Eli Lilly 2006 Annual Report Download - page 78

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PROXY STATEMENT
7676
annual report on Form 10-K for the year ended December 31, 2006, for fi ling with the Securities and Exchange Com-
mission. We have also appointed the company’s independent auditors, subject to shareholder ratifi cation, for 2007.
Audit Committee
J. Michael Cook, Chair
Martin S. Feldstein, Ph.D.
Franklyn G. Prendergast, M.D., Ph.D.
Kathi P. Seifert
Services Performed by the Independent Auditor
The audit committee preapproves all services performed by the independent auditor, in part to assess whether the
provision of such services might impair the auditor’s independence. The committee’s policy and procedures are as
follows:
• The committee approves the annual audit services engagement and, if necessary, any changes in terms,
conditions, and fees resulting from changes in audit scope, company structure, or other matters. The committee
may also preapprove other audit services, which are those services that only the independent auditor reasonably
can provide. Since 2004, audit services have included internal controls attestation work under Section 404 of the
Sarbanes-Oxley Act.
• Audit-related services are assurance and related services that are reasonably related to the performance of the
audit, and that are traditionally performed by the independent auditor. The committee believes that the provision
of these services does not impair the independence of the auditor.
• Tax services. The committee believes that, in appropriate cases, the independent auditor can provide tax
compliance services, tax planning, and tax advice without impairing the auditor’s independence.
• The committee may approve other services to be provided by the independent auditor if (i) the services are
permissible under SEC and Public Company Accounting Oversight Board rules, (ii) the committee believes the
provision of the services would not impair the independence of the auditor, and (iii) management believes that
the auditor is the best choice to provide the service.
• Process. At the beginning of each audit year, management requests prior committee approval of the annual
audit, statutory audits, and quarterly reviews for the upcoming audit year as well as any other engagements
known at that time. Management will also present at that time an estimate of all fees for the upcoming audit
year. As specifi c engagements are identifi ed thereafter, they are brought forward to the committee for approval.
To the extent approvals are required between regularly scheduled committee meetings, preapproval authority is
delegated to the committee chair.
For each engagement, management provides the committee with information about the services and fees suf-
fi ciently detailed to allow the committee to make an informed judgment about the nature and scope of the services
and the potential for the services to impair the independence of the auditor.
After the end of the audit year, management provides the committee with a summary of the actual fees in-
curred for the completed audit year.
Independent Auditor Fees
The following table shows the fees incurred for services rendered on a worldwide basis by Ernst & Young LLP, the
company’s independent auditor, in 2006 and 2005. All such services were preapproved by the committee in accor-
dance with the preapproval policy.
2006 2005
(millions) (millions)
Audit Fees
• Annual audit of consolidated and subsidiary fi nancial statements, including Sarbanes-Oxley 404 attestation
• Reviews of quarterly fi nancial statements
• Other services normally provided by the auditor in connection with statutory and regulatory fi lings
$5.8 $5.8
Audit-Related Fees
•
Assurance and related services reasonably related to the performance of the audit or reviews of the fi nancial statements
—2006 and 2005: primarily related to employee benefi t plan and other ancillary audits, and accounting consultations
$0.4 $1.0
Tax Fees
• 2006: primarily related to compliance services outside the U.S.
• 2005: primarily related to tax planning and various compliance services
$1.5 $1.8
All Other Fees
• 2006: primarily related to compliance services outside the U.S.
• 2005: primarily related to upgrading and maintaining on-line training programs
$0.1 $0.1
Total $7.8 $8.7