring the regularity of financial transactions. The Accounting Officer is also responsible for the preparation of the other contents of the Annual Report and Accounts. My responsibilities, as independent auditor, are established by statute and guided by the Auditing Practices Board and the auditing profession's ethical guidance.  

I report my opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Government Resources and Accounts Act 2000 and Treasury directions made thereunder, and whether in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. I also report if, in my opinion, the Annual Report including the annual performance report is not consistent with the financial statements, if the Department has not kept proper accounting records, or if I have not received all the information and explanations I require for my audit.  

I read the other information contained in the Annual Report and Accounts, and consider whether it is consistent with the audited financial statements. I consider the implications for my certificate if I become aware of any apparent misstatements or material inconsistencies with the financial statements.  

I review whether the statement on pages 72 to 74 reflects the Department's compliance with Treasury's guidance Corporate Governance: Statement on Internal Control. I report if it does not meet the requirements specified by Treasury, or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements.  

Basis of audit opinion

I conducted my audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board except that the scope of my work was limited as explained below. An audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Department in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Department's circumstances, consistently applied and adequately disclosed.

I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by error, or by fraud or other irregularity and that, in all material respects, the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them.  

However the evidence available to me was limited in the following respect:

• Many of the Department's stock management systems were designed primarily for logistics purposes and have not lent themselves to providing the data required to account for financial transactions on an accruals basis. Consequently accounting transactions may not be correctly recorded. The evidence available to me was limited in respect of a £1,128 million net credit to the Operating Cost Statement relating to movements in consumable stock and capital spares.  

In respect of the above, there were no other satisfactory procedures I could adopt to confirm that charges and credits to the Operating Cost Statement for certain stock and fixed assets were complete or correctly recorded. In forming my opinion I have also evaluated the overall adequacy of the presentation of information in the financial statements.  

Qualified opinion arising from limitation in audit scope

In my opinion:  

except for any adjustments that might have been found to be necessary had I been able to obtain sufficient evidence concerning the value and disclosure of charges to the operating cost statement arising from stock written off and impairment of fixed assets, referred to in paragraphs 25 to 29 of my Report;

• the financial statements give a true and fair view of the state of affairs of the Ministry of Defence at 31 March 2003 and of the net resource outturn, resources applied to objectives, recognised gains and losses and cash flows for the year then ended, and have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and directions made thereunder by Treasury; and

• in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them.  

In respect alone of the limitations on my work relating to the issue mentioned above I have not obtained all the information and explanations that I considered necessary for the purpose of my audit.  

My Report on these financial statements is at pages 77 to 87.

John Bourn
Comptroller and Auditor General
29 October 2003

National Audit Office
157-197 Buckingham Palace Road
Victoria
London SW1W 9SP

Last Updated: 2 Dec 03