United States General Accounting Office
GAO Report to Congressional Committees
September 1997
FINANCIAL AUDIT
Review of the Audit of
SEMATECH’s Financial
Statements for 1996
GAO/AIMD-97-158
United States
GAO General Accounting Office
Washington, D.C. 20548
Accounting and Information
Management Division
B-278040
September 29, 1997
The Honorable Strom Thurmond
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate
The Honorable Floyd Spence
Chairman
The Honorable Ronald V. Dellums
Ranking Minority Member
Committee on National Security
House of Representatives
The National Defense Authorization Act for Fiscal Years 1988 and 1989
(Public Law 100-180) requires that we review the annual audits of the
financial statements of SEMATECH, Inc., a consortium of U.S. semiconductor
manufacturers and the Department of Defense, and provide comments to
you on the statements’ accuracy and completeness. This report presents
the results of our review of the audit conducted by Price Waterhouse, an
independent public accounting firm, of SEMATECH’s financial statements for
the year ended December 31, 1996.
Price Waterhouse’s opinion, dated January 31, 1997, stated that SEMATECH’s
Results in Brief financial statements for the year ended December 31, 1996, are fairly
presented in all material respects in conformity with generally accepted
accounting principles. Also, as required by generally accepted government
auditing standards, Price Waterhouse issued reports on SEMATECH’s
internal control structure and its compliance with laws and regulations.
These reports disclosed no material internal control weaknesses or
noncompliance with laws and regulations.
The results of our review disclosed no instances where Price Waterhouse’s
opinion on SEMATECH’s 1996 financial statements, its report on internal
control structure, or its report on compliance with laws and regulations
did not comply, in all material respects, with generally accepted
government auditing standards.
Page 1 GAO/AIMD-97-158 Sematech’s 1996 Financial Audit
B-278040
SEMATECH was incorporated in Delaware in August 1987 as a nonprofit
Background research and development corporation with the objective of advancing
semiconductor manufacturing technology. The National Defense
Authorization Act for Fiscal Years 1988 and 1989, enacted in
December 1987, authorized the Secretary of Defense to make grants to
SEMATECH to defray research and development expenses. The act also
required the Secretary of Defense to enter into a memorandum of
understanding with SEMATECH. The memorandum provided that the total
amount of funds made available to SEMATECH by federal, state, and local
government agencies for any fiscal year for the support of research and
development activities may not exceed 50 percent of the total cost of such
activities. The remaining 50 percent is funded by member companies.
Our review considered (1) the extent to which SEMATECH has ensured that
Scope and member company funding was not less than 50 percent of the cost of
Methodology research and development activities for 1996 and (2) the accuracy and
completeness of the financial audit conducted by Price Waterhouse.
To determine the extent of funding match, we reviewed SEMATECH’s 1996
financial statements and related notes and compared the amounts funded
by the member companies, plus interest earned and less any unallowable
costs, to amounts funded by federal and state government. There was no
local funding.
To determine the accuracy and completeness of the independent audit, we
• reviewed the auditor’s approach and planning of the audit;
• evaluated the qualifications and independence of the audit staff;
• reviewed the financial statements and auditor’s reports to evaluate
compliance with generally accepted accounting principles and generally
accepted government auditing standards; and
• reviewed the auditor’s working papers to determine (1) the nature, timing,
and extent of audit work performed, (2) the extent of audit quality control
methods the auditor used, (3) whether a review was conducted of
SEMATECH’s internal control structure, (4) whether the auditor tested
transactions for compliance with applicable laws and regulations, and
(5) whether evidence in the working papers supported the auditor’s
opinion on the financial statements and internal control structure and
compliance reports.
Page 2 GAO/AIMD-97-158 Sematech’s 1996 Financial Audit
B-278040
Our review, as differentiated from an audit of financial statements
performed in accordance with generally accepted government auditing
standards, was not intended to enable us to express, and we do not
express, an opinion on SEMATECH’s financial statements, a conclusion about
the effectiveness of its internal controls, or conclusions on compliance
with laws and regulations. Price Waterhouse is responsible for its report
on SEMATECH dated January 31, 1997, and the conclusions expressed in its
report.
Our review was conducted in accordance with generally accepted
government auditing standards. We discussed the results of our review
with cognizant Price Waterhouse, SEMATECH, and Defense officials. This
report does not include a copy of SEMATECH’s 1996 financial statements
because they contain proprietary information.
We are sending copies of this report to the Secretary of Defense, the
Chairman of the Board of Directors of SEMATECH, representatives of Price
Waterhouse, and other interested parties. Copies will be made available to
others upon request. Please call me or Roger Stoltz, Assistant Director, at
(202) 512-9489 if you or your staffs have any questions.
David L. Clark
Director, Audit Oversight and Liaison
(911743) Page 3 GAO/AIMD-97-158 Sematech’s 1996 Financial Audit
Ordering Information
The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.
Orders by mail:
U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013
or visit:
Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC
Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.
Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.
For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:
info@www.gao.gov
or visit GAO’s World Wide Web Home Page at:
http://www.gao.gov
PRINTED ON RECYCLED PAPER
United States Bulk Rate
General Accounting Office Postage & Fees Paid
Washington, D.C. 20548-0001 GAO
Permit No. G100
Official Business
Penalty for Private Use $300
Address Correction Requested
Financial Audit: Review of the Audit of SEMATECH's Financial Statements for 1996
Published by the Government Accountability Office on 1997-09-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)