Report of the Audit Committee
The Audit Committee of the Board of Directors is composed entirely of nonemployee
directors. The Board of Directors has determined that each of the Audit Committee
members has met the independence and expertise requirements of the New York
Stock Exchange, the Securities and Exchange Commission and Duke Energy's categorical
standards for independence, as discussed under the caption "Audit
Committee and Audit Committee Financial Expert" under "Information
on the Board of Directors" in this proxy statement. The Audit Committee's
responsibilities are described under the caption "Board
Committees" under "Information on the Board of Directors"
in this proxy statement. The Board of Directors adopted a revised written charter
for the Audit Committee in February 2004, a copy of which is attached
as Appendix A to
this proxy statement. The Audit Committee held 14 meetings during 2003.
The financial statements of Duke Energy are prepared by management, which
is responsible for their objectivity and integrity. With respect to the financial
statements for the calendar year ended December 31, 2003, the Audit Committee
reviewed and discussed the audited financial statements and the quality of
financial reporting with management and the independent auditors. It also discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees) and
received and discussed with the independent auditors the matters in the written
disclosures required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). The Audit Committee has discussed with
the independent auditors the independent auditors' independence and has also
considered the compatibility of nonaudit services with the auditors' independence.
Based upon the reviews and discussions referred to above, and pursuant to
delegation of authority by the Board of Directors, the Audit Committee authorized
the inclusion of the audited financial statements in Duke Energy's Annual Report
on Form 10-K for the year ended December 31, 2003, for filing with
the Securities and Exchange Commission. The Audit Committee also appointed,
subject to shareholder ratification, Duke Energy's independent auditors for
2004.
This report has been provided by the Audit Committee.
A. Max Lennon, Chairman
G. Alex Bernhardt, Sr.
Robert J. Brown
William T. Esrey
James T. Rhodes
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