**EXHIBIT 11.1(b)**

 

**KERZNERINTERNATIONAL LIMITED**

**AMENDEDAND RESTATED AUDIT COMMITTEE CHARTER**

**DATEDAS OF AUGUST 10, 2004**

 

#### **I.**                                        PURPOSE

 

The Audit Committee is acommittee of the Board of Directors.  Theprimary function of the Audit Committee is to assist the Board in fulfillingits oversight responsibilities by reviewing the integrity of (i) thefinancial information which will be provided to the stockholders and others, (ii) thesystem of disclosure controls and (iii) the system of internal controlsregarding finance, accounting, legal compliance, and ethics that management andthe Board have established. The Audit Committee is also responsible foroverseeing the Company’s compliance with legal and regulatory requirements (inconjunction with the Compliance Committee), the independent auditors’qualifications and independence, and the performance of the Company’s internalaudit function, the independent auditor and the overall audit process.  The independent auditor is ultimatelyaccountable and reports directly to the Audit Committee.  The Audit Committee has the sole authorityand is directly responsible for the selection, evaluation, oversight and, whereappropriate, replacement of the independent auditor (or the nomination of theindependent auditor to be proposed for stockholder approval.)

 

The Audit Committee will beresponsible for preparing the audit committee report required by the rules ofthe Securities and Exchange Commission (SEC) to be included in the Company’sannual report.

 

The Audit Committee willfulfill these responsibilities by carrying out the activities enumerated inSections III-VI of this Charter.

 

While the Audit Committeehas the responsibilities and powers set forth in this Charter, it is not theduty of the Audit Committee to plan or conduct audits or to determine that theCompany’s financial statements and disclosures are complete and accurate andare in accordance with generally acceptable accounting principles andapplicable rules and regulations. These are the responsibility of management and the independent auditor.

 

#### **II.**                                    COMPOSITIONAND COMPENSATION OF THE AUDIT COMMITTEE

 

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The Audit Committee shallconsist of at least three directors, all of whom have no relationship to theCompany that may interfere with the exercise of their independence frommanagement and the Company, that in the opinion of the Board, would interferewith the exercise of his or her independent judgment as a member of the AuditCommittee. Any disallowed compensatory arrangement shall, per se, disqualify adirector from serving on the Company’s Audit Committee.  In addition, each member of the AuditCommittee shall meet the independence and expertise requirements set forth inthe New York Stock Exchange Listing Standards, as modified or supplemented.

 

All members of the AuditCommittee shall be financially literate (i.e. have a working familiarity withbasic finance and accounting practices), as determined by the Board in itsbusiness judgment, or shall become financially literate within a reasonableperiod of time after his or her appointment to the Audit Committee.  The Board shall determine whether at leastone member of the Audit Committee qualifies as an “audit committee financialexpert” in compliance with the criteria established by the SEC and otherrelevant regulators.  The existence ofsuch member, including his or her name and whether or not he or she isindependent, shall be disclosed in periodic filings as may required by the SEC.

 

The members of the AuditCommittee shall be elected and may be replaced by the Board.  Unless a Chair is elected by the full Board,the members of the Audit Committee may designate a Chair by majority vote ofthe full Audit Committee membership. The duties and responsibilities of amember of the Audit Committee are in addition to those duties of such member asa member of the Board.

 

No member of the AuditCommittee may serve simultaneously on the audit committees of more than twoother public companies, unless the Board determines that such simultaneousservice would not impair such director’s ability to serve effectively on theAudit Committee and such determination is disclosed in the Company’s annualreport.

 

No member of the AuditCommittee may receive, directly or indirectly, any compensation from theCompany other than (i) fees paid to directors for service on the Board(including customary perquisites and other benefits that all directorsreceive), (ii) additional fees paid to directors for service on acommittee of the Board (including the Audit Committee) or as the chairperson ofany committee and (iii) a pension or other deferred compensation for priorservices that is not contingent on future services on the Board.

 

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##### **III.**                                CONTINUOUS ACTIVITIES – GENERAL

 

The Audit Committee shall:

 

1.                                       Provide an open avenue of communication amongthe independent auditors, financial and senior management, the internal auditfunction and the Board.

 

2.                                       Encourage continuous improvement of, andfoster adherence to, the Company’s policies, procedures and practices at alllevels.

 

3.                                       Have the authority to obtain advice andassistance from outside legal, accounting, or other advisors as it deemsappropriate to perform its duties and responsibilities, without having to obtain approval from the Board.

 

4.                                       In conjunction with the Company’s ComplianceCommittee, establish, review and update periodically a Code of Ethical Conductand ensure that management has established a system to enforce this Code.  Ensure that the code is in compliance withall applicable rules and regulations.

 

5.                                       In conjunction with the Company’s ComplianceCommittee, review management’s monitoring of the Company’s compliance with theCode of Ethical Conduct, and ensure that the Company’s financial statements,reports and other financial information disseminated to governmentalorganizations and the public satisfy legal requirements.

 

6.                                       Establish the appropriate funding forcompensation to the independent auditor and to any advisers that the AuditCommittee chooses to engage.

 

7.                                       Meet four times per year or more frequentlyas circumstances require.  The AuditCommittee may ask members of management or others to attend meetings andprovide pertinent information as necessary. Each regularly scheduled meetingshall conclude with an executivesession of the Audit Committee absent members of management and on such termsand conditions as the Audit Committee may elect.  As part of its job to foster opencommunication, the Audit Committee should meet periodically and separately with(i) management, (ii) the director of the internal auditing functionand (iii) the independent auditors in executive sessions to discuss anymatters that the Audit Committee or any of these groups believe should bediscussed privately.

 

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8.                                       Confirm and assure the independence of theindependent auditor.  With respect to theindependence of the independent auditor, the Audit Committee must:

 

(a)                                  Ensure that the independent auditor submitson a periodic basis to the Audit Committee a formal written statementdelineating i) all relationships between the independent auditor and theCompany (which must comply with Independence Standards Board Standard No. 1, as may be modified orsupplemented), ii) the independent auditors’ internal quality-controlprocedures and iii) any material issues raised by the most recent internalquality-control review or peer review of the outside auditors, or by anyinquiry or investigation by governmental or professional authorities, withinthe preceding five years, with respect to any independent audit carried out bythe independent auditors, and any steps taken to deal with any such issues;

 

(b)                                 Actively engage in a dialogue with theindependent auditor with respect to any disclosed relationships or servicesthat may impact the objectivity and independence of the independent auditor;

 

(c)                                  Consider whether, in order to assure thecontinuing independence of the independent auditors, there should be regularrotation of the lead and reviewing audit partners (in addition to the rotationevery five years required pursuant to Section 10A(j) of the Exchange Act)or of the independent audit firm;

 

(d)                                 Based upon the information provided andascertained pursuant to Sections 8(a) through (c) above, theCommittee shall evaluate the independent auditors’ qualifications, performanceand independence (including a review and evaluation of the lead partner) andpresent its conclusions and recommendations to the Board.

 

9.                                       Instruct the independent auditor that theBoard and the Audit Committee are the independent auditors’ clients.

 

10.                                 Review and approve the appointment,replacement, reassignment or dismissal of the director of the Company’sinternal audit function and periodically review his or her performance.

 

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11.                                 Inquire of management and the independentauditor about significant risks or exposures and assess the steps managementhas taken to minimize such risk to the Company.

 

12.                                 Consider and review with the independentauditor:

 

(a)                                  The adequacy of the Company’s internal controls including computerizedinformation system controls, security, staffing levels and budgets, as well asthe performance of the director of the Company’s internal audit function;

 

(b)                                 Related findings and recommendations of the independent auditor together withmanagement’s responses; and

 

(c)                                  The material issues on which the national office of the independent auditorwas consulted by the Company’s audit team.

 

13.                                 Consider and review with management and theindependent auditor:

 

(a)                                  Significant findings during the year,including the status of previous audit recommendations;

 

(b)                                 Any difficulties encountered in the course ofaudit work including any restrictions on the scope of activities or access torequired information, any accounting adjustments noted or proposed but passedas immaterial for other reasons, any communications between the outside auditteam and the independent auditors’ national office and any management orinternal control letters proposed but never issued by the independent auditorto the Company.  The Audit Committeeshall be responsible for the resolution of disagreements among the Company’smanagement, the independent auditors and the internal auditors regardingfinancial reporting; and

 

(c)                                  The quality and adequacy of the Company’sinternal controls, including reviewing any management internal control report,any significant internal control deficiencies or material weaknesses, any fraudinvolving management or others significantly involved in the Company’s internalcontrols and procedures and any changes implemented in light of materialcontrol deficiencies or weaknesses.

 

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14.                                 Periodically, but not less than annually,assess the performance of the Audit Committee by consulting with independentauditors, internal auditors and Company counsel on how audit committee bestpractices relate to current Audit Committee practices, and instituteappropriate change.

 

15.                                 Set guidelines for Audit Committee educationand orientation to assure understanding of the business and the environment inwhich the Company operates and to report periodically to the Board as a resultof the foregoing.

 

##### **IV.**                               CONTINUOUS ACTIVITIES REGARDING REPORTING:SPECIFIC POLICIES

 

1.                                       Advise financial management and theindependent auditor that they are expected to provide a timely analysis ofsignificant current financial reporting issues and practices including thefollowing:

 

(a)                                  Selection of new or changes to accountingpolicies;

 

(b)                                 Estimates, judgments, and uncertainties;

 

(c)                                  Unusual transactions;

 

(d)                                 Accounting policies relating to significantfinancial statement items, including the presentation and timing oftransactions and the period in which they were recorded.

 

2.                                       Ensure that financial management and theindependent auditor discuss with the Audit Committee their qualitativejudgments about the appropriateness of accounting principles and financialdisclosure practices used or proposed to be adopted by management, includingcompliance with applicable SEC staff accounting bulletins and other regulatoryor accounting initiatives.

 

3.                                       Inquire as to the independent auditors’independent qualitative judgments about the appropriateness of the accountingprinciples, the consistency of the Company’s accounting policies, and theclarity and completeness of the Company’s financial statements and relateddisclosure practices (specifically with respect to “Management’s Discussion andAnalysis of Financial Condition and Results of Operations”) used or proposed tobe

 

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adopted by management inconnection with the independent auditors’ review of financial statements priorto filing its appropriate SEC forms. Involve, as appropriate, members ofmanagement including the President, CFO and legal counsel in the discussions.

 

4.                                       Determine, with regard to new transactions orevents, the independent auditors’ reasoning for the appropriateness of theaccounting principles and disclosure practices adopted by management.

 

5.                                       In consultation with the independent auditorsand the internal auditors, review the integrity of the Company’s financialreporting processes (both internal and external), and the internal controlstructure (including disclosure controls). Meet with representatives of the Disclosure Committee on a periodicbasis to discuss any matters of concern arising from the Disclosure Committee’sprocess to assist the CEO and CFO in their Sarbanes-Oxley Act of 2002 Section 302and 906 certifications.

 

6.                                       Review with management major issues regardingaccounting principles and financial statement presentations, including anysignificant changes in the Company’s selection or application of accountingprinciples, and major issues as to the adequacy of the Company’s internalcontrols and any special audit steps adopted in light of material controldeficiencies.

 

7.                                       Review analyses prepared by management (andthe independent auditor as noted in Section V, Item 3 below) setting forthsignificant financial reporting issues and judgments made in connection withthe preparation of the financial statements, including analyses of the effectsof alternative GAAP methods on the financial statements.

 

8.                                       Review with management the effect ofregulatory and accounting initiatives, as well as off-balance sheet structures,on the financial statements of the Company.

 

9.                                       Review and approve all significant relatedparty transactions.

 

10.                                 In conjunction with the Company’s ComplianceCommittee and Code of Business Conduct and Ethics, establish and maintainprocedures for the receipt, retention, and treatment of complaints regardingaccounting, internal accounting, or auditing matters.

 

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11.                                 In conjunction with the Company’s ComplianceCommittee and Code of Business Conduct and Ethics, establish and maintainprocedures for the confidential, anonymous submission by Company employeesregarding questionable accounting or auditing matters*.*

 

12.                                 Review earnings press releases withmanagement, including review of “non-GAAP financial measures” as defined by Regulation G.

 

13.                                 Review the regular internal reports (orsummaries thereof) to management prepared by the internal auditing departmentand management’s response.

 

##### **V.**                                   SCHEDULED ACTIVITIES

 

1.                                       Appoint (subject to shareholder ratification,if applicable), compensate, and oversee the work performed by the independentauditor for the purpose of preparing or issuing an audit report or relatedwork.  Review the performance of theindependent auditors. The independent auditors shall report directly to theAudit Committee and the Audit Committee shall oversee the resolution ofdisagreements between management and the independent auditors in the event thatthey arise,**and*c*onsiderwhether the auditors’ performance of permissible non-audit services is compatible with the auditors’ independence.

 

2.                                       Review with the independent auditor any problems or difficulties and management’sresponse.

 

3.                                       In connection with the annual and quarterlyreview by the independent auditors of the Company’s financial statements,review the independent auditors’ attestation and report on management’sinternal control report and hold timely discussions with the independentauditors regarding the matters required to be discussed by Statement onAuditing Standards No. 61, including the following:

 

•                  critical accounting policies and practices.

 

•                  alternative treatments of financial information within generally accepted accountingprinciples that have been discussed with management, ramifications of the useof such alternative disclosures and treatments, and the treatment preferred bythe independent auditor.

 

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•                  other material written communications betweenthe independent auditor and management including, but not limited to, themanagement letter and schedule ofunadjusted audit differences; and

 

•                  an analysis of the auditors’ judgment as tothe quality of the Company’s accounting principles, setting forth significantreporting issues and judgmentsmade in connection with the preparation of the financial statements.

 

4.                                       Review and pre-approve both audit andnon-audit services to be provided by the independent auditor (other than withrespect to *de minimis* exceptionspermitted by the Sarbanes-Oxley Act of 2002). This duty may be delegated to one or more designated members of theAudit Committee with any such pre-approval reported to the Audit Committee atits next regularly scheduled meeting. Approval of non-audit services shall be disclosed to investors inperiodic reports required by Section 13(a) of the Securities ExchangeAct of 1934.

 

5.                                       Set clear hiring policies, compliant withgoverning laws or regulations, for employees or former employees of theindependent auditor.

 

6.                                       Consider, in consultation with theindependent auditor, the audit scope and plan of the independent auditor.

 

7.                                       Review with management and the independentauditor the results of annual audits and related comments in consultation withother committees as deemed appropriate including:

 

(a)                               The Company’s audited annual financialstatements and related footnotes;

 

(b)                              The independent auditors’ audit of, andreport on the financial statements;

 

(c)                               Any significant changes required in theindependent auditors’ audit plans;

 

(d)                              Any difficulties or disputes with managementencountered during the course of the audit; and

 

(e)                                  Other matters related to the conduct of theaudit which are to be communicated to the Audit Committee under GenerallyAccepted Auditing Standards.

 

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8.                                       Review annual filings with the SEC and other publisheddocuments containing the Company’s financial statements andconsider whether to recommend to the Board that the audited financialstatements be included in the Company’s Annual Report on Form 20-F filingwith the SEC. Review and discuss with management the Company’s annual andquarterly financial statements, and all internal controls reports (or summariesthereof)*.* Review other relevantreports or financial information submitted by the Company to any governmentalbody, or the public, including management certifications as required by theSarbanes-Oxley Act of 2002 (Sections 302 and 906) and relevant reports renderedby the independent auditors (or summaries thereof).

 

9.                                       Review the interim financial reports withmanagement and the independent auditor before those interim reports arereleased to the public or filed with the SEC or other regulators.

 

10.                                 Arrange for the independent auditor to beavailable to the full Board at least annually to help provide a basis for theBoard to recommend the appointment of the independent auditor.

 

11.                                 Set guidelines for review of stock exchangecertifications and SEC  disclosurerequirements related to the Audit Committee.

 

12.                                 Obtain from the Independent Auditor assurancethat Section 10A(b) of the Exchange Act has not been implicated.

 

13.                                 Review and update this Audit CommitteeCharter periodically.

 

14.                                 Prepare the report that the SEC requires beincluded in the Company’s annual report.

 

##### **VI.**                               “WHEN NECESSARY” ACTIVITIES

 

1.                                       Review periodically with Company counsel,legal and regulatory matters that may have a material impact on the Company’sfinancial statements, compliance policies and programs.

 

2.                                       Conduct or authorize investigations into anymatters within the Audit Committee’s scope of responsibilities.  The Audit Committee shall be

 

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empowered to retainindependent counsel and other professionals to assist in the conduct of anyinvestigation or in discharging its responsibilities.

 

3.                                       Perform any other activities consistent withthis Charter, the Company’s Memorandum and Articles of Association, andgoverning law, as the Audit Committee or the Board deems necessary orappropriate.

 

4.                                       Review with the independent auditors, theinternal auditing department and management the extent to which changes orimprovements in financial or accounting practices, as approved by the AuditCommittee, have been implemented. (This review should be conducted at anappropriate time subsequent to implementation of changes or improvements, asdecided by the Audit Committee.)

 

5.                                       Discuss policies with respect to riskassessment and risk management.  Suchdiscussions should include the Company’s major financial and accounting riskexposures and the steps management has undertaken to control them.

 

6.                                       Review, with the organization’s counsel,legal compliance matters including corporate securities trading policies.

 

7.                                       Discuss with management financial informationand earnings guidance provided to analysts and rating agencies.  Such discussions may be on general terms(i.e., discussion of the types of information to be disclosed and the type ofpresentation to be made).

 

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