This excerpt taken from the PBG DEF 14A filed Mar 31, 2006.
REPORT OF THE AUDIT AND AFFILIATED TRANSACTIONS COMMITTEE
The Audit and Affiliated Transactions Committee (the Committee) of the Companys Board of Directors is composed of four directors, Barry H. Beracha (Chairperson), Ira D. Hall, Susan D. Kronick and Blythe J. McGarvie, each of whom has been determined by the Board of Directors to be an Independent Director. The Committee operates under a written charter that was approved by the Board of Directors and complies with the NYSE corporate governance rules and applicable SEC rules and regulations. The charter is posted on the PBG website at http://www.pbg.com under Investor Relations-Company Information-Corporate Governance. The Committee appoints and evaluates the Companys independent auditors.
In late 2004, in accordance with sound corporate governance practices, the Committee issued a request for proposal with regard to the Companys audit engagement (the Audit RFP). The Committee decided to issue the Audit RFP because it wanted the opportunity to review other auditing firms as prospective independent auditors for PBG and to consider the benefits and detriments of changing independent auditors. As a result of the Audit RFP, effective June 1, 2005, the Committee determined to terminate KPMG LLP as the Companys independent auditors and to retain Deloitte & Touche LLP. References in this report to the independent auditors refer to KPMG LLP for the period from January 2005 through May 2005 and to Deloitte & Touche LLP from June 2005 through December 2005.
Management is responsible for the Companys disclosure controls, internal controls over financial reporting and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Companys consolidated financial statements (in accordance with the Standards of the Public Company Accounting Oversight Board (United States)), and of the effectiveness of the Companys internal controls over financial reporting, and for issuing a report thereon. The Committees responsibility is to monitor and oversee these processes.
During 2005 the Committee met and held discussions with the independent auditors for the Company, with and without management present. Management represented that the consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Committee reviewed and discussed the audited consolidated financial statements and the Companys critical accounting policies with management and the independent auditors. For 2005, management completed the documentation, testing and evaluation of the Companys internal controls over financial reporting in response to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Throughout the year, management kept the Committee apprised of the progress of its evaluation of internal controls and the Committee provided oversight of the evaluation process. At the end of the year, management issued a report on the effectiveness of the Companys internal control over financial reporting. The Committee reviewed this report and discussed with management, the senior most internal auditor and the independent auditors the adequacy of the Companys internal controls over financial reporting and disclosure controls. The Committee also discussed with the independent auditors matters required to be discussed by Securities & Exchange Commission Rule 2-07 of Regulation S-X (SEC Rule 2-07) and Statement on Auditing Standards No. 61 (Communication with Audit Committees). The Committee evaluated the independent auditors performance, including a review of D&Ts internal quality-control procedures report.
The independent auditors also provided the Committee with the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), including a letter from the independent auditors confirming its independence. The Committee discussed with the independent auditors that firms independence from management and the Company.
The Committee maintains a policy requiring pre-approval by the Committee or its Chairperson of audit, audit-related, tax and other services performed by the independent auditors for the Company. The Committee has determined that the provision of all non-audit, audit-related and tax services performed for the Company by the independent auditors is compatible with maintaining that
firms independence. The Committee also maintains a policy that restricts the Companys hiring of employees and former employees of the Companys independent auditors. Additionally, the Committee established procedures for it to receive, retain and respond to complaints regarding accounting, internal accounting controls and auditing matters, as well as for confidential, anonymous submission by employees of concerns related to questionable accounting or auditing matters.
Based on reviews and discussions of the audited financial statements with management and the independent auditors and discussions with the independent auditors regarding matters required by SEC Rule 2-07 and Statement on Auditing Standards No. 61, a review of required written disclosures from the independent auditors required by Independence Standards Board Standard No. 1, and a discussion of the independent auditors independence, the Committee recommended to the Board of Directors that the audited financial statements be included in the Companys Annual Report on Form 10-K for fiscal year 2005 to be filed with the SEC.
The Audit and Affiliated Transactions Committee