Eli Lilly 2011 Annual Report Download - page 80

FORM 10-K
Management’s Reports
Management’s Report for Financial Statements—Eli Lilly and Company and Subsidiaries
Management of Eli Lilly and Company and subsidiaries is responsible for the accuracy, integrity, and fair
presentation of the financial statements. The statements have been prepared in accordance with generally accepted
accounting principles in the United States and include amounts based on judgments and estimates by management.
In management’s opinion, the consolidated financial statements present fairly our financial position, results of
operations, and cash flows.
In addition to the system of internal accounting controls, we maintain a code of conduct (known as The Red Book) that
applies to all employees worldwide, requiring proper overall business conduct, avoidance of conflicts of interest,
compliance with laws, and confidentiality of proprietary information. All employees must take training annually on
The Red Book and are required to report suspected violations. A hotline number is published in The Red Book to
enable employees to report suspected violations anonymously. Employees who report suspected violations are
protected from discrimination or retaliation by the company. In addition to The Red Book, the CEO, and all financial
management must sign a financial code of ethics, which further reinforces their fiduciary responsibilities.
The consolidated financial statements have been audited by Ernst & Young LLP, an independent registered public
accounting firm. Their responsibility is to examine our consolidated financial statements in accordance with
generally accepted auditing standards of the Public Company Accounting Oversight Board (United States). Ernst &
Young’s opinion with respect to the fairness of the presentation of the statements is included in Item 8 of our annual
report on Form 10-K. Ernst & Young reports directly to the audit committee of the board of directors.
Our audit committee includes five nonemployee members of the board of directors, all of whom are independent
from our company. The committee charter, which is available on our web site, outlines the members’ roles and
responsibilities and is consistent with enacted corporate reform laws and regulations. It is the audit committee’s
responsibility to appoint an independent registered public accounting firm subject to shareholder ratification,
approve both audit and non-audit services performed by the independent registered public accounting firm, and
review the reports submitted by the firm. The audit committee meets several times during the year with
management, the internal auditors, and the independent public accounting firm to discuss audit activities, internal
controls, and financial reporting matters, including reviews of our externally published financial results. The internal
auditors and the independent registered public accounting firm have full and free access to the committee.
We are dedicated to ensuring that we maintain the high standards of financial accounting and reporting that we have
established. We are committed to providing financial information that is transparent, timely, complete, relevant, and
accurate. Our culture demands integrity and an unyielding commitment to strong internal practices and policies.
Finally, we have the highest confidence in our financial reporting, our underlying system of internal controls, and our
people, who are objective in their responsibilities and operate under a code of conduct and the highest level of
ethical standards.
Management’s Report on Internal Control Over Financial Reporting—Eli Lilly and Company and Subsidiaries
Management of Eli Lilly and Company and subsidiaries is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
Act of 1934. We have global financial policies that govern critical areas, including internal controls, financial
accounting and reporting, fiduciary accountability, and safeguarding of corporate assets. Our internal accounting
control systems are designed to provide reasonable assurance that assets are safeguarded, that transactions are
executed in accordance with management’s authorization and are properly recorded, and that accounting records
are adequate for preparation of financial statements and other financial information. A staff of internal auditors
regularly monitors, on a worldwide basis, the adequacy and effectiveness of internal accounting controls. The
general auditor reports directly to the audit committee of the board of directors.
We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our evaluation under this framework, we concluded that our internal control over
financial reporting was effective as of December 31, 2011. However, because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The internal control over financial reporting has been assessed by Ernst & Young LLP as of December 31, 2011.
Their responsibility is to evaluate whether internal control over financial reporting was designed and operating
effectively.
John C. Lechleiter, Ph.D. Derica W. Rice
Chairman, President, and Chief Executive Officer Executive Vice President, Global Services and Chief Financial Officer
February 24, 2012
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