LUCENT TECHNOLOGIES INC.
2003 Audit Charter: LU
AUDIT COMMITTEE CHARTER OF THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS
1.2 The Committee's primary audit committee duties and responsibilities are to assist the Board with respect to:
2.2 All members of the Committee shall meet the independence requirements of the New York Stock Exchange as interpreted by the Board in its business judgment.
2.3 Each Committee member shall be financially literate as such qualification is interpreted by the Board in its business judgment, or shall become financially literate within a reasonable period of time after appointment to the Committee.
2.4 At least one member of the Committee shall have accounting or related financial management expertise as the Board interprets such qualification in its business judgment.
3.2 The Committee may request that members of management and/or the Company's Independent Auditor be present as needed.
3.3 Quarterly, the Committee shall meet, in separate private sessions, with each of (i) the Company's chief financial officer, (ii) the Company's senior internal auditing executive, and (iii) the Independent Auditor.
3.4 Minutes of each meeting will be kept and distributed to the entire Board.
3.5 The presence of a majority of Committee members at any meeting shall constitute a quorum.
b. The Committee shall evaluate the performance of the Independent Auditor and, if so determined by the Committee, recommend that the Board replace the Independent Auditor. The Committee and the Board have the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the Company's Independent Auditor. The evaluation shall include the quality control procedures and the experience and qualifications of senior members of the Independent Auditor.
c. The Committee shall review and approve the scope of the audit and the audit fees to be paid to the Independent Auditor, as well as any significant variations to the original scope and the associated fees.
d. If the Company's Independent Auditor identifies a significant problem which is not being adequately addressed by management, it should be communicated immediately to the Committee by the Independent Auditor.
b. Actively engage in a dialogue with the Independent Auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the Independent Auditor.
c. Recommend, if determined by the Committee to be called for, that the Board take appropriate action in response to the Independent Auditor's report to satisfy itself of the Independent Auditor's independence.
d. Review and approve any services and the fees associated with such services provided by the Independent Auditor, that are exceptions to the "allowable traditional services" as defined in Addendum 1 adhered to this charter.
e. Review and approve, at least annually, management's guidelines for any hiring of employees of the Independent Auditor who were engaged on the Company's account.
5.2 The Committee shall discuss with the Independent Auditor the matters the Independent Auditor determines are required to be discussed by Statement on Auditing Standards No. 61.
5.3 The Committee shall discuss with management and the Independent Auditor alternative accounting methods that may be acceptable under GAAP. In addition, the Committee shall also discuss with management and the Company's Independent Auditor the effect of regulatory and accounting initiatives and any off-balance sheet structures.
5.4 The Committee shall discuss with management the Company's and its subsidiary and foreign affiliated entities' compliance with applicable legal requirements and the Company's Code of Conduct including disclosures of insider and related party transactions and the Committee shall ask the Independent Auditor to comment on these matters as appropriate.
5.5 The Committee shall review with management and the Independent Auditor any non-routine correspondence with regulators or governmental agencies and any employee complaints or published reports that raise material issues regarding the Company's financial statements or accounting policies.
5.6 Based on the review and discussions with management and the Independent Auditor referred to in paragraphs 4.2, 5.1, 5.2, 5.3, 5.4 and 5.5 above, the Committee will advise the Board of Directors whether it recommends that the audited financial statements be included in the Company's annual report on Form 10-K (or incorporated from the Annual Report to Shareowners).
5.7 The Committee or the Chairman of the Committee shall discuss with management and the Company's Independent Auditor the matters the Independent Auditor determines are required to be discussed by Statement on Auditing Standards No. 71 regarding the interim quarterly financial statements prior to filing the Form 10-Q with the Securities and Exchange Commission.
b. The status of internal control recommendations made by the Independent Auditor and Internal Auditing.
5.10 The Committee shall periodically receive reports from and discuss with the Company's General Counsel the adequacy of the policies and practices of the Company related to compliance with key regulatory requirements, conflicts of interest and ethical conduct, including any potential or actual conflicts of interest involving directors or officers of the Company.
5.12 The Committee shall review the appointment and replacement of the Company's senior internal auditing executive.
b. Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's annual proxy statement.
The following policy on the use of Lucent's Independent Auditors became effective upon the approval of the Board of Directors at its February 2002 Meeting.
LUCENT'S POLICY ON THE USE OF ITS INDEPENDENT AUDITORS
Effective immediately, the independent auditors, PricewaterhouseCoopers (PwC), shall be engaged only to provide audit, audit-related, tax, and other accounting and financial-related services. All existing contracts for consulting services to be performed by PwC shall continue until the earlier of the completion of services or contract termination in accordance with the terms and conditions of such contract. Effective immediately, Lucent will not engage PwC or request PwC to bid for any new consulting services, as defined.
Scope of Services
Allowable Traditional Services:
Audit and related services: Examples include accounting research and services related to SEC filings; carve-out audits; benefit plan audits and statutory audits.