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Independent Auditors Report

Independent Auditors Report

To the Board of Directors and Shareholders of Icelandair Group hf.


Report on the Consolidated Financial Statements

We have audited the accompanying consolidated
financial statements of Icelandair Group hf. and its subsidiaries, (“the Group”),
which comprise the consolidated balance sheet as at December 31, 2006, and the
consolidated income statement, consolidated statement of changes in equity and consolidated
statement of cash flows for the three months period from 1 October 2006 to 31
December 2006, and a summary of significant accounting policies and other explanatory
notes.

We have also audited the pro forma financial information presented in the consolidated
income statement and consolidated statement of cash flows and the related disclosures
made in the notes to these consolidated financial statements, which have been
compiled on the basis described in note 2e to these consolidated financial statements, for
illustrative purposes only, to provide information about how the Group‘s operations and
cash flows might have been if the acquisition of Icelandair Group hf. had been effected at
the beginning of the year 2006.

Management‘s Responsibility for the Consolidat ed Financial
Statements

Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with International Financial Reporting Standards
as adopted by the EU . This responsibility includes: designing, implementing and
maintaining internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatements, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates
that are reasonable in the circumstances. Management is also responsible for the
preparation and fair presentation of the pro forma financial information presented in these
consolidated financial statements on the basis described in note 2e to these consolidated
financial statements.


Auditor‘s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements
based on our audit and to express an opinion as to the proper compilation of the pro forma
financial information. We conducted our audit in accordance with International Standards
on Auditing. Those standards require that we comply with relevant ethical requirements and
plan and perform the audit to obtain reasonable assurance whether the financial statements
are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on our judgement,
including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, we consider
internal control relevant to the entity‘s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity‘s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We planned and performed our work so as to obtain the information and explanations
we considered necessary in order to provide us with reasonable assurance that the pro
forma financial information has been properly compiled on the basis stated.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the
financial position of the Group as at 31 December 2006, and of its financial performance
and its consolidated cash flows for the three months period then ended in accordance
with International Financial Reporting Standards as adopted the EU .


In our opinion, the pro forma financial information has been properly compiled on the
basis stated in note 2e to these consolidated financial statements. Without qualifying our
opinion, we draw attention to note 2e, which states that the pro forma financial information
is not necessarily indicative of the operations and cash flows that would have been attained
if the acquisition of Icelandair Group hf. had indeed taken place at the beginning of the
year 2006.

Reykjavík, 20 February 2007

KPMG hf.

Jón S. Helgason
Sæmundur Valdimarsson

Til baka, Senda grein, Prenta greinina

 

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