Management’s Discussion of Financial Responsibility
Management of Merrill Lynch & Co., Inc. is responsible for preparing the financial statements and related notes contained in this Annual Report. The consolidated financial statements and notes are prepared in accordance with generally accepted accounting principles in the United States of America. Other financial data included in the Annual Report are consistent with those in the financial statements.Management recognizes the importance of safeguarding Merrill Lynch’s assets and integrity. Therefore, Management devotes considerable attention to understanding the risks of its businesses, promoting the highest standards of ethical conduct, exercising responsible stewardship over Merrill Lynch’s assets, and presenting fair financial statements.
Merrill Lynch regularly reviews its framework of internal controls, taking into account changing circumstances. Corrective actions are taken to address control deficiencies, and other opportunities for improvement are implemented when cost effective.
The framework of internal control includes policies, procedures, and organizational structures that are overseen by a predominantly independent Board of Directors. Several committees of the Board actively participate in setting policy and monitoring controls, including overseeing Merrill Lynch’s compliance with acceptable business standards and ethics in accordance with the committees’ written charters of responsibilities and duties. The Audit Committee, which consists of four independent directors, monitors and oversees internal accounting controls and audit functions, and the performance and independence of our independent auditors. It also recommends overall policies regarding risk management. The Finance Committee, which consists of four independent directors, reviews significant financial issues and funding requirements. It also reviews and recommends overall policies regarding financial commitments, including acquisitions, divestitures and proprietary investments. The Management Development and Compensation Committee, also composed entirely of independent directors, oversees procedures for developing and assessing the performance of Merrill Lynch’s employees with an emphasis on ethical business behavior.
Oversight is provided by independent units within Merrill Lynch, working together to maintain Merrill Lynch’s internal control standards.
Corporate Audit reports directly to the Audit Committee, providing independent appraisals of Merrill Lynch’s internal accounting controls and compliance with established policies and procedures.
The Finance Division establishes accounting policies and procedures, measures and monitors financial risk, and prepares financial statements that fairly present the underlying transactions and events of Merrill Lynch. Corporate Risk Management is both independent from business line management and has oversight responsibility for Merrill Lynch’s market and credit risks. This group has clear authority to enforce trading and credit limits using various systems and procedures to monitor positions and risks.
The Office of the General Counsel serves in a counseling and advisory role to Management. In this role, the group develops policies; monitors compliance with internal policies, external rules, and industry regulations; and provides support in connection with the execution of various transactions.
The independent auditors, Deloitte & Touche LLP, perform annual audits of Merrill Lynch’s financial statements in accordance with generally accepted auditing standards. The independent auditors openly discuss with the Audit Committee their views on the quality of the financial statements and related disclosures and the adequacy of Merrill Lynch’s internal accounting controls. Quarterly review reports on the interim financial statements are also issued by Deloitte & Touche LLP. Merrill Lynch’s independent auditors are appointed each year by the Audit Committee and are given unrestricted access to all financial records and related data, including minutes of meetings of stockholders, the Board of Directors, and committees of the Board.
David H. Komansky
Chairman of the Board and
Chief Executive Officer
Thomas H. Patrick
Executive Vice President and
Chief Financial Officer
