LeapFrog 2007 Annual Report Download - page 152

• the process used by management in formulating particularly sensitive accounting estimates and the
basis for the independent registered public accounting firm’s conclusions regarding the reasonableness
of those estimates; and
• 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 2007 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), as adopted by the PCAOB in Rule 3600T and Ernst & Young LLP reported that it is
independent under applicable standards in connection with its audit opinion for the company’s 2007 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 2007 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 2007, 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 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, 2007.
Audit Committee
E. Stanton McKee, Jr. (Chairman)
Stanley E. Maron
Caden Wang
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