AUDIT COMMITTEE CHARTER
Statement of Purpose
The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Telewest Global, Inc. (the "Corporation") is to: (a) oversee the accounting and financial reporting processes of the Corporation and audits of the financial statements of the Corporation; (b) prepare a report for inclusion in the Corporation's Annual Proxy Statement in compliance with applicable federal securities laws; and (c) assist the Board to oversee:
the integrity of the Corporation's financial statements and the appropriateness of the Corporation's accounting policies and procedures;
the external auditor's qualifications and independence;
the performance of the Corporation's internal audit function and external auditor; and
the sufficiency of the external auditor's review of the Corporation's financial statements.
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. It is the duty of the Committee to conduct investigations, as necessary, and to resolve disagreements, if any, between management and the external auditor.
This Charter has been adopted and approved by the Board and may be amended by the Board from time to time in compliance with applicable laws, rules and regulations, including the applicable rules of the Securities and Exchange Commission and the Nasdaq Marketplace Rules (collectively, "Applicable Rules"). On an annual basis, the Committee shall review and reassess the adequacy of this Charter and evaluate the Committee's performance, and in either case submit a summary of its evaluation to the Board and to the Executive and Nominating Committee in connection with its assessment of the Committee's composition and recommend to the Board any changes that the Committee deems necessary or appropriate. A copy of the Charter will be attached as an appendix to the Corporation's annual proxy statement at least once every three years.
The Committee shall consist of at least three directors, all of whom shall be independent, as affirmatively determined by the Board in accordance with Applicable Rules, in each case having no relationship to the Corporation that may interfere with the exercise of a Committee member's independence from management and the Corporation. The Corporation shall disclose the basis on which the Board made such determination in the Corporation's annual proxy statement as required by Applicable Rules.
Each Committee member shall be financially literate as required by Applicable Rules. At least one Committee member shall be a financial expert having such accounting or related financial management expertise as required by Applicable Rules.
The Executive Committee shall recommend candidates for membership on the Committee. Candidates shall be appointed to the Committee by the Board. One Committee member shall be designated by the Board as the Chairman of the Committee, and in the Chairman's absence, or in the event the Board has not appointed a Committee Chairman, a majority of the members of the
Committee may designate another member of the Committee to act as interim chairman. The Board may remove or replace a Committee member at any time.
The Chief Financial Officer of the Corporation shall be the member of management to serve in a liaison capacity with respect to the Committee.
The only compensation a Committee member may receive from the Corporation shall be compensation determined by the Board (or the Compensation Committee) in compliance with Applicable Rules.
At its discretion, the Committee shall have direct access to the external auditor, general counsel, controller, Director of Risk and Control, members of the internal audit staff, and any other employee of the Corporation. All employees will be directed to cooperate in providing any information as requested by members of the Committee.
The Committee shall have the authority to engage independent counsel and other advisers as it determines necessary or advisable to carry out its duties, and may, as it deems appropriate, obtain outside advice and assistance from legal, accounting and other advisors. The Corporation shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any such advisors and for the Committee's ordinary administrative expenses that are necessary or appropriate in carrying out its duties.
The Committee will meet at least as frequently as required by Applicable Rules. Additional meetings may be called by the Chairman of the Committee, a majority of the members of the Committee or the Secretary of the Corporation whenever circumstances warrant. The Corporation shall provide prior notice for any meeting of the Committee to the Committee members.
The Committee shall receive from management the Corporation's financial results each quarter as well as an oral report from the external auditor describing their SAS 100 review and any other reports required to be prepared or filed under Applicable Rules. The Committee shall direct management and the external auditor to communicate directly to the Committee any significant matters required to be discussed under SAS 61, as amended, each quarter.
Officers and employees of the Corporation, as well as representatives of the external auditor, may be asked to attend meetings of the Committee by the Chairman or a member of the Committee. The Committee may meet without non-committee members for all or any portion of a meeting at the request of the Chairman or a member of the Committee.
A majority of the members of the Committee shall constitute a quorum for the transaction of business. Committee members may attend meetings in person, by conference call or through other means by which each member may hear and be heard by each other member, and the Committee may also act by written consent.
Authority and Specific Duties
Without in any way limiting any additional authority required to be granted to the Committee, or any additional responsibilities required to be performed by the Committee, under Applicable Rules, the Committee is granted the authority, and is required to perform, the specific duties and responsibilities enumerated below.
External Auditor Retention and Oversight
1. The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the external auditor of the Corporation, including resolution of disagreements
between management and the auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation. Subject to Applicable Rules for stockholder consent, the Committee shall have the sole authority to retain and replace the Corporation's external auditor, and it shall approve all audit engagement fees and terms and any significant non-audit relationships with the external auditor. The external auditor shall report directly to the Committee, and to the extent the Committee deems it necessary or appropriate, the Committee shall meet with the external auditor without the presence of the Corporation's management. The Corporation shall provide appropriate funding for payment of compensation to the external auditor, as determined by the Committee.
2. The Committee shall obtain annually from the external auditor a written list of all of the external auditor's relationships with, and professional services provided to, the Corporation and its related entities, as required by Independence Standards Board Standard No. 1, Independence Discussions With Committees, or other Applicable Rules. The Committee shall actively engage in a dialogue with the external auditor with respect to any relationships or services that may impact the objectivity and independence of the external auditor.
3. The Committee shall evaluate the qualifications, performance and independence of the external auditor and the lead partner of the external audit team, taking into account the opinions of management and the internal auditors. In this context to the extent the Committee deems it desirable or appropriate, the Committee should consider whether the external auditor's quality controls are adequate and whether the provision of non-audit services, if any, is compatible with maintaining the external auditor's independence. The Committee shall present its conclusions to the Board and take such additional actions as it deems appropriate to satisfy itself of the qualifications, performance and independence of the Corporation's external auditor.
4. The Committee shall, and shall have sole authority to, pre-approve (A) all audit services and (B) non-audit services, which means any professional services provided to the Corporation by the external auditor other than those provided to the Corporation in connection with an audit or a review of the financial statements of the Corporation, in either case to be provided to the Corporation by the external auditor as required by and to the extent permissible under Applicable Rules. The Committee may adopt a formal pre-approval policy. The Committee may delegate pre-approval authority to one or more members of the Committee.
5. The Committee shall be responsible for overseeing compliance by the Corporation and the external auditor with the requirements imposed by the Public Corporation Accounting Oversight Board (the "Oversight Board"). The Committee should request and receive assurances from the external auditor that it has complied with Section 10A of the Securities Exchange Act of 1934, the rules and policies of the Oversight Board and all other Applicable Rules.
6. The Committee shall require the external auditor to rotate the lead audit partner at least every five years as necessitated under Applicable Rules.
7. The Committee shall set clear policies regulating the hiring of any employees or former employees of the external auditor.
Performance of Audit
Committee shall review with the external auditor, and approve, the scope of
their examination prior to the initiation of the audit. The Committee shall
confirm with the external auditors that the examination is in accordance with
9. To the extent required by Applicable Rules or as the Committee otherwise deems appropriate, the Committee shall inquire as to the extent to which external accountants other than the principal
external auditor are used and understand the rationale for using them and the extent of the review of their work to be performed by the principal external auditor.
10. The Committee shall timely obtain and review reports from the external auditor relating to its performance of the audit, in accordance with Applicable Rules.
11. The Committee shall discuss with the external auditor the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, relating to the conduct of the audit.
12. The Committee shall review with the external auditor any audit problems or difficulties, and management's response thereto, including whether there were any restrictions on the scope of the external auditor's activities or on access to requested information or any significant disagreements with management. To the extent required by Applicable Rules or as the Committee otherwise deems appropriate, the Committee should discuss with the external auditor whether there were any accounting or disclosure issues not resolved to the satisfaction of the external auditor.
13. To the extent required by Applicable Rules or as the Committee otherwise deems appropriate, the Committee should review with the external auditors material written communications between the external auditor and management regarding any management letter, internal control letter or schedule of unadjusted differences.
Disclosure and Financial Reporting
14. The Committee shall review, and discuss with management and the external auditor, the Corporation's financial statements and other statements contained in the annual report on Form 10-K and in quarterly reports on Form 10-Q. The Committee shall recommend to the Board whether the audited financial statements should be included in the Corporation's annual report on Form 10-K.
15. To the extent required by Applicable Rules or as the Committee otherwise deems appropriate, the Committee should review any required management internal control report prior to its inclusion in the Corporation's annual report on Form 10-K.
16. The report of the Committee and other required disclosure items related to the Committee and the external auditor shall be prepared and included in the annual proxy materials in accordance with Applicable Rules.
17. The Committee shall discuss earnings press releases in accordance with Applicable Rules.
18. The Committee shall review and discuss such financial reporting and disclosure items as required by Applicable Rules, including without limitation:
major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation's selection or application of accounting principles, and major issues as to the adequacy of the Corporation's internal controls and any special audit steps adopted in light of material control deficiencies;
analyses prepared by management and/or the external auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements;
the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation;
with respect to each audit, a report from the external auditor relating to (1) all critical accounting policies and practices to be used in the audit, (2) all alternative treatments of financial information within generally accepted accounting principles that have been discussed
with management of the Corporation, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor and (3) other material written communications between the external auditor and the management of the Corporation, such as any management letter or schedule of unadjusted differences; and
the certifications required from management under sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
19. To the extent the Committee deems it desirable or appropriate, the Committee should review and discuss:
special purpose entities and off-balance sheet transactions;
the nature of any material correcting adjustments identified by the external auditor;
significant unusual transaction; and
the substance of any significant litigation, contingencies or claims that had, or may have, a significant impact on the financial statements.
To the extent required by Applicable Rules, the Committee should address the above matters with the external auditors, management and the internal auditors, in each case separately or together as the Committee deems appropriate.
20. The Committee shall review the Corporation's policies with respect to risk assessment and risk management, including guidelines and policies governing the process by which risk management is handled. To the extent the Committee deems it desirable or appropriate, the Committee should discuss the Corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures.
21. To the extent the Committee deems it desirable or appropriate, the Committee should address whether there are any matters (including matters affecting the independence of the external auditor) that should be discussed with the Committee that have not been raised or covered elsewhere.
Oversight of Internal Audit Function and Internal Controls
22. The Corporation's internal audit staff shall receive direction from the Director of Risk and Control and the Chief Financial Officer of the Corporation. The Committee shall discuss with the Chief Financial Officer, the Director of Risk and Control, the internal audit staff and the external auditor, as appropriate, the internal audit function, the adequacy and scope of the annual internal audit plan, budget and staffing and any recommended changes in the planned scope of the internal audit function. The Committee shall have the authority to modify or supplement the internal audit plan. The Director of Risk and Control and other members of the internal audit staff may at any time, at their option or when so directed by the Committee, report on any matter directly to the Committee.
23. The Committee shall periodically review the work and performance of the internal audit staff.
24. The Committee shall review on an annual basis the adequacy of internal controls, steps adopted in light of material control deficiencies and significant internal control recommendations identified through the internal or external audit process.
25. To the extent the Committee deems it desirable or appropriate, the Committee should review and discuss with management and the external auditors the assessment of internal controls and the internal control report made by management and the attestation and report related to the assessment of internal controls by the external auditor, in each case as required by Applicable Rules.
26. The Committee shall establish procedures for (A) the receipt, retention, and treatment of complaints received by the Corporation regarding accounting matters, internal accounting controls, or auditing matters and (B) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.
General Compliance and Oversight
27. In performing its duties and in accordance with Applicable Rules, the Committee shall periodically meet separately with management, the internal audit staff and the external auditor.
28. The Committee shall report to the Board on a regular basis regarding the matters for which it has oversight.
29. The Committee shall have responsibility for reviewing, as appropriate, all transactions between the Corporation and related-parties, including any cases of conflicts of interest relating thereto, as required by Applicable Rules.
30. The Committee shall investigate, to the extent necessary or appropriate, any other matter brought to the Committee's attention that is within the scope of its duties.
31. The Committee shall have the authority to establish other rules and operating procedures in order to fulfill its obligations under this Charter and Applicable Rules.