WILSHIRE ENTERPRISES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors (the "Committee") of Wilshire
Enterprises, Inc. (the "Company") will assist the Board of Directors (the
"Board") in fulfilling its oversight responsibilities. The Committee will
review (i) the financial reporting process (including the financial reports
provided by the Company to the public), (ii) the systems of internal control,
(iii) the external audit process and (iv) the Company's process for monitoring
compliance with laws and regulations and with the code of conduct. In
performing its duties, the Committee will maintain effective working
relationships with the Board, management and the external auditors. To
effectively perform his or her role, each Committee member will obtain an
understanding of the detailed responsibilities of Committee membership as well
as the Company's business, operations and risks.
The Board authorizes the Committee, within the scope of its responsibilities
o Seek any information it requires from:
^ Any employee (and all employees are directed to co-operate with any
request made by the Committee)
^ External parties
o Obtain outside legal or other professional advice
o Encourage the attendance of Company officers at meetings as appropriate
3.1 The Committee will be comprised of at least three members, all of whom
shall be independent, as defined by the Securities and Exchange Commission's
Rules and Regulations and the American Stock Exchange.
3.2 Each member of the Committee shall be able to read and understand
3.3 The Chairman of the Committee shall have accounting or related
financial management expertise, shall be nominated at the Annual Meeting of
the Board and shall serve for a one-year term. The Chairman may continue to
serve in this capacity following the one-year term if appointed by the Board
at its Annual Meeting.
3.4 Members of the Committee shall be appointed by the Board at the Annual
Meeting of the Board and shall serve for one-year terms. Members may continue
to serve on the Committee if appointed by the Board at its Annual Meeting.
3.5 The Committee shall meet no fewer than four times per fiscal year in
accordance with a schedule established each year by the Board and at such
other times that the Committee may determine. Meetings may be conducted either
in person or telephonically.
3.6 A quorum for any meeting shall be two members (assuming the Committee
consists of three members), whose participation may be either in person or by
3.7 The Secretary of the Committee shall be the Company Secretary, or such
other person as appointed by the Board. The Secretary of the Committee shall
record minutes of the proceedings of all meetings. The Committee at a
subsequent meeting shall approve such minutes.
3.8 Meeting agendas shall be developed by the Committee Chairman, in
consultation with the Company's management and the Secretary of the Committee.
Committee members who would like to suggest agenda items should communicate
with one of these individuals. Agendas shall be circulated to Committee
members prior to Committee meetings.
3.9 In addition to the Committee members and the Secretary of the
Committee, meetings shall include, at the discretion of the Committee, the
Company's Chief Executive Officer, Chief Financial Officer and Controller as
well as representatives from the Company's external audit firm. As
appropriate, the Committee may request any officer or employee of the Company
or representatives of the Company's outside counsel, investment bankers or
other individuals that it deems appropriate to attend a meeting.
3.10 The external auditors may request that the Chairman of the Committee
call a special meeting of the audit committee, if such auditors deem such a
meeting to be necessary and appropriate.
ROLES AND RESPONSIBILITIES
Financial Reporting Process and Financial Statements
4.1 In consultation with the Company's management and its external
auditors, review the design and operation of the Company's financial reporting
and disclosure process, both internally and externally.
4.2 Establish complaint procedures for employees and others to report
matters affecting financial reporting and disclosure, internal controls and
related accounting and auditing issues as well as protocols to address these
4.3 Review the Company's critical accounting policies, including any
changes to these policies and practices on an annual or interim basis. This
review shall include an analysis, prepared by management of the Company and
the external auditors, of significant financial reporting issues and judgments
made in connection with the preparation of the Company's financial statements,
including an analysis of the effect of alternative Generally Accepted
Accounting Principles (GAAP) methods on the Company's financial statements and
a description of any transactions as to which management obtained accounting
4.4 Review and discuss the certifications made by the Company's Chief
Executive and Chief Financial Officers with respect to the accuracy and
completeness of the financial statements and disclosures included in annual
and interim reports filed with the Securities and Exchange Commission and the
basis upon which those certifications were made prior to filing such reports.
4.5 Review the results of the work performed by the Company's external
auditors prior to the release of annual and interim financial reports to
consider any issues that arose during the course of that work concerning the
completeness or accuracy of the financial statements or disclosures. Confirm
that the scope of the external auditors review of the interim and audit of the
annual financial statements was performed in accordance with Generally
Accepted Auditing Standards (GAAS).
System of Internal Controls
4.6 Obtain an understanding of the significant business and operational
risks that the Company faces and the internal controls and processes in place
to mitigate the impact of those risks on the Company's performance and
4.7 Understand the scope, nature and results of testing of the Company's
internal controls by the Company's external auditors and whether appropriate
corrective action has been taken on their recommendations.
4.8 Review and discuss the certifications made by the Company's Chief
Executive and Chief Financial Officers with respect to the Company's system of
internal controls included in annual and interim
reports filed with the Securities and Exchange Commission and the basis upon
which those certifications were made prior to filing such reports.
4.9 Assume direct responsibility for the appointment, retention and
oversight of the independent auditor, which firm is ultimately accountable to
4.10 Review the experience and qualifications of the senior members of the
independent auditor team and the quality control procedures of the independent
auditor. Obtain and review the formal written statement and letter required by
Independence Standards Board Standard No. 1 related to the auditors'
independence. Ensure that the audit team has followed required partner
4.11 Review the external auditor's proposed audit scope and approach and
ensure no unjustified restrictions or limitations have been placed on the
scope of their audit procedures.
4.12 Review and approve the external audit fees based upon the proposed
4.13 Establish criteria for the pre-approval of non-audit services to be
performed by the independent auditors and ensure such services comply with the
scope of services regulations promulgated by the Securities and Exchange
Commission and other Company regulators.
4.14 Review the results of the independent auditors procedures, including
all matters required to be reported in accordance with GAAS and other
4.15 Meet separately with the external auditors to discuss any matters
that the Committee or auditors believe should be discussed privately.
4.16 Ensure that specific findings and recommendations made by the
external auditors are received and discussed on a timely basis and Company
management takes that appropriate corrective action.
Compliance with Laws and Regulations
4.17 Review the effectiveness of the system for monitoring compliance with
laws and regulations and the results of management's investigation and follow-
up (including disciplinary action) of any fraudulent acts or non-compliance.
4.18 Obtain regular updates from management and the Company's legal
counsel regarding regulatory compliance matters as well as any legal issues
that could have a significant impact on the Company's financial statements or
Compliance with the Company's Code of Conduct
4.19 Ensure that the Company's Code of Conduct is in writing and that it
has been distributed to and understood by Company employees and other
individuals covered by its contents.
4.20 Review the process for monitoring compliance with the Code of Conduct
and obtain regular updates from management regarding compliance.
Reporting and other Responsibilities
4.21 Regularly update the Board concerning Committee activities, ensure
that the Board is aware of matters that may significantly impact the financial
condition or affairs of the Company and make appropriate recommendations to
address these matters.
4.22 Perform other oversight functions as requested by the Board.
4.23 If necessary, institute special investigations and, if appropriate,
hire special counsel or experts to assist in such investigations.
4.24 Review and update the Committee Charter and receive approval of
changes from the Board.
4.25 Evaluate the Committee's own performance on a regular basis.