Audit Comittee Charter
The audit committee (the "Committee") is appointed by the board of directors of the Company to assist the board of directors in fulfilling its oversight responsibilities for the Company's accounting and financial reporting processes and audits of the financial statements of the Company, by monitoring (1) the integrity of the Company's financial statements, (2) the independence and qualifications of its external auditor, (3) the Company's system of internal controls, (4) the performance of the Company's internal audit process and external auditor, and (5) the Company's compliance with laws, regulations, and the codes of conduct .
1.0 Committee Structure and Operations:
The Committee will consist of at least three members of the board of directors. The board will appoint Committee members and the Committee chair on the recommendation of the Company's Governance and Nominating Committee. Committee members may be replaced by the board of directors. Each Committee member shall be Independent and Financially literate (See Appendix A).Committee members shall be barred from accepting any consulting, advisory, or other compensatory fee from the Company or any subsidiary thereof, other than in the member's capacity as a member of the board of directors and any board committee, and no member shall be an "affiliated person" of the Company or any subsidiary apart from his or her capacity as a member of the board and any board committee.
The Committee will consist of at least three members of the board of directors. The board will appoint Committee members and the Committee chair on the recommendation of the Company's Governance and Nominating Committee. Committee members may be replaced by the board of directors. Each Committee member shall be Independent and Financially literate (See Appendix A).Committee members shall be barred from accepting any consulting, advisory, or other compensatory fee from the Company or any subsidiary thereof, other than in the member's capacity as a member of the board of directors and any board committee, and no member shall be an "affiliated person" of the Company or any subsidiary apart from his or her capacity as a member of the board and any board committee.
2. 0 Meetings
The Committee will meet as often as it determines is appropriate, but not less frequently than quarterly. All Committee members are expected to attend each meeting, in person or via conference call. The Committee periodically will hold private meetings with management and the external auditor. The Committee may invite any officer or employee of the Company, the external auditor, the Company's outside counsel, the Committee's counsel, or others to attend meetings and provide pertinent information. Meeting agendas will be prepared by the Committee Chair and provided in advance to members, along with appropriate briefing materials. Minutes will be kept by a member of the Committee or a person designated by the Committee.
The Committee will meet as often as it determines is appropriate, but not less frequently than quarterly. All Committee members are expected to attend each meeting, in person or via conference call. The Committee periodically will hold private meetings with management and the external auditor. The Committee may invite any officer or employee of the Company, the external auditor, the Company's outside counsel, the Committee's counsel, or others to attend meetings and provide pertinent information. Meeting agendas will be prepared by the Committee Chair and provided in advance to members, along with appropriate briefing materials. Minutes will be kept by a member of the Committee or a person designated by the Committee.
A quorum for a meeting of the Audit Committee will require all of its 3 members.
3.0 Authority and Responsibilities
The Committee has the authority to conduct or authorize investigations into any matters within its scope of responsibility. It has the responsibility to (1) appoint, compensate, retain, and directly oversee the work of the Company's external auditor, (2) resolve any disagreements between management and the auditors regarding financial reporting. It also has the authority to:
The Committee has the authority to conduct or authorize investigations into any matters within its scope of responsibility. It has the responsibility to (1) appoint, compensate, retain, and directly oversee the work of the Company's external auditor, (2) resolve any disagreements between management and the auditors regarding financial reporting. It also has the authority to:
- Retain outside advisors, including counsel, as it determines necessary or advisable to carry out its duties at the Company's expense.
- Seek any information it requires from employeesall of whom are directed to cooperate with the Committee's requestsor from external parties.
- Meet with company officers, external auditors, or outside counsel, as necessary.
- The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to any registered chartered accounting firm engaged for the purpose of rendering or issuing an audit report or related work or performing other audit, review, or attest services for the Company, and to any advisors employed by the Committee.
The Committee, to the extent it deems necessary or appropriate, will carry out the following specific responsibilities:
4. 0 Financial Statements
Review and discuss with management and the external auditor significant accounting and financial reporting issues, including complex or unusual transactions and judgments concerning significant estimates or significant changes in the Company's selection or application of accounting principles and recent professional, accounting, and regulatory pronouncements and initiatives, and understand their impact on the Company's financial statements.
Review and discuss with management and the external auditor significant accounting and financial reporting issues, including complex or unusual transactions and judgments concerning significant estimates or significant changes in the Company's selection or application of accounting principles and recent professional, accounting, and regulatory pronouncements and initiatives, and understand their impact on the Company's financial statements.
- Review with management and the external auditor the results of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
- Review and discuss with management and the external auditor the annual financial statements along with any off-balance-sheet structures, including disclosures made in management's discussion and analysis, and recommend to the board of directors whether they should be included in the Company's Report to Shareholders.
- Review and discuss with management and the external auditor interim financial statements, including the results of the external auditor's review of the quarterly financial statements before issuance.
- At least once per year, prior to the completion of the audit report (and more frequently if appropriate), review and discuss reports from the external auditor on (1) all critical accounting policies and practices to be used, (2) benchmark the Company's accounting policies to those followed in its industry, (3) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, including ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the external auditor, and (4) other material written communications between the external auditor and management, such as any management letter or schedules of unadjusted differences.
- Understand how management prepares interim financial information, and the nature and extent of internal and external auditor involvement.
5. 0 Internal Controls and Risk Management
The Committee, in consultation with the management and the board of directors, identifies the principal business risks, validates the risk tolerance, and recommends related risk management policies to the board of directors.
The Committee, in consultation with the management and the board of directors, identifies the principal business risks, validates the risk tolerance, and recommends related risk management policies to the board of directors.
- Consider the effectiveness of the Company's internal control systems, including information technology security and control.
- Meet with management to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.
- Understand the scope of the external auditor's reviews of internal control over financial reporting and obtain reports on significant findings and recommendations, together with management's responses.
6.0 External Audit
Have the external auditor report directly to the Committee.
Have the external auditor report directly to the Committee.
- Meet with the external auditor to discuss the external auditor's proposed audit planning, scope, staffing, and approach. Discuss the coordination of audit efforts to assure completeness of coverage, avoidance of redundant efforts, and effective use of audit resources.
- Obtain and review a report from the external auditor regarding its quality control procedures and material issues raised by the most recent internal quality control review or peer review of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more of the independent audits carried out by the firm, and any steps taken to deal with any such issues and all relationships between the external auditor and the Company.
- Evaluate and present to the board of directors its conclusions regarding the qualifications, performance, and independence of the external auditor, including considering whether the auditor's quality controls are adequate and permitted non-audit services are compatible with maintaining the auditor's independence and taking into account the opinions of management and the internal auditors.
- Ensure the rotation of the audit partners as required by law and regulation, and consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the external audit firm on a regular basis.
- Establish policies concerning the Company's hiring of employees or former employees of the external auditor, as required by law and by applicable listing standards.
- On a regular basis, meet separately with the external auditor to discuss any matters that the Committee or external auditor believes should be discussed privately.
7.0 Compliance
- Review the effectiveness of the system for monitoring compliance with laws and regulations. The results of management's investigation and follow-up (including disciplinary action) of any instances of non-compliance should also be reviewed.
- Advise the board of directors with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's codes of conduct, including review of the process for communicating the codes of conduct to company personnel and for monitoring compliance.
- Review with management the policies and procedures with respect to executive officers' expense accounts and perquisites, including their use of corporate assets.
- Establish procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
- Review and discuss with management and the external auditor any correspondence with, or the findings of any examinations by, regulatory agencies, published reports, or auditor observations that raise significant issues regarding the Company's financial statements or accounting policies.
- Obtain regular updates from management and company counsel regarding compliance matters and legal matters that may have a significant impact on the financial statements or the Company's compliance policies, including disclosures of insider and affiliated party transactions.
8. 0 Reporting Responsibilities
- Regularly report to the board of directors about Committee activities, issues, and related recommendations.
- Provide an open avenue of communication between the external auditor and the board of directors.
- Review any other reports the Company issues that relate to Committee responsibilities.
- Review and authorize press releases related to the Company's financial matters.
9.0 Other Responsibilities
- Perform other activities related to this charter as requested by the board of directors.
- Institute and oversee special investigations as needed.
- Annually review and assess the adequacy of the Committee charter, requesting board approval for proposed changes, and ensure appropriate disclosure as may be required by law or regulation.
- Annually review the Committee's own performance.
Audit Committee Charter (Appendix A)
Definitions
Independence
An audit committee member is "independent" if they have no direct or indirect "material relationship" with the Company. A "material relationship" is one that could, in the view of the Company's Board, reasonably interfere with the exercise of a member's independent judgment. In addition, certain persons are deemed to have "material relationships" if, during the prior three years they were:- employees or executive officers of the Company;
- immediate family members of an executive officer of the Company;
- an affiliated entity, a partner, or employee of an auditor (internal or external) of the Company;
- an immediate family member of an affiliated entity, partner, or professional
- partner of an auditor of the Company or any of its employees that were involved in the audit process;
an executive officer (or immediate family member) of an entity, if any of the Company's executive officers are on that entity's compensation committee;
individuals directly or indirectly accepting consulting, advisory, or other fees from the Company or its subsidiaries, other than as a board or committee member ("indirectly" means via their spouse, minor child, or child sharing their home, or as a partner/member/etc. of an accounting, consulting, legal, investment banking, or financial advisory services firm providing services to the Company or its subsidiaries); - anyone who receives or whose immediate family member receives more than $25,000 per year in direct compensation from the Company for non board matters; or
a person who is an affiliated entity of the Company or any of its subsidiaries.
Note that the three-year "cooling off" period is consistent with the NYSE requirement.
Financial Literacy
All audit committee members are required to be financially literate, which is defined as having the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to those that can reasonably be expected to be raised by the Company's financial statements.
