LeapFrog 2004 Annual Report Download - page 156

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•Earnings Press Releases—The Committee shall review all financial press releases and other financial
disclosures, including financial information and earnings guidance provided to analysts and rating
agencies. In particular, the Committee shall review financial disclosures containing pro forma
information to verify that they include reconciliations to the comparable GAAP information and do not
give undue prominence to the pro forma information or otherwise provide misleading presentations of
results of operations or financial condition.
•Fraud and Regulatory Noncompliance—The Committee shall review and assess the internal audit
function and external auditors’ responsibility and procedures for detecting accounting and reporting
financial errors, fraud and defalcations, illegal act, and noncompliance with the corporate code of
conduct and regulatory requirements.
•Internal Audit Responsibilities—The Committee shall review and assess the annual audit plan and the
process used to develop the plan, status of activities, significant findings, recommendations and
management’s response. The Committee shall also review the appointment and replacement of the
senior manager responsible internally for the audit.
•Regulatory Examinations—The Committee shall review and assess Securities and Exchange
Commission (“SEC”) inquiries and the results of examinations by other financial regulatory authorities
in terms of important findings, recommendations and management’s response.
•External Auditor Responsibilities—The Committee shall pre-approve and negotiate the engagement of
the external auditors, including the overall scope, extent, procedures and focus of the annual, and if
applicable interim, audit. The foregoing shall also include the scope and level of involvement with
unaudited quarterly or other interim-period information as well as the compensation to be paid to the
external auditors in connection with their engagement. The Committee shall pre-approve and negotiate
the engagement of external auditors, including the overall scope, extent, procedures and focus of non-
audit services.
•Financial Reporting and Controls—The Committee shall review and assess key financial statement
issues and risks, their impact or potential impact on reported financial information, the processes used
by management to address such matters, related auditor views and the basis for audit conclusions. The
Committee shall also confer with internal auditors (or other personnel responsible for the internal audit
function) and external auditors regarding the scope, adequacy and effectiveness of internal accounting
and financial reporting controls in effect.
•Risk Management—The Committee shall periodically review and assess the Company’s risk
management policies that relate to the financial control environment and financial reporting, and
discuss with management the Company’s major financial risk exposures and steps being taken to
monitor and control such exposures.
•Auditor Recommendations and Related Matters—The Committee shall discuss with the external
auditors the results of the annual audit, including the external auditors’ assessment of the quality, not
just acceptability, of accounting principles, the reasonableness of significant judgments, the nature of
significant risks and exposures, the adequacy of the disclosures in the financial statements and any
other matters required to be communicated to the Committee by the external auditors under GAAP and
the Sarbanes-Oxley Act. In connection with this discussion, the Committee shall also evaluate the
cooperation received by the external auditors during their audit examination, including any restrictions
on the scope of their activities or access to required records, data and information. The Committee shall
discuss with the outside auditor any problems or difficulties the outside auditor may have encountered
during the course of the audit work, including any restrictions on the scope of activities or access to
required information or any disagreements with management, whether or not those disagreements were
resolved to the satisfaction of the outside auditor. The Committee shall obtain from the outside auditor
assurances that Section 10A of the Securities and Exchange Act of 1934, as amended, has not been
implicated. The Committee shall review and assess important internal auditor (or other personnel
responsible for the internal audit function) and external auditor recommendations on financial
reporting, controls, other matters and management’s response.
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