NTRS » Topics » Financial Reporting and Control Review Activities.

This excerpt taken from the NTRS DEF 14A filed Mar 14, 2005.

Financial Reporting and Control Review Activities.


·          Being directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation, and having each such registered public accounting firm report directly to the Committee (the registered public accounting firm engaged for the purpose of preparing or issuing audit reports for inclusion in the Corporation’s Annual Report on Form 10-K is referred to herein as the “public accountants”).


·          Reviewing and, in its sole discretion, approving in advance the Corporation’s public accountants’ annual engagement letter, including the proposed fees contained therein, as well as all audit and, as provided in the Act and the SEC rules and regulations promulgated thereunder, all permitted non-audit services engagements and relationships between Northern Trust and such public accountants (which approval should be made after receiving input from Northern Trust’s management, if desired). Approval of audit and permitted non-audit services will be granted by the Committee in its sole discretion.


·          Reviewing the performance of the Corporation’s public accountants, including the lead partner of the public accountants, and, in its sole discretion, making decisions regarding the replacement or termination of the public accountants when circumstances warrant.


·          Reviewing and approving all related party transactions disclosable pursuant to Item 404 of Regulation S-K, i.e., transactions or series of similar transactions to which Northern Trust is a party, in which the amount involved exceeds $60,000 and in which any director, executive officer, director nominee, beneficial holder of more than five percent of the Corporation’s voting securities or any immediate family member of any of the foregoing persons has a direct or indirect material interest.



·          Reviewing and discussing with management, the Corporation’s public accountants and, if appropriate, Northern Trust’s internal auditors, the following:


  (1) Northern Trust’s annual audited consolidated financial statements and quarterly consolidated financial statements, including the Corporation’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and any major issues related thereto, and the certifications required under Sections 302 and 906 of the Act;


  (2) such accounting policies (and changes therein) of Northern Trust, including any financial reporting issues which could have a material impact on Northern Trust’s consolidated financial statements, as are deemed appropriate for review by the Committee prior to any interim or year-end filings with the SEC or other regulatory body;


  (3) major issues regarding accounting principles and financial statement presentations, including (A) any significant changes in Northern Trust’s selection or application of accounting principles, (B) any analyses prepared by management and/or the public accountants setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the ramifications and effects of alternative GAAP methods on Northern Trust’s consolidated financial statements, and (C) all alternative treatments of financial information that have been discussed by the public accountants and management, and the treatment preferred by the public accountants;


  (4) all other material written communications between the public accountants and management, such as any management letter or schedule of unadjusted differences;


  (5) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the consolidated financial statements of Northern Trust; and


  (6) any other matters required to be brought forth by AICPA Statement of Auditing Standards No. 61.


·          As appropriate, receiving and discussing with the Corporation’s Chief Executive Officer and Chief Financial Officer and other senior members of management, Northern Trust’s internal auditors and the Corporation’s public accountants:


  (1) their assessments of the adequacy of internal financial controls, including the responsibilities, budget and staffing of Northern Trust’s internal audit function;


  (2) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Northern Trust’s ability to record, process, summarize and report financial information;


  (3) any fraud, whether or not material, that involves management or other employees who have a significant role in Northern Trust’s internal control over financial reporting;



any significant changes in internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting, including any




corrective actions or resolutions with regard to significant deficiencies and material weaknesses or the ability of management to override or compromise Northern Trust’s internal financial control system;


  (5) the reports issued with respect to the annual consolidated financial statements, the internal financial control structure and procedures for financial reporting, and compliance with laws and regulations relating to these statements or structure and procedures for financial reporting and the basis for such reports; and


  (6) the reports of the internal auditors on the internal audit program and the results of internal audit examinations, including significant findings.


·          Determining whether to recommend to the Board that the audited consolidated financial statements be included in the Corporation’s Annual Report on Form 10-K for the last fiscal year.


·          Discussing the Corporation’s earnings press releases, as well as discussing generally financial information and earnings guidance provided by the Corporation to analysts and rating agencies through discussion of the types of information to be disclosed and the types of presentations to be made.


·          Discussing the Corporation’s major financial reporting risk exposures and the guidelines and policies governing the process by which management monitors and controls financial reporting risk to the Corporation. Recognizing that it is the responsibility of one or more other Board Committees to discuss risks to the Corporation other than financial reporting risk and the guidelines and policies governing the process by which management monitors and controls those risks, the Committee should review in a general manner the processes by which those Committees accomplish those tasks.


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