Suffolk Bancorp

Audit Committee Charter

Adopted June 28, 2004


The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the compliance by the Company with legal and regulatory requirements and (3) the independence and performance of the Company’s internal and external auditors.


The members of the Audit Committee shall meet the independence and experience requirements of the National Association of Securities Dealers (NASD). A director will be deemed independent if he or she meets the definition of an “independent director” set forth in NASD Rule 4200. All members of the Committee shall have a working familiarity with basic finance and accounting practices and shall otherwise have the qualifications set forth for all audit committee members in NASD Rule 4460 (d) (2) (A). In particular, the Chairman of the Audit Committee shall have accounting or related financial management expertise. Audit committee members shall not simultaneously serve on the audit committees of more than two other public companies. The Board, at its annual organizational meeting, shall appoint the members of the Audit Committee based on the recommendation of the Nominating Committee. They shall serve until their successors are duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.


The Audit 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 independent auditor for the purpose of rendering or issuing an audit report and to any advisors employed by the Audit Committee. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or advisors to, the Committee. The Audit Committee may also meet with the Company’s investment bankers or financial analysts who follow the Company.


The Audit Committee shall maintain minutes of each meeting of the Committee and shall report the actions of the Audit Committee to the Board, with such recommendations as the Audit Committee deems appropriate.


The Audit Committee, to the extent it deems necessary or appropriate, shall:



Review and update this Charter periodically, at least annually, and as conditions may dictate. The Audit Committee Charter shall be presented to the full Board for its approval of any changes. The Audit Committee shall annually review the Audit Committee’s own performance.



Review analyses prepared by management and the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles.



Review and discuss with management and the independent auditor any major issues as to the adequacy of the Company’s internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting.



Review and discuss reports from the independent 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 independent auditor.




Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.



Review with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.



Review regularly, with management and with the independent auditor, the Company’s annual audited financial reports (including earnings releases, reports to


the Securities and Exchange Commission on Form 10-K and Form 10-Q, and reports to shareholders since the previous quarterly meeting of the Committee) and the quality of the Company’s accounting principles as applied therein.



Review and discuss with management (including the senior internal audit executive) and the independent auditor the Company’s internal controls report and the independent auditor’s attestation of the report prior to the filing of the Company’s Form 10-K.



Meet periodically with management to review the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.



Periodically consult with the independent auditor, out of the presence of management, about internal controls and the completeness and accuracy of the Corporation’s financial statements.



Review major changes to the Company’s auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management.



Review with the independent auditor, the internal audit director and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented. This review should be conducted at an appropriate time after the implementation of such changes or improvements, as decided by the Committee.



Obtain from the independent auditor assurance that Section 10A (b) of the Exchange Act has not been implicated.



Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct 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.



Recommend to the Board the appointment or replacement of the independent auditor, which firm is ultimately accountable to the Audit Committee and the Board. The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.



Review and evaluate the lead partner of the independent auditor team. Review and evaluate the quality control procedures of the independent auditor. The Audit Committee shall review (a) the qualifications, performance and independence of the independent auditor, (b) a description of the quality control procedures the firm has established (c) a report from the firm describing any material issues raised by the most recent quality control review of the firm and describing the steps the firm has taken to deal with any reported problems and (d) all relationships between the independent auditor and the Company. This review shall be performed annually and reflected in the minutes of the Committee. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.



Pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A (i) (1) (B) of the Exchange Act which are approved by the Committee prior to the completion of the audit. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.



Receive periodic reports from the independent auditor regarding the auditor’s independence, discuss such reports with the auditor, consider whether the provision of permitted non-audit services is compatible with maintaining the auditor’s independence and, taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.



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. 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.



Recommend to the Board guidelines for the Company’s hiring of employees of the independent auditor who participated in any capacity in the audit of the Company.



Discuss with the national office of the independent auditor issues on which it was consulted by the


Company’s audit team and matters of audit quality and consistency.



Meet with the independent auditor prior to the audit to review the planning and staffing of the audit.



Obtain reports from management, the Company’s director of internal auditing and the independent auditor that the Company and its subsidiary entities are in conformity with applicable legal requirements and the Company’s Code of Conduct, including disclosures of insider and affiliated party transactions. Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Conduct.



Review disclosures made to the Audit Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and 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.



Review with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies.



Evaluate the independence of the senior internal audit executive and the internal audit function. Review activities, organizational structure and qualifications of the internal audit department. Review the appointment and replacement of the senior auditing executive.



Consider and review with management and internal audit (a) departmental responsibilities, budget and staffing, (b) any difficulties encountered in the course of their audits, including any restrictions on the scope of activities, access to required information or disagreements with management and (c) any changes required in the planned scope of the internal audit plan.



Review the regular internal audit reports to management prepared by the internal auditing department, as well as management’s response. All unresolved items from prior audits shall be included in this review. Unresolved items shall include violations of regulations, violations of institutional policy, and best practice recommendations that were to be adopted after presentation to the Committee. The Committee shall seek assurance that all best practice recommendations are submitted during formal Committee meetings and not eliminated prior thereto.



Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the company of concerns regarding questionable accounting or auditing matters.



Review with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies and internal controls.



Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement.



Perform any other activities consistent with this Charter, the Corporation’s By-laws and governing law, as the Committee or the Board deems necessary or appropriate.



Investigate or consider such other matters within the scope of its responsibilities and duties as the Audit Committee may, in its discretion, determine to be advisable.



Meet at least four times annually, or more frequently as circumstances dictate. As part of its commitment to foster open communications, the Committee shall meet periodically with the chief financial officer, the director of the internal auditing department and the Company’s independent auditors in separate executive sessions.



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 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 independent auditor.