Eli Lilly 2004 Annual Report Download - page 92

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PROXY STATEMENT
9090
3. Pre-approve all audit services and approve permitted non-audit services (including fees and terms) to be per-
formed for Lilly by the independent auditor, consistent with the requirements of the SEC and NYSE or any stricter
standards as may be adopted by the committee.
4. Oversee the internal audit function, including:
• Reviewing the appointment and replacement of the general auditor;
• Reviewing and approving the internal audit plan;
• Reviewing signifi cant reports to management prepared by internal audit (and management’s response); and
• Discussing with the independent auditor and management the responsibilities, budget, and staffi ng of the
internal audit function.
The general auditor will report directly to the chair of the audit committee, with a secondary reporting rela-
tionship to the chief fi nancial offi cer for administrative purposes.
5. Prepare a report for inclusion in the company’s annual proxy statement in accordance with SEC regulations.
6. Review, with management and the independent auditors, the annual and quarterly fi nancial results before they
are fi led in periodic reports with the SEC or other regulators. These reviews shall include discussions with man-
agement and the independent auditor regarding signifi cant fi nancial reporting issues and judgments made in
connection with the preparation of Lilly’s fi nancial statements and any special steps adopted in light of material
control defi ciencies. The committee shall also receive regular reports from the independent auditor on the criti-
cal accounting policies and practices of Lilly and signifi cant alternative treatments of fi nancial information within
GAAP that have been discussed with management. The committee shall discuss with the independent auditor the
auditor’s assessment of the quality, not just the acceptability, of the company’s accounting principles as required
by SAS No. 61.
7. Review and discuss with management Lilly’s earnings press releases, including the use of “pro forma” non-
GAAP information, as well as fi nancial information and earnings guidance provided to analysts and rating agencies.
8. Provide an open avenue of communication between the independent auditor, the general auditor, and the board,
including suffi cient opportunity for the independent auditor and the general auditor to meet with the committee
without members of management present.
9. Consider and review with the independent auditor, the chief accounting offi cer, and the general auditor:
• The independent auditor’s audit of fi nancial statements and their report thereof;
• The adequacy of the company’s internal controls and disclosure controls;
• Any related signifi cant fi ndings and recommendations of the independent auditors or the internal auditors
together with management’s responses thereto;
• Any diffi culties encountered in the course of the audits, including any restriction on the scope of work or access
to required information; and
• Any material written communications between the independent auditor and management, including
management letters or schedules of unadjusted differences.
10. Oversee the company’s dissemination of and compliance with the company’s code of conduct, including but not
limited to those codes that apply specifi cally to employees involved in matters that affect accounting, auditing, and
fi nancial reporting.
11. Review procedures to promote and protect employee reporting of suspected fraud or wrongdoing relating to ac-
counting, auditing, or fi nancial reporting, including procedures for:
• Receiving, retaining, and addressing complaints received by Lilly relating to such matters;
• Enabling employees to submit to the committee, on a confi dential and anonymous basis, any concerns regarding
such matters; and
• Protecting reporting employees from retaliation.
12. Together with the public policy and compliance committee, assist the board in its oversight of legal and regula-
tory compliance. The audit committee shall have sole oversight over matters of fi nancial compliance (accounting,