Summary of intended testimony of Judy C. Lewent on behalf of Merck & Co., Inc.
1) The primary function of the outside auditor is to provide an expert and independent appraisal of the fair presentation of its client's financial statements. An auditor's independence is integral part of this guardianship role of objective and independent financial reporting.
2) Certain practices help assure independence of the audit firm: peer review of the firm's audits both by internal staff and by other audit firms, open communication between the auditor and the Audit Committee, maintenance of an acceptable personnel rotation policy on the audit engagement, and a rigorous process for ensuring that the proposed scope of non-audit services provided by the auditor is appropriate.
3) Elements which help assure the independence of our auditor include the following: a) rotating the audit partner off of the engagement team every 5 years, and b) requiring Audit Committee approval of non-audit services provided by our auditors, except those that are deemed to be ancillary to the audit. Non-audit services, except those ancillary to the audit, must be demonstrated to be unavailable from another provider or materially more cost effective if provided by our auditor.
4) The process described above has resulted in the use of our audit firm for non-audit services only on rare occasions, and has not limited Merck's ability to obtain quality, cost effective services.