• Discussion with the executive office, Tax Council and Board of Directors about scope and results of internal investigations conducted by the Company.

• Involvement of our forensic investigation specialists to evaluate scope and methodology used for internal investigation, follow up work conducted by the Company’s external legal advisors, conduct interviews with the Company’s main executives, and determine other procedures considered as necessary under work circumstances.
• Procedures for analysis of transaction documents related to the theme, including, among others, purchases of raw material (Nafta), expenses with services and payments without effective proof of service rendering, which were identified by the law firm responsible for investigations.
• Recalculation, with the aid of our tax specialists, of tax effects deriving from payments referring to services without effective proof of rendering.
• Obtaining specific representations of executive board, Tax Council, and Board of Directors.
• Evaluation of disclosures related to this theme in the financial statements.

Intangible assets recoverable value with undefined useful life (goodwill) and deferred tax assets – notes 14(a) and 20.2 (individual and consolidated)

The Company maintains a significant balance of intangible assets with undefined useful lives (goodwill) and deferred tax assets, whose recoverability is based on cash flow analyses and projections, and income generation. Due to uncertainties inherent to the process of determining future cash flows and some assumptions - such as discount rates, which are the basis for evaluation of recoverable value of such assets -, we considered this matter as significant for our audit.

How our audit conducted this issue

We understood the process and evaluated the design and implementation of internal controls related to the preparation and review of the business plan, budgets and impairment analysis provided by the Company. We can count with the help of our specialists in corporate finance to evaluate assumptions and methodologies, such as discount rate based on average capital cost (WAAC), growth rate for the next 5 years, expected sales volume and margin, among others, used by the Company to project cash flow. We also evaluated disclosures made by the Company, mainly those related to sensitivity analysis, which demonstrate the impact on recoverable value resulting from possible and reasonable changes in key assumptions used by the Company.

Fair value of financial instruments – notes 4 and 17 (individual and consolidated)

In view of relevance and complexity of estimates made to measure fair value of financial instruments and possible impact that changes in pricing assumptions and techniques used to measure such value would have on the Company’s income and financial position, and also considering that the Company adopts hedge accounting, we consider this as a significant matter for our audit.

How our audit conducted this issue

We understood the process and evaluated design and implementation of internal controls related to the process of evaluating financial instruments. Our audit work also included tests on samples of transactions with these financial instruments and, with the involvement of our specialists in financial instruments, we recalculated them based on pricing methodologies and data and information sources independently defined, and compared our results with those recorded by the Company. We evaluated effectiveness of hedge accounting calculation and also evaluated adequacy of disclosures made by the Company involving transactions with financial instruments and hedge accounting, mainly those related to sensitivity analysis of these instruments.

Other matters

Statements of value added

The individual and consolidated statements of value added (DVA) for the year ended December 31, 2016, prepared under the responsibility of the Company’s management, and presented herein as supplementary information for IFRS purposes, have been subject to audit procedures jointly performed with the audit of the Company's financial statements.  In order to form our opinion, we assessed whether those statements are reconciled with the financial statements and accounting records, as applicable, and whether their format and contents are in accordance with criteria determined in the Technical Pronouncement 09 (CPC 09) - Statement of Value Added issued by the Committee for Accounting Pronouncements (CPC). In our opinion, the statements of value added have been fairly prepared, in all material respects, in accordance with the criteria determined by the aforementioned Technical Pronouncement, and are consistent with the overall individual and consolidated financial statements.

Audit of the corresponding amounts

The examination of the individual and consolidated balance sheet on January 1, 2015 (derived from the financial statements for the year ended December 31, 2014), originally prepared prior to the adjustments described in Note 2.4, was conducted under the responsibility of other independent auditors, who issued an audit report without changes dated February 12, 2015. As part of our analysis of the financial statements for the year ended December 31, 2016, we examined the adjustments in the corresponding amounts of the balance sheets on January 1, 2015 and, in our opinion, are appropriate and have been properly carried out, in all material respects. We were not hired to audit, review or apply any other procedures in regard to the information related to the balance sheets as of January 1, 2015 and, accordingly, we did not express an opinion or any type of assurance taken as a whole.

Other information accompanying the individual and consolidated financial statements and the auditor's report

Management is responsible for the other information comprising the management report.

Our opinion on the individual and consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the individual and consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

Responsibilities of Management and Those Charged with Governance for the Individual and Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and subsidiaries financial reporting process.

Auditors’ Responsibilities for the Audit of the Individual and Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and international standards on auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Brazilian and international standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company’s and its subsidiaries internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and its subsidiaries ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company and subsidiaries to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the individual and consolidated financial statements.  We are responsible for the direction, supervision and performance of the group audit.  We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

São Paulo, August 15, 2017

KPMG Auditores Independentes

CRC 2SP014428/O-6

Original report in Portuguese signed by

Anselmo Neves Macedo

Accountant CRC 1SP160482/O-6

Braskem S.A.

Balance sheet at December 31

All amounts in thousands of reais                                                                                                                                                                                   

1

Braskem S.A.

Statement of operations

Years ended December 31

All amounts in thousands of reais

3

Braskem S.A.

Statement of comprehensive income

Years ended December 31

All amounts in thousands of reais, except earnings (loss) per share

4

Braskem S.A.

Statement of changes in equity

All amounts in thousands of reais