Audit Committee Charter
The primary function of the Audit Committee is to oversee the accounting and financial reporting processes of the Corporation and the audits of the Corporation's financial statements by the Corporation's independent auditing firm.
The Audit Committee's primary duties and responsibilities are:
To serve as an independent and objective party to monitor the Corporation's financial reporting process and internal control system.
To appoint, compensate and provide oversight of the work of the independent auditing firm employed by 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 related work; and to that end each such independent auditing firm shall report directly to the Audit Committee.
To review and appraise the Corporation's internal auditing function.
To provide an open avenue of communication among the Corporation's independent auditing firm, financial and senior management, those involved in the Corporation's internal auditing function and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in this Charter. This Charter, however, is not intended to, and does not, create any additional legal or fiduciary duties for the members of the Audit Committee beyond those of any other member of the Board of Directors. While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Corporation's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles ("GAAP") and applicable rules and regulations. These are the responsibilities of management and the Corporation's independent auditing firm.
The Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be "independent" as that term is defined in (i) paragraph (m) of Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78f), and the rules and regulations of the Securities and Exchange Commission promulgated thereunder, and (ii) the rules of the NASDAQ National Market, or any other stock exchange or quotation service on which the Corporation's securities are listed. Further, each member of the Audit Committee shall meet all other requirements for membership on the Audit Committee set forth in the rules of the NASDAQ National Market, or any other stock exchange or quotation service on which the Corporation's securities are listed, and be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee.
All members of the Audit Committee shall be able to read and understand fundamental financial statements, including the Corporation's balance sheet, income statement and cash flow statement, and shall have a working familiarity with basic finance and accounting practices. At least one member of the Audit Committee shall have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. The Board of Directors shall take reasonable efforts to appoint to the Audit Committee at least one person who qualifies as an "audit committee financial expert" as such term is defined by the Securities and Exchange Commission. Audit Committee members are encouraged to enhance their familiarity with finance and accounting principles applicable to the Corporation by participating in educational programs conducted by the Corporation or an outside consultant.
Unless a Chair is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership.
The Audit Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Audit Committee should meet at least annually with management, the managers of those involved in the Corporation's internal auditing function and the Corporation's independent auditing firm in separate executive sessions to discuss any matters that the Audit Committee or each of these groups believe should be discussed privately. A majority of the Committee members shall constitute a quorum for the transaction of business. The action of a majority of those present at a meeting at which a quorum is present shall be the action of the Committee. The Committee shall keep a record of its actions and proceedings and make a report thereof from time to time to the Board of Directors.
Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
Documents / Reports Review
Review and update this Charter periodically, at least annually, as conditions dictate.
Review and discuss with financial management and the Corporation's independent auditing firm the Corporation's annual financial statements, and the disclosures made in the section of the Corporation's Annual Report on Form 10-K entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," to be included in the Corporation's Annual Report prior to its filing or the release of earnings for the year, and recommend to the Board whether the audited financial statements should be included in the Corporation's Annual Report. Similarly, review and discuss any other financial information submitted to any governmental body, or the public, including any certification, report, opinion, or review rendered by the Corporation's independent auditing firm.
Review and discuss with financial management and the Corporation's independent auditing firm the Corporation's quarterly financial statements, and the disclosures to be made in the section of the Corporation's Quarterly Report on Form 10-Q entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," to be included in the Corporation's Quarterly Report prior to its filing or the release of earnings for the quarter, including the results of the independent auditing firm's reviews of the quarterly financial statements. The person designated as the "audit committee financial expert" may represent the entire Audit Committee for purposes of this review.
Review and discuss the annual report from the independent auditors on:
All critical accounting policies and practices to be used;
Target annual incentive awards;
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 independent auditor; and
Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
Select the independent auditing firm to be employed by the Corporation for the purpose of preparing or issuing an audit report on the Corporation's annual financial statements or related work, determine the scope of the independent auditing firm's engagement and approve the fees and other compensation to be paid to the independent auditing firm.
Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor's internal quality-control procedures, (b) any 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 independent audits carried out by the firm, and any steps taken to deal with any such issues, and (c) all relationships between the independent auditor and the Corporation.
Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence. The evaluation shall include the review and evaluation of the lead audit partner. In making its evaluation, the Audit Committee shall take into account the opinions of management and the internal auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
Ensure the rotation of the audit partners as required by law. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
Specifically approve in advance, in accordance with Section 10 below, each non-audit service, including tax services, to be performed by the independent auditing firm outside of its regular audit engagement. For purposes hereof, the term "non-audit services" means any professional services provided to the Corporation by an independent auditing firm, other than those provided to the Corporation in connection with an audit or a review of its financial statements. The foregoing notwithstanding, the Corporation's independent auditing firm may not be engaged to perform any of the services described in clauses (1) through (9) below:
bookkeeping or other services related to the accounting records or financial statements of the Corporation;
financial information systems design and implementation;
appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
internal audit outsourcing services;
management functions or human resources;
broker or dealer, investment adviser, or investment banking services;
legal services and expert services unrelated to the audit; and
any other service that the Public Company Accounting Oversight Board, established pursuant to Section 101 of the Sarbanes-Oxley Act of 2002, determines, by regulation, is impermissible.
Approve in advance all auditing services (which may entail providing comfort letters in connection with securities underwritings) and permissible non-audit services to be provided to the Corporation by the Corporation's independent auditing firm. In carrying out its duties under Section 5 above, if the Audit Committee approves an audit service within the scope of the engagement of the Corporation's independent auditing firm, such audit service shall be deemed to have been preapproved for purposes of this Section 10. The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant preapprovals required hereunder. Each and every decision of a member of the Audit Committee to whom authority is delegated hereunder to preapprove an activity under this Section 10 shall be presented to the full Audit Committee at its next meeting.
Meet with the Corporation's independent auditing firm prior to the audit to discuss the planning and staffing of the audit.
Review the performance of the Corporation's independent auditing firm and discharge such firm when circumstances warrant.
Financial Reporting Processes
In consultation with the Corporation's independent auditing firm and those involved in the Corporation's internal auditing function, review the integrity of the Corporation's financial reporting processes, both internal and external.
Periodically consult with the Corporation's independent auditing firm out of the presence of management about internal controls and the completeness and accuracy of the Corporation's financial statements.
Consider the judgements of the Corporation's independent auditing firm about the quality and appropriateness of the Corporation's accounting principles as applied in its financial reporting.
Discuss with management and the Corporation's independent auditing firm significant financial reporting issues and judgments made in connection with the preparation of the Corporation's financial statements, including any significant changes in the Corporation's selection or application of accounting principles, any major issues as to the adequacy of the Corporation's internal controls, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Corporation's financial statements.
Discuss with management the Corporation's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.
Discuss with management and the Corporation's independent auditing firm the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Corporation's financial statements.
Discuss with management the Corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Corporation's risk assessment and risk management policies.
Review disclosures made to the Audit Committee by the Corporation's CEO and CFO 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, the steps taken to correct such deficiencies or weaknesses, and any fraud involving management or other employees who have a significant role in the Corporation's internal controls.
Discuss with the Corporation's independent auditing firm the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, as the same may be modified or supplemented. In particular, discuss:
The adoption of, or changes to, the Corporation's significant auditing and accounting principles and practices as suggested by the Corporation's independent auditing firm, those involved in the Corporation's internal auditing function or management.
The management letter provided by the Corporation's independent auditing firm and the Corporation's response to that letter.
Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
Oversight of the Corporation's Internal Audit Function
Review the activities, organizational structure, and qualifications of those involved in the Corporation's internal auditing function.
Review the appointment and replacement of the senior internal auditing executives.
Review the significant reports to management prepared by persons performing the internal auditing function and management's responses.
Discuss with the independent auditor and management the Corporation's internal audit function and employee responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.
Establish regular and separate systems of reporting to the Audit Committee by each of management, the Corporation's independent auditing firm and those involved in the Corporation's internal auditing function regarding any significant judgments made in management's preparation of the financial statements and the view of each as to appropriateness of such judgments.
Following completion of the annual audit, review separately with each of management, the Corporation's independent auditing firm and those involved in the Corporation's internal auditing function, any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.
Review and resolve any significant disagreement among management and the Corporation's independent auditing firm or those involved in the Corporation's internal auditing function in connection with the preparation of the financial statements.
Review with the Corporation's independent auditing firm, those involved in the Corporation's internal auditing function and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as determined by the Audit Committee.)
Ethical and Legal Compliance
Review periodically the Corporation's Code of Ethics and recommend to the Board of Directors any revisions to the Code of Ethics.
Review management's monitoring of the Corporation's compliance with the Corporation's Code of Ethics, and ensure that management has the proper review system in place to ensure that the Corporation's financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy all applicable legal requirements.
Review with the Corporation's counsel any legal matter that could have a significant impact on the Corporation's financial statements.
Establish procedures for the receipt, retention, and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
Perform any other activities consistent with this Charter, the Corporation's By-laws and applicable statutes, rules and regulations as the Audit Committee or the Board deems necessary or appropriate.
Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Corporation's annual proxy statement.
Disclose all approvals by the Audit Committee under Section 9 above of non-audit services to be performed by the Corporation's independent auditing firm in the Quarterly and Annual Reports on Forms 10-Q and 10-K required to be filed by the Corporation with the Securities and Exchange Commission.
Review and Approval of Related Party Transactions
Review and determine whether to approve any transaction between the Corporation and one or more officers, directors and major shareholders of the Corporation.
Authority to Engage Advisors; Funding
The Audit Committee shall have the authority to engage independent counsel and other advisers as it determines necessary to carry out its duties. The Corporation shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board of Directors, for payment of (i) compensation to any registered public accounting firm engaged by the Committee for the purpose of preparing or issuing an audit report or performing other audit, review, attest or other services for the Corporation; (ii) compensation to any advisers employed by the Audit Committee; and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
As Amended and Restated on