Exhibit 15.1
CHARTER OF THE AUDIT COMMITTEE
NETEASE.COM, INC.
AUTHORITY AND PURPOSE
The Audit Committee of NetEase.com, Inc. (the "Corporation") is appointed
by the Corporation's Board of Directors (the "Board") to oversee the accounting
and financial reporting processes of the Corporation and audits of the financial
statements of the Corporation. The Audit Committee (the "Committee") shall
undertake those specific duties and responsibilities listed below and such other
duties as the Board shall from time to time prescribe. All powers of the
Committee are subject to the restrictions designated in the Corporation's
Memorandum and Articles of Association and applicable law.
STATEMENT OF POLICY
The Committee shall oversee the accounting and financial reporting
processes of the Corporation and audits of the financial statements of the
Corporation. In so doing, the Committee shall endeavor to maintain free and open
means of communication among the directors, the independent auditors and the
financial management of the Corporation. In addition, the Committee shall review
the policies and procedures adopted by the Corporation to fulfill its
responsibilities regarding the fair and accurate presentation of financial
statements in accordance with generally accepted accounting principles and
applicable rules and regulations of the Securities and Exchange Commission and
the National Association of Securities Dealers (the "NASD") applicable to a
Nasdaq listed issuer.
COMMITTEE STRUCTURE AND MEMBERSHIP
The Committee shall be comprised of three or more directors, as determined
by the Board. The Committee members shall be designated by the Board and shall
serve at the discretion of the Board.
Each member of the Committee shall be an independent director. For purposes
hereof, an "independent director" shall be one:
1. who accepts no consulting, advisory or other compensatory fee from the
Corporation other than in his or her capacity as a member of the
Committee, the Board or any other committee of the Board or is not
otherwise an affiliated person of the Corporation,
1
2. who is free from any relationship that, in the opinion of the Board,
would interfere with the exercise of his or her independent judgment
in carrying out the responsibilities of a director, and
3. who otherwise satisfies the then current laws applicable to members of
the audit committee of the Corporation and the listing rules of any
securities exchange or securities quotation system on which any of the
Corporation's securities are listed.
The Board shall use its best efforts to ensure that at least one member of
the Committee shall be a "financial expert," as defined by Section 407 of the
Sarbanes-Oxley Act of 2002, having an understanding of generally accepted
accounting principles and financial statements, experience in the preparation or
auditing of financial statements of companies generally comparable to the
Corporation, experience in the application of generally accepted accounting
principles in connection with the accounting for estimates, accruals and
reserves, experience with internal accounting controls and an understanding of
audit committee functions.
Each member of the Committee shall be able to read and understand
fundamental financial statements in accordance with the rules of the National
Association of Securities Dealers (the "NASD") applicable to Nasdaq listed
issuers. At least one member shall have past employment experience in finance or
accounting, a professional certification in accounting or other comparable
experience or background that results in the individual's possessing the
requisite financial sophistication, including a current or past position as a
chief executive or financial officer or other senior officer with financial
oversight responsibilities.
The quorum necessary for the transaction of business of the Committee shall
be two, and all matters arising at a Committee meeting shall be determined by a
majority of votes of the members present.
POWERS
The Committee shall have the power to conduct or authorize investigations
into any matters within the Committee's scope of responsibilities. The Committee
shall be empowered to engage independent counsel and other advisers, as it
determines necessary to carry out its duties. While the Committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Corporation's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. Those tasks are the responsibility of
management and the independent auditor. The audit committee shall meet at least
four times annually, or more frequently as circumstances dictate.
RESPONSIBILITIES
The Committee's policies and procedures should remain flexible, in order to
best react to changing conditions and to ensure to the Board and the
Corporation's
2
stockholders that the corporate accounting and reporting practices of the
Corporation are in accordance with all requirements and are of the highest
quality.
In meeting its responsibilities, the Committee is expected to:
1. Review and reassess the adequacy of this Charter annually.
2. With respect to the Corporation's independent auditors:
a. Appoint the Corporation's independent auditors, determine its
compensation and oversee its work. The Committee shall preapprove
all auditing services (including the provision of comfort
letters) and non-audit services provided by the independent
auditors to the Corporation and consider whether such services
are permissible under applicable law. The Committee may delegate
to one or more designated Committee members the authority to
grant preapprovals required by the foregoing sentence. The
decisions of any Committee member to whom authority is delegated
hereunder shall be presented to the Committee at each of its
scheduled meetings. The independent auditors shall be ultimately
accountable to the Board and to the Committee as representatives
of the Corporation's stockholders.
b. Review the independence of the independent auditors, including a
review of management consulting services provided by the
independent auditors and related fees. The Committee shall
require the independent auditors at least annually to provide a
formal written statement delineating all relationships between
the independent auditors and the Corporation consistent with the
rules of the NASD applicable to Nasdaq listed issuers and request
information from the independent auditors and management to
determine the presence or absence of a conflict of interest. The
Committee shall actively engage the auditors in a dialogue with
respect to any disclosed relationships or services that may
impact the objectivity and independence of the auditors. The
Committee shall take, or recommend that the full Board take,
appropriate action to oversee the independence of the auditors.
3. Review with management the scope and responsibilities of an internal
audit department and on the appointment, replacement, reassignment or
dismissal of an internal audit department manager or director and work
with management to reach a consensus on the foregoing.
4. Review and discuss with management, before release, the audited
financial statements and the Management's Discussion and Analysis
proposed to be included in the Corporation's Annual Report on Form
20-F. Make a recommendation to the Board whether or not the audited
financial
3
statements should be included in the Corporation's Annual Report on
Form 20-F.
5. In consultation with management, cooperate with, and to the extent
deemed appropriate by the members of the Committee, oversee, the
members of any internal disclosure control task force or other group
within the Corporation which is charged with gathering information for
the Corporation's public reports and filings, considering the
materiality of such information and determining disclosure
obligations, and consider and respond to any issues and deficiencies
relating to the Corporation's disclosure controls and procedures which
are identified by management or such internal group.
6. In consultation with the independent auditors, the internal audit
department, if any, and management, consider and review at the
completion of the annual examinations and such other times as the
Committee may deem appropriate:
a. The Corporation's annual financial statements and related notes.
b. The independent auditors' audit of the financial statements and
their report thereon.
c. The independent auditors' reports regarding critical accounting
policies, alternative treatments of financial information and
other material written communications between the independent
auditors and management.
d. Any deficiency in, or suggested improvement to, the procedures or
practices employed by the Corporation as reported by the
independent auditors in their annual management letter.
7. Periodically and to the extent appropriate under the circumstances, it
may be advisable for the Committee, with the assistance of the
independent auditors, the internal audit department, if any, and/or
management, to consider and review the following:
a. Any significant changes required in the independent auditors'
audit plan or auditing and accounting principles.
b. Any difficulties or disputes with management encountered during
the course of the audit.
c. The adequacy of the Corporation's system of internal financial
controls.
4
d. The effect or potential effect of any regulatory regime,
accounting initiatives or off-balance sheet structures on the
Company's financial statements.
e. Any correspondence with regulators or governmental agencies and
any employee complaints or published reports that raise material
issues regarding the Corporation's financial statements or
accounting policies.
f. Other matters related to the conduct of the audit, which are to
be communicated to the Committee under generally accepted
auditing standards.
8. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as modified or
supplemented.
9. Obtain from the independent auditor assurance that it has complied
with Section 10A of the Securities Exchange Act of 1934.
10. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters and (b) the confidential,
anonymous submission by the Corporation's employees of concerns
regarding questionable accounting or auditing matters.
11. Cooperate with the Corporation in preparing any reports of the
Committee it intends to include in a proxy statement and any other
reports required by applicable securities laws.
12. Review, with the Corporation's counsel, any legal matter that could
have a significant impact on the Corporation's financial statements.
13. Report through its chairperson to the directors following meetings of
the Committee.
14. Maintain minutes or other records of meetings and activities of the
Committee.
15. Review the rationale for employing audit firms other than the
principal independent auditors; and, where an additional audit firm
has been employed, review the coordination of audit efforts to assure
completeness of coverage, reduction of redundant efforts and the
effective use of audit resources.
16. Periodically review, before release, the unaudited operating results
in the Corporation's quarterly earnings release and/or discuss the
contents the quarterly earnings release with management.
5
17. Meet periodically with or interview, in separate sessions, the chief
financial officer, the senior internal auditing executive and the
independent audit firm engagement partner.
6