LeapFrog 2006 Annual Report Download - page 138

• disagreements with management over the application of accounting principles, the basis for
management’s accounting estimates, and the disclosures in the financial statements.
Based on the discussions with management and Ernst & Young LLP concerning the audit, the Audit
Committee’s review of the representations of management and the report of the independent registered public
accounting firm to the Audit Committee, the Audit Committee’s independence review, as described below, and
the review of such other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee
recommended to the board of directors that the financial statements be included in LeapFrog’s 2006 annual
report on Form 10-K filed with the SEC.
Oversight of Independent Registered Public Accounting Firm
The Audit Committee appoints the independent registered public accounting firm and reviews their
performance and independence from management. Ernst & Young LLP provided to the Audit Committee the
written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and Ernst & Young LLP reported that it is independent under applicable standards in
connection with its audit opinion for the company’s 2006 financial statements. The Audit Committee has
discussed with Ernst & Young LLP its independence from the company.
As set forth in its charter, the Audit Committee must pre-approve all audit and non-audit services performed
by the independent registered public accounting firm, provided that, as allowed under its charter, the Audit
Committee has delegated to the Chairman of the Audit Committee the authority to grant such pre-approvals,
provided that all approvals made by the Chairman are presented to the full Audit Committee for its ratification at
each of its scheduled meetings. In determining whether to approve audit and non-audit services to be performed
by Ernst & Young LLP, the Audit Committee takes into consideration the fees to be paid for such services and
whether the fees would affect the independence of the independent registered public accounting firm in
performing its audit function. In addition, when determining whether to approve non-audit services to be
performed by Ernst & Young LLP, the Audit Committee considers whether the performance of such services is
compatible with maintaining the independence of the independent registered public accounting firm in
performing its audit function, and under no circumstances will the non-audit services include the prohibited
activities set forth in Section 201 of the Sarbanes-Oxley Act of 2002. The fees paid to the independent registered
public accounting firm for services performed for fiscal year 2006 are disclosed in this report under the caption
“Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm—Independent
Registered Public Accounting Firm Fee Information.”
Oversight of Assessment of Internal Control Over Financial Reporting
During 2006, management documented, tested and evaluated the company’s internal control over financial
reporting pursuant to the requirements of the Sarbanes-Oxley Act of 2002. The Audit Committee was kept
apprised of the company’s progress by management and the independent registered public accounting firm at
each regularly scheduled committee meeting as well as at specially scheduled meetings. At the conclusion of the
assessments, management and Ernst & Young LLP each provided the Audit Committee with its respective report
on the effectiveness of the company’s internal control over financial reporting. The committee reviewed
management’s assessment and the independent registered public accounting firm’s opinion on the effectiveness
of internal control over financial reporting that were included in the company’s annual report on Form 10-K for
the fiscal year ended December 31, 2006.
Audit Committee:
E. Stanton McKee, Jr. (Chairman)
Stanley E. Maron
Caden Wang
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