LF » Topics » COMMITTEES RELATIONSHIP WITH EXTERNAL AND INTERNAL AUDITORS
This excerpt taken from the LF DEF 14A filed Apr 22, 2005.
COMMITTEES RELATIONSHIP WITH EXTERNAL AND INTERNAL AUDITORS
The external auditors, in their capacity as independent public accountants, shall be ultimately accountable to the Board through the Committee as representatives of the
stockholders. The external auditors are required to report directly to the Committee. The Committee has the sole authority to retain, oversee and terminate the external auditors (subject, if applicable, to stockholder ratification) in regards to
both audit and non-audit services.
The external auditors shall be viewed as the Board and Committees representatives in executing the Committees 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 firms 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 auditors 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 auditors 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.
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