Faro Technologies Inc.

Audit Committee Charter



The Audit Committee will assist the Board of Directors in fulfilling its oversight responsibilities.  The Committee’s primary purpose is to provide oversight regarding the accounting and financial reporting process, the system of internal control, the audit process, and the Company’s process for monitoring compliance with laws and regulations.



·         The Committee shall be comprised of three or more directors as determined by the Board

·         All members of the Committee shall meet the general independence, experience and financial understanding requirements of the Nasdaq Stock Market, Inc. (“Nasdaq”), Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the Securities and Exchange Commission (the “SEC”)

·         The Committee shall meet as frequently as circumstances dictate, and shall periodically meet in executive session

·         The members of the Committee shall be appointed by the Board annually or as necessary to fill vacancies on the recommendation of the Company’s Nominating and Corporate Governance Committee

·         The Chairperson of the Committee shall be appointed by the Board upon recommendation of the Nominating and Corporate Governance Committee and in consultation with the Chairman of the Board

·         The Chairperson will chair all regular sessions of the Committee and, in consultation with the Company’s management, set the agenda for Committee meetings; provided that in the Chairperson’s absence, the Chairperson’s responsibilities may be undertaken by another member of the Committee

·         Any member of the Committee may call meetings of the Committee



Internal Control


·         Review and reassess the adequacy of this Charter annually, with the assistance of counsel, if appropriate, with an emphasis on compliance with any new SEC or Nasdaq rules and considering other developments as appropriate

·         Submit the Charter to the Board for approval annually and have the Charter published in the Company’s proxy statement at least every three years or as otherwise appropriate in accordance with the SEC’s rules and regulations

·         Discuss with management its efforts to communicate the importance of internal control

·         Discuss annually with management and the external auditors the extent to which the external auditors review computer systems and applications, the security of such systems and applications, and the contingency plan for processing financial information in the event of a systems breakdown; advise the Board of, or otherwise address, any significant issues or recommendations

·         Determine by discussion with management whether internal control recommendations made by the external auditors have been implemented by management; request that, in connection with the Company’s next financial statement audit, the external auditors advise the Committee of whether the recommendations were implemented to the satisfaction of the external auditors

·         Review disclosures made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls.

Financial Reporting



·         Request that management and/or the Company’s or the Committee’s outside experts periodically update the Committee about significant accounting and reporting issues, including recent professional and regulatory pronouncements

·         At least annually, ask management and the external auditors about significant risks and exposures and the plans to minimize such risks; request that management and the external auditors provide updates to the Committee as appropriate

·         Review major changes to the Company’s accounting principles as suggested by the external auditors or management

·         Review and discuss with management and the external auditors the quarterly and annual earnings press releases; provided that the responsibility for such review may be delegated to one or more members of the Committee

Annual Financial Statements

·         Review and discuss with management and the external auditors the annual audited financial statements to be included in the Company’s annual report on Form 10-K; and, based on the foregoing review and discussion, recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K

·         Review and discuss with management and the external auditors the management’s discussion and analysis (“MD&A”) and other sections of the annual report before its release

Interim Financial Statements

·         Consult with management and the external auditors, as appropriate, regarding matters related to the preparation of quarterly financial information

·         Review and discuss with management the interim financial statements and MD&A included in each quarterly Form 10-Q prior to filing thereof with the SEC; provided that the responsibility for such review may be delegated to one or more members of the Committee

Compliance with Laws and Regulations


·         Periodically obtain updates from management, general counsel, and tax director regarding compliance with applicable laws and regulations and applicable internal conflict of interest policies and procedures

·         Periodically receive updates from management and the external auditors regarding regulatory compliance matters

·         Periodically receive updates from management regarding the findings of any examinations by regulatory agencies that may have a material impact on the financial statements, such as the SEC

·         Approve all related-party transactions to the extent required by the rules and regulations of Nasdaq

External Audit

·         Appoint, retain and, as appropriate, terminate the Company’s external auditors (such actions shall be taken in the Committee’s sole discretion); the external auditors shall report and be accountable to the Committee

·         Approve in its sole discretion the compensation to be paid to and oversee the work of the external auditors (including resolution of disagreements between management and the external auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work

·         Pre-approve (which pre-approval may be pursuant to pre-approval policies and procedures established by the Committee) all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its external auditors, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act; provided that the Committee may delegate authority to grant pre-approvals of audit and permitted non-audit services to one or more of its members, provided that decisions of such member or members to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting

·         Meet with the external auditors prior to the audit and review the external auditors’ proposed audit scope, staffing and approach

·         Ensure the receipt of formal written reports from the external auditors regarding the auditors’ independence, and delineating all relationships between the auditors and the Company, consistent with Independence Standards Board Standard No. 1, and discuss such reports with the auditors; it is the responsibility of the Committee to take such action as may be necessary to ensure the independence of the external auditors

·         Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law

·         Set clear policies for the hiring by the Company of employees or former employees of the external auditors who participated in any capacity in the audit of the Company

·         Discuss with the external auditors the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit

·         Review and discuss reports from the external auditors on:

·         All critical accounting policies and practices to be used

·         All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditors

·         Other material written communications between the external auditors and management, such as any management letter or schedule of unadjusted differences


Other Responsibilities


·         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 the Company of concerns regarding questionable accounting or auditing matters

·         Maintain minutes or other records of meetings and activities of the Committee



·         Report regularly to the Board (a) following meetings of the Committee, (b) with respect to such other matters as are relevant to the Committee’s discharge of its responsibilities and (c) with respect to such recommendations as the Committee may deem appropriate, which report may take the form of an oral report by the Committee’s Chairperson or any other member of the Committee designated by the Committee to make such report

·         Prepare, with the assistance of counsel if appropriate, the report required by the rules and regulations of the SEC to be included in the Company’s annual proxy statements




The Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors.  The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the external auditors for the purpose of rendering or issuing an audit report or performing related services and to any advisors employed by the Committee.  The Company shall also provide appropriate funding, as determined by the Committee, for ordinary administrative expenses incurred by the Committee in carrying out its duties.  The Committee shall not delegate any of its responsibilities to a subcommittee or member of the Committee, except as set forth in this Charter.



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 Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the external auditors.