AUDIT Seminar in Accounting & Society SOX – Section 404 & Enterprise Risk Management March 30, 2010

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2 Seminar in Accounting & Society SOX Section 404 – March 30, 2010 Rick Andrews Partner KPMG Karen Vangyia Partner KPMG

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 3 Agenda Introductions/Background Overview – What is Sarbanes-Oxley? Impact of SOX Impact of AS5 The Economy & Risk – What Happened? What’s Next? Enterprise Risk Management Questions

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 4 About KPMG KPMG LLP is a provider of audit, tax and advisory services KPMG LLP is #1 in the St. Louis market auditing 42% of St. Louis’ Top 50 Public Companies KPMG LLP is the U.S. member firm of the KPMG international network with a presence in ~ 150 countries KPMG has been recognized as a great place to work by Fortune, Working Mother, the Human Rights Campaign, Business Week, The Women’s Alliance, the Black Collegian, Diversity Inc and others KPMG LLP consists of 21,000 partners and staff across the U.S. The St. Louis office is supported by approximately 250 employees serving in the capacity of client support delivery or client service support functions

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 5 What is Sarbanes-Oxley? What is SOX 302? What is SOX 404? What is AS5?

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 6 Management’s Certifications The CEO and CFO must personally certify to the: Accuracy of financial statements Adequacy & effectiveness of disclosure controls and procedures (SOX 302) Adequacy & effectiveness of internal controls over financial reporting (SOX 404) Completeness of all disclosures that materially impact the financial statements or relate to frauds involving management with a significant role in internal controls over financial reporting

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 7 Impact of SOX on Stakeholders SOX 404 & 302 had a significant impact on: Board of Directors’ responsibilities Management’s responsibilities Internal Audit Department resources and responsibilities Costs of compliance

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 8 Impact on Board of Directors Increased liability & responsibility for Audit Committee members Qualifications for Audit Committee members more stringent (“financial expert” requirement) Director, Internal Audit reports directly to the Chairman of the Audit Committee Whistleblower Policy implemented with reports to the Audit Committee Chair

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 9 Impact on Board of Directors As a result, the Audit Committee has: Increased focus on internal controls & audit results Demanded swift remediation of internal control weaknesses Supported the addition of Internal Audit resources to support compliance efforts Initiated discussion over business risk management strategies across the organization

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 10 Impact on Management Certifying officers (CEO & CFO) are personally liable for undisclosed issues and significant financial misstatements Potential for large $$ penalties and prison sentences Increased accountability to Board with respect to maintaining internal controls and SOX compliance processes

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 11 Impact on Management As a result, Management has: Increased focus on internal controls & audit results Demanded swift remediation of internal control weaknesses Placed reliance on transparency of quarterly disclosure certification process Continued to set a strong “Tone at the Top” with respect to establishment and adherence to policies & controls

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 12 Impact on the Audit Profession “The Good” Stature of audit profession raised Bubble of demand for auditors Increased salaries “The Bad” Balance of work shifted to routine detail tests More challenging to find ways to provide value due to independence rules (external audit) & resource limitations (internal audit)

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 13 Benefits of SOX 404 & 302 Increased knowledge of internal controls throughout the organization Ownership of internal controls embedded within the organization More rapid remediation of significant control deficiencies Increased transparency over events that may impact the financial statements and disclosures (SOX 302)

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 14 Impact of AS5 External audit no longer opines on management’s approach to forming their opinion on internal controls over financial reporting Scales are balancing with more focus on a risk-based approach Management has increased flexibility in developing its compliance plan

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 15 Global disruption of economy Massive stock market decline Bernie Madoff Mortgage backed Securities AIG bailout Lehman Bankruptcy Bank foreclosures What Happened??? Wall St VS. Main St

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 16 What’s Next? The Economy, Risk & SOX 404 Companies are dealing with issues that are still evolving! As a result of the global economic disruption and the turmoil in the financial markets, companies are dealing with certain accounting and reporting issues for the first time in decades, and for some, the first time EVER

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 17 What’s Next? The Economy, Risk & SOX 404 Anticipate increased focus on Enterprise Risk Management (ERM) and integration of related control structure into organizations Boards and management are being asked why they did not foresee the potential impact of major risks Debt ratings agencies (Standard & Poor’s) are starting to ask about ERM

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 18 ENTERPRISE RISK MANAGEMENT Journey ERM

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 19 The Meaning of Risk is Changing Prior Thinking Current Thinking A way of preserving value by avoiding risk A way of creating sustainable value by embracing risk Focus on what has happened Focus on what could happen

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 20 What is Risk Management? What is Risk? “the chance of something that will have an impact on objectives. It is measured in terms of consequences and likelihood.” What is Risk Management? “the culture, processes and structures that are directed towards the effective management of potential opportunities and adverse effects”

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 21 Source: COSO Enterprise Risk Management – Integrated Framework (September 2004) Enterprise Risk Management Defined “Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.”

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 22 ERM Drivers? External triggers Share shocker: Surprises that lead to a falling or poor-performing share price Born in the U.S.A.: Sarbanes-Oxley controls reporting is time- consuming and must deliver back more than just compliance Capital concerns: Credit-rating agencies taking an interest in governance and risk management capabilities Rules and more rules: New trends in the regulatory environment at home and abroad (e.g., Euro-SOX) Listing pressure: Demerger or listing on a new exchange that requires additional governance and compliance processes Losing face: An event that could put the company’s reputation at significant risk of damage

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 23 ERM Drivers? (continued) Internal triggers Musical chairs A new CEO or Chair of the Board/Audit Committee who is open to fresh approaches Flex from the center Concerns at HQ about the level of control they have over a diverse business Expansionists The company is growing quickly and struggling to maintain control over operations A risky business Major changes in business direction or the dynamics of an industry Ticking off Ongoing Audit Committee or major shareholder complaining about a lack of internal control Keeping up with the Trends Executive management wants to maintain parity with the practices of their peers

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved % 20% 8% 4% 48% 76% 53% 50% 29% 24% 0%20%40%60%80%100% Other No/little change Improved equity value or reduced debt costs Reduced earnings volatility due to hedging Improved earnings or shareholder value Reduced infrastructure, operating, or resource costs Improved decision-making Improved operations Improved regulatory compliance Improved risk awareness and collaboration What value has Enterprise-wide risk management created? Source: KPMG, LLP: ERM in the US – A 2006 Report Card 265 US Company Responses Where Are Global Companies Heading with ERM? Expected Potential Benefits/Outcomes

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 25 Accountability Pyramid The Business Help manage the risks Risk Management Oversight Facilitate the process The Board Provide Governance Helps enable direct objective comparison of risks Risks can be monitored and reported Limits/KRI’s and accountabilities are set Policies and procedures defined and implemented Risk Policy and Appetite Key Systems/Processes Clear and unambiguous communication of the risk

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 26 Creating Process Building and maintaining a dynamic risk management framework and process to achieve sustainability Creating Content Identifying, evaluating and prioritizing enterprise risks KPMG ERM Framework Risk Governance Risk Assessment Risk Quantification & Aggregation Risk Monitoring and Reporting Risk & Control Optimization Framework Element Description Establishment of approach for developing, supporting, and embedding the risk strategy and accountabilities Identifying, assessing, and categorizing risks across the enterprise Measurement, analysis, and consolidation of enterprise risks Reporting, monitoring, and assurance activities to provide insights into risk management strengths and weaknesses Using risk and control information to help improve performance Likelihood Consequence Insignificant Minor Moderate Major Catastrophic Remote Unlikely PossibleLikelyAlmost certain Top Risks (those that threaten) 1.Strategic Priorities 2.Business Model 3.Corporate Existence Create Content Create Process ERM Content and Process

©2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 27 Questions??? The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.