Eli Lilly 2013 Annual Report Download - page 147

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49
Board Proposal on Item 1
The Board recommends that you vote FOR each of the following nominees:
• Michael L. Eskew
• Karen N. Horn, Ph.D.
• William G. Kaelin, Jr., M.D.
• John C. Lechleiter, Ph.D.
• Marschall S. Runge, M.D., Ph.D.
Biographical information and a statement of their qualifications for each of the nominees may be found in the
“Director Biographies” section.
Item 2. Proposal to Ratify the Appointment of Principal
Independent Auditor
Audit Committee Report
The Audit Committee reviews the company’s financial reporting process on behalf of the Board. Management
has the primary responsibility for the financial statements and the reporting process, including the systems of
internal controls and disclosure controls. In this context, the committee has met and held discussions with
management and the independent auditor. Management represented to the committee that the company’s
consolidated financial statements were prepared in accordance with generally accepted accounting principles
(GAAP), and the committee has reviewed and discussed the audited financial statements and related
disclosures with management and the independent auditor, including a review of the significant management
judgments underlying the financial statements and disclosures.
The independent auditor reports to the Audit Committee, which has sole authority to appoint and to replace
the independent auditor.
The committee has discussed with the independent auditor matters required to be discussed with the Audit
Committee by the standards of the Public Accounting Oversight Board (PCAOB) and the NYSE, including the
quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments,
and the clarity of the disclosures in the financial statements. In addition, the committee has received the
written disclosures and the letter from the independent auditor required by applicable requirements of the
PCAOB regarding communications with the Audit Committee concerning independence, and has discussed
with the independent auditor the auditor’s independence from the company and its management. In
concluding that the auditor is independent, the committee determined, among other things, that the nonaudit
services provided by Ernst & Young LLP ("EY") (as described below) were compatible with its independence.
Consistent with the requirements of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), the committee
has adopted policies to ensure the independence of the independent auditor, such as prior committee
approval of nonaudit services and required audit partner rotation.
The committee discussed with the company’s internal and independent auditors the overall scope and plans
for their respective audits, including internal control testing under Section 404 of the Sarbanes-Oxley Act. The
committee periodically meets with the internal and independent auditors, with and without management
present, and in private sessions with members of senior management (such as the chief financial officer and
the chief accounting officer) to discuss the results of their examinations, their evaluations of the company’s
internal controls, and the overall quality of the company’s financial reporting. The committee also periodically
meets in executive session.
In reliance on the reviews and discussions referred to above, the committee recommended to the Board (and
the Board subsequently approved the recommendation) that the audited financial statements be included in
the company’s annual report on Form 10-K for the year ended December 31, 2013, for filing with the SEC.