LeapFrog 2004 Annual Report Download - page 155

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• The external auditors shall be viewed as the Board and Committee’s representatives in executing the
Committee’s oversight of periodic, annual, and other financial reporting to stockholders. They shall
report all relevant issues to the Committee responsive to agreed-on Committee expectations. The
Committee should review the work of external auditors in executing their role of oversight.
• The Committee should review at least annually and report to the Board on the performance
(effectiveness, objectivity, and independence) of the external auditors. In this respect, the Committee
should seek to obtain from the external auditors a written statement from the external auditors
delineating all relationships between the auditor and the Company consistent with Independence
Standards Board Statement No. 98-1, “Independence Discussions with Audit Committees.” In addition,
a written statement from the external auditors shall describe: the firm’s internal quality-control
procedures and any material issues raised by the most recent internal quality-control review, or peer
review, of the firm, or by any inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent audits carried out by the firm, and
any steps taken to deal with any such issues. Additionally, the Committee should seek to maintain an
active dialogue with the external auditors with respect to disclosed relationships or services that may
impact auditor objectivity or independence and take appropriate action to ensure the independence of
the external auditors.
• The Committee must pre-approve the retention of the external auditor or any of its affiliates for any
audit and non-audit services. The Committee may delegate to one member of the Committee the
authority to grant such pre-approvals, provided that all approvals made by the delegate will be
presented to the full Committee at each of its scheduled meetings. Upon the pre-approval of any audit
or non-audit services, the Committee will negotiate the scope of services to be provided, the terms for
providing such services, and the fees to be paid to the external auditor or its affiliates for any such
services.
• In considering whether to pre-approve non-audit services, the Committee will consider whether the
external auditor’s provision of the non-audit services to the Company is compatible with maintaining
the independence of the external auditor and under no circumstances will the non-audit services include
the prohibited activities set forth in Section 201 of the Sarbanes-Oxley Act.
• The Committee shall review the experience and qualifications of the external auditor’s senior personnel
that are providing audit services to the Company.
• The internal audit function shall be responsible to senior management, but have a direct reporting
responsibility to the Board through the Committee.
• If either the internal auditors (or other personnel responsible for the internal audit function) or the
external auditors identify significant issues warranting the attention of the Committee or the full Board
that, in their judgment, have been communicated to management but have not been adequately
addressed, they should be communicated to the Committee chairperson or any member of the
Committee.
• Senior management will consult with the Committee regarding changes in the senior management of
the internal audit function.
PRIMARY COMMITTEE RESPONSIBILITIES
The primary Committee responsibilities are:
•Annual Financial Reports—The Committee shall review and discuss with management and the
external auditors the Company’s annual and interim financial reports, including the Company’s
disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of
Operation”, in advance of filings or distribution. The Committee will also review with the external
auditors all significant correcting adjustments (whether or not made) to ensure that all material
adjustments are properly reflected in the financial reports.
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