Audit Committee Charter
The primary purpose of the Audit Committee (the "Committee") is to assist the Board of Directors in fulfilling its oversight responsibilities with respect to the integrity of financial statements and other financial information. The Committee will review the financial reporting process, the system of internal control, the audit process, the qualification and independence of the Company's external auditor (the "Auditor") and the Company's process for monitoring compliance with applicable laws and regulations.In performing its duties, the Committee will maintain effective working relationships with the Board of Directors, Management and the Auditors.To effectively perform his or her role, each Committee member will obtain understanding of the Company's business operation and risks, as well as an understanding of the detailed responsibilities of Committee membership.
A. The Audit Committee shall be composed of at least three Directors.The members of the Audit Committee shall be appointed by the Board and shall serve for such term or terms as the Board determines.The Committee Chairperson shall be designated by the Board and shall maintain regular liaison with the chief executive officer, chief financial officer, and the lead partner of the Auditor.The Audit Committee shall be composed of at least three Directors.The members of the Audit Committee shall be appointed by the Board and shall serve for such term or terms as the Board determines.The Committee Chairperson shall be designated by the Board and shall maintain regular liaison with the chief executive officer, chief financial officer, and the lead partner of the Auditor.
B. Each member of the Committee must, notwithstanding anything in the Company's by-laws to the contrary, be a member of the Board, and must be independent. In order for a member to be independent, he or she(i) may not be an officer or employee of the Company or its subsidiaries, (ii) must be free of any relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, (iii) other than in his or her capacity as a member of the Committee, the Board, or any other Board committee, (a) does not accept directly or indirectly (within the meaning of Rule 10A-3(8) of the Securities and Exchange Act of 1934, as amended (the “Act”)) any consulting, advisory or other compensatory fee from the Company or any subsidiary of the Company, and (b) is not an affiliate of the Company or any parent or subsidiary of the Company, (iv) must not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (v) is not otherwise excluded from being considered independent under applicable laws, rules and regulations defining independence as they currently exist and as they may be amended from time to time.
C. Each member must be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement. Committee members shall have such other qualifications as the Board may from time to time deem appropriate in light of the mission of the Committee.
D. At least one member of the Committee must have past employment experience in finance or accounting, requisite professional certification in accounting, or any 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.
A. The Committee shall meet no less than quarterly. The Committee shall meet at the call of the Chairperson.Committee actions shall be reported to the Board either in writing or orally at the next Board meeting, depending on the subject and the Board meeting schedule.While the Committee may meet by telephone conference call or by any means permitted by law and the Company's bylaws, it shall meetface-to-face with Management, the internal auditor and the Auditor before year-end results are released.
B. The Committee shall keep written minutes of its meetings, which should be filed with the books and records of the Company. The secretary need not be a member of the Committee and shall attend and prepare the written minutes which shall be made available to any member of the Board.
C. The Committee may ask members of Management, employees, Auditor, outside counsel or others whose advice and counsel are relevant to the issues being considered by the Committee, to attend meetings.
D. The Committee shall be available to meet regularly with Management (including the CFO and Controller) and the Auditor in separate executive sessions to discuss matters that the Committee or any of these groups believes should be discussed privately.
Roles and Responsibilities
The Audit Committee shall:
A. Financial Statement and Disclosure Matters
1. Require that the Auditors keep the Committee informed about fraud, illegal acts, and deficiencies in internal control and certain matters.
2. Require Management to regularly update the Committee about the Company's major financial risk exposure and the steps Management has taken to monitor and control such exposures.
3. Review and discuss the annual audited financial statements and quarterly financial statements with Management and the Auditor prior to its release to the public, including the disclosures under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations” and recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K and 10-Q.
4. Discuss earnings press releases, including the use of "pro-forma" or "adjusted" non-GAAP information. Such discussion may be done generally (such as the types of information to be disclosed and the types of presentations to be made).
5. Discuss with the Auditor the Auditor's judgment about the quality and appropriateness, not just acceptability, of accounting principles applied in the Company’s financial reporting. The Committee discussion with the Auditor about the appropriateness of accounting principles and financial disclosure practices shall generally include the following: i.) discuss whether the financial statements are in accordance with (a) GAAP and (b) Securities and Exchange Commission disclosure requirements, and whether the financial statements present fairly to investors, with clarity and completeness, the Company's financial position and performance for the reporting period;
ii.) the Auditor's independent qualitative judgments about the appropriateness, not just acceptability, of accounting principles and the clarity of financial disclosure practices used or proposed to be adopted by the Company;
iii.) the Auditor's views about whether Management choices of accounting principles are conservative, moderate or extreme and whether those principles are common practices or are minority practices;
iv.) the Auditor's reasoning in determining the appropriateness of changes in accounting principles and disclosure practices;
v.) the Auditor's reasoning in accepting or questioning significant estimates made by Management;
vi.) the Auditor's opinion if there are any significant accounting judgment made by Management in preparing the financial statements that would have been made differently had the Auditor itself prepared and been responsible for the financial statements;
vii.) any issues that the Auditor reviews with its national office;
viii.) any correspondence, including but not limited to those, from regulators or governmental agencies, shareholders and any employee complaints or published reports, which raise issues regarding the Company's financial statements and accounting policies.
6. Review with the Auditor any audit problems or difficulties, Management's response and handling of proposed audit adjustments identified by the Auditor, cooperation received, the Auditor's findings and their recommendations.
7. Review with the Auditor the effect of regulatory and accounting initiatives on Company financial statements.
8. Discuss with the Chief Financial Officer and Management their views as to the competence, performance and independence of the Auditor.
9. Review the effect of off-balance sheet structures and related-party transactions, if any, on the Company's financial statements.
10. Review with the Auditor, with or without Management, the Auditor's evaluation of the Company's internal controls.
11. Review annually with Management the programs that the Company has instituted to correct any control deficiencies noted by the Auditor in its annual review.
12. Review with Company’s General Counsel legal matters that may have material impact on the financial statements, the Company’s compliance policies and any material reports or inquiries received from regulators or government agencies.
13. Review the findings of any examinations (including comment letters) by any regulatory agency.
14. Review reports made to Management prepared by the Independent or internal auditor and any response to the same by Management.
15. Prepare the report required by the SEC to be included in the Company’s annual proxy statement and any other reports of the Committee required by applicable securities laws or stock exchange listing requirements or rules.
B. Oversight of the Company's Relationship with the Independent Auditor
16. Communicate with the Auditor the fact that the Board and the Committee, as the stockholders’ representatives, are the Auditor's client.
17. Obtain from the Auditor written affirmation of its independence and a delineation of all relationships between the Auditor and the Company as required bySAS no. 1(“Independence Discussion withAudit Committee”); engage in dialogues with the Auditor about any relationships of non-audit services that may impact objectivity, competence and independence.
18. On an annual basis, the Committee shall evaluate the Auditor’s qualifications, performance and independence.Reports will be requested from the Auditor to make the evaluation, such as,but is not limited to, non-audit services, peer reviews, internal quality control procedures, relationships with the Company and relevant third parties.
19. The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged (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 Company, and each such registered public accounting firm must report directly to the Committee.
20. The Committee ensures the rotation of the lead Auditor as required by law.
21. Review with the Auditor, at a time when the annual audit plan is being developed, its scope, purpose or procedures to be included.
22. Allowable non-audit services to be done by the Auditor has to be pre-approved by the Committee.
23. Attempt to resolve any differences arising between Management and the Auditor.
24. Establish procedures for: i.) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
ii.) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Review periodically with Management these procedures and any significant complaints received.
25. The Committee may take on additional functions as designated by the Full Board.
26. If necessary, initiate special investigation within theparameter of its responsibilities and, if appropriate, hire special counsel or experts (without approval from the Board) to assist and perform its responsibilities under this charter and such other functions, that the Full Board shall assign to the Committee.
27. Report regularly to The Board with respect to the activities of the Audit Committee generally and with respect to any issues that arise regarding the quality or integrity of the Company's financial statements, the Company's compliance with legal and regulatory requirements, and the performance and independence of the Auditor.
The Committee will be provided with the resources and funding by the Company, as the Committee determines, to discharge its duties and responsibilities.
The Committee shall annually assess its own performance in meeting its responsibilities under this Charter.
The Committee shall annually review and reassess the adequacy of this Charter and recommend changes with respect thereto to the Board of Directors.
While the Committee has the responsibilities described in this Charter, it is not the duty of the Committee:to plan, conduct, oversee or determine the appropriate scope of any audit; to determine that the Company’s financial statements are complete, accurate, fairly presented, or in accordance (compliance) with Generally Accepted Accounting Principles,applicable laws, regulations, and the Company's code of business ethics. These are the responsibilities of Management and the Auditors.