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Audit fees increased in 2004 due to increased
requirements associated with the Sarbanes-Oxley
Act of 2002, including the newly required audit
of the assertion by management of the effectiveness
of the Company’s internal controls. Audit-related
fees primarily include regulatory audits and audits
of subsidiaries. Tax fees primarily consist of
federal, state, local and international tax planning
and compliance. All other fees primarily consist
of support services to certain Verizon expatriate
employees and other advisory services. The Audit
and Finance Committee considered, in consultation
with management and the independent registered
public accounting firm, whether the provision
of these services is compatible with maintaining
the independence of Ernst & Young.
The Audit and Finance Committee has established
policies and procedures regarding pre-approval
of all services provided by the independent registered
public accounting firm. At the beginning of the
fiscal year, the Committee pre-approves the engagement
of the independent registered public accounting
firm to provide audit services based on fee estimates.
The Committee also pre-approves proposed audit-related
services, tax services and other permissible services,
based on specified project and service details,
fee estimates, and aggregate fee limits for each
service category. The Committee receives a report
at each meeting on the status of services provided
or to be provided by the independent registered
public accounting firm and the related fees.
The affirmative vote of a majority of eligible
shares present at the Annual Meeting, in person
or by proxy, and voting on the matter is required
to ratify the appointment of Ernst & Young.
If this appointment is not ratified by the shareholders,
the Audit and Finance Committee will reconsider
its decision.
One or more representatives of Ernst & Young
will be at the Annual Meeting. They will have
an opportunity to make a statement and will be
available to respond to appropriate questions.
The Board of Directors recommends a vote
FOR ratification.
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