Statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. As discussed in Note B to the Consolidated Financial Statements, accounting for long-term contracts involves estimation of the costs to complete a contract in order to accurately recognize the associated revenue. The estimated costs to complete each contract are used to assess the proportion of revenues to recognize based upon the costs incurred-to-date in comparison to the total estimate of costs to complete the contract. We identified the assessment of the estimation of costs to complete for a select group of long-term contracts in the defense segments as a critical audit matter. The estimated costs to complete for the select group of long-term contracts incorporates assumptions, such as labor hours and the cost of materials for the work to be performed. The evaluation of one or more of the assumptions used in estimating the costs to complete each selected contract required a high level of subjective auditor judgment, due to the nature of the individual contracts and related contract performance risks. Specifically, changes to certain assumptions may have a significant impact on the estimated revenue recorded during the period. The following are primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the estimation of costs to complete the selected long-term contracts. This included contract level controls over the estimated cost assumptions. For certain contracts, we compared the Company’s historical estimates of costs to actual costs incurred to assess the Company’s ability to estimate accurately. Based on the nature of the individual contract, we evaluated certain assumptions within the Company’s estimation of costs to complete by: – reading the underlying contract and related amendments to obtain an understanding of the contractual requirements and related performance obligations – assessing costs incurred to-date and the relative progress toward satisfying the performance obligation(s) of the contract – assessing, if relevant, the estimated costs to complete on similar or predecessor contracts and programs – inquiring of financial and operational personnel of the Company to identify factors that should be considered within the cost to complete estimates or indications of potential management bias – inspecting correspondence, if any, between the Company and the customer regarding actual to-date and expected performance – analyzing the sufficiency of the Company’s assessment of contract performance risks included within the estimated costs to complete. 102 Estimation of costs to complete for select long-term contracts