The European Commission on Monday defended itself against a critical report from its auditors on how it manages the European Union's money.

The annual report of the European Court of Auditors on the EU's 2005 accounts was to be published on Tuesday after being presented to the European parliament late on Monday.

The auditors gave the EU's 2005 accounts a "clean bill of health", the Commission said, but they also voiced concerns about how some payments were processed, including whether they were paid on time, invoices properly signed, and the amounts paid correct.

The audit report also raised questions over whether the best and cheapest suppliers were chosen for contracts and voiced concerns about overstated net assets in the balance sheet, the Commission said.

The Commission's strong defence of its accounts was timed to coincide with the presentation of the annual report to the European Parliament's budgetary committee.

Last year the auditors opined that the European Union's notoriously murky accounts remained littered with errors and irregularities in 2004, and refused to sign the EU's accounts as it had done for more than a decade.

The Commission said that errors had been identified regarding the valuation of net assets in 2005 but that mistakes were "immaterial".

The net effect of overstated assets, as estimated by the auditors, was 314 million euros (394 million dollars), or 0.5 percent of total net assets, whereas auditors normally consider errors totalling up to one percent of revenue as immaterial, the Commission said in its statement.

"The Court (of Auditors) says it can only give positive assurance on some spending, not on the whole budget, as it has found errors in some of the payments under scrutiny," the Commission said.

EU Audit and Anti-fraud Commissioner Siim Kallas welcomed the auditors' "positive assessment of the EU accounts".

He said: "2005 was the first year when the Commission used a thoroughly modernised accounting system.

"In spite of the complexity of the reform and apart from the obvious related teething problems, the Commission delivered on its pledge to implement the system within two years.

"One will always find errors in individual transactions, in any organisation, but we have effective mechanisms to claw back any undue payments."

He added: "In 2005 the Commission recovered more than 2.170 billion euros (2.723 billion dollars). The Court should finally recognise this."

The Commission also argued that the auditors assessed the accounts on an annual basis whereas EU control systems operate on a multiannual basis and "effectively correct past errors, safeguarding taxpayers' interests".

The Commission said that it found some of the auditors' criticism "unduly severe and, in some cases, contentious", especially with regard to the control mechanisms in agriculture, structural funds and research.

The Commission thinks more responsibility in the whole audit process should be placed on national authorities, as they spend up to 76 percent of the EU's 100-billion-euro (125-billion-dollar) budget.

According to the Commission, the auditors agreed that the EU accounts "present fairly, in all material respects the financial position of the Communities as of 31 December 2005, and the results of their operations and cash flows for the year ended."

"The accusations that the Commission is not accountable for how it spends EU money are ridiculous," said Kallas.

So far in EU history, the European Parliament has refused to endorse the budget only twice: in 1984, and again in 1999, which led to the resignation of the then Commission led by Jacques Santer.

The European Court of Auditors is the EU's independent, external auditor and consists of one national from each member state.