The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of PeopleSupport, Inc. (the "Corporation") is to assist the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and financial reporting practices of the Corporation, and such other duties as directed by the Board. The Committee's role includes a particular focus on the qualitative aspects of financial reporting to stockholders, and on the Corporation's processes to manage business and financial risk, and for compliance with significant applicable legal, ethical, and regulatory requirements. The Committee is directly responsible for the appointment, compensation, and oversight of the public accounting firm engaged to prepare or issue an audit report on the financial statements of the Corporation.
Notwithstanding the purpose of the Committee, it is understood that the Committee duties do not include planning or conducting audits or determining that the Corporation's financial statements are accurate, complete and in accordance with generally accepted accounting principles. The foregoing is the responsibility of management and the independent auditors. It is not the duty of the Committee to resolve disagreements between management and the independent auditors or to ensure compliance with applicable laws, regulations, Nasdaq Rules (as defined below) or the Corporation's Code of Ethics.
Membership and Procedures
Membership and Appointment. The Committee shall comprise of not fewer than three members of the Board, and shall be appointed from time to time by the Board based on recommendations from the Nominating and Corporate Governance Committee, if any.
Removal of Members. The entire Committee or any individual Committee member may be removed from such Committee with or without cause by the affirmative vote of a majority of the Board. Any Committee member may resign from the Committee effective upon giving oral or written notice to the Chairman of the Board, the Corporate Secretary, or the entire Board (unless the notice specifies a later time for the effectiveness of such resignation). The Board may appoint a qualified successor to take office when such resignation becomes effective.
Chairperson. A chairperson of the Committee (the "Chairperson") may be designated by a majority of the members of the Committee or by the Board upon recommendation, if any, by the Nominating and Corporate Governance Committee of the Board. In the absence of such designation, the members of the Committee may designate the Chairperson by majority vote of the full Committee membership. The Chairperson shall determine the agenda, the frequency and the length of meetings. All Committee members, including the Chairperson, shall have unlimited access to management, employees and information.
Secretary. The Committee may appoint a Secretary whose duties and responsibilities shall be to keep full and complete records of the proceedings of the Committee for the purposes of reporting Committee activities to the Board and to perform all other duties as may from time to time be assigned to him or her by the Committee, or otherwise at the direction of a Committee member. If no Secretary is appointed, any member of the Committee may serve as Secretary of a meeting. The Secretary need not be a Director.
Meetings. The Committee shall meet at such times as determined by the Chairperson. Meetings may be held in conjunction with regularly scheduled meetings of the Board or otherwise. Notice of meetings shall be given in accordance with the provisions of the Corporation's Bylaws.
Delegation. The Committee may, by resolution passed by a majority of the Committee, designate one or more subcommittees, each subcommittee to consist of one or more members of the Committee. Any such subcommittee to the extent provided in the resolutions of the Committee, and to the extent permitted by applicable law or the Nasdaq Rules, shall have the power and authority of the Committee to grant preapprovals of auditing and non-audit services by the independent auditor. Any decision of a subcommittee to whom authority is delegated to preapprove an activity shall be presented to the Committee at each of its scheduled meetings.
Authority to Retain and Terminate Advisers. The Committee shall have the power and authority, at the Corporation's expense, to retain, terminate and compensate independent counsel and other advisers, as it determines necessary to carry out its duties.
Annual Performance Evaluation. The Committee shall evaluate its performance on an annual basis and, to the extent the Committee so determines, make recommendations to the Board for changes or modifications to the Committee's Charter.
In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention that is within this Charter, with full power to retain outside counsel or other experts for this purpose.
Duties and Responsibilities
The following shall be the common recurring duties and responsibilities of the Committee in carrying out its oversight functions. These duties and responsibilities are set forth below as a guide to the Committee with the understanding that the Committee may alter or supplement them, as appropriate under the circumstances, to the extent permitted or required by applicable law, regulation or the Nasdaq Rules.
1. Annually, the Committee shall retain the Corporation's independent auditor, which may be subject to stockholder ratification as required or as the Committee may seek.
The Committee, or a subcommittee of the Committee, shall preapprove the provision of all audit and non-audit
services by the independent auditor to the Corporation and its subsidiaries and
shall also approve all audit and non-audit engagement fees and terms with the
independent auditor. In connection with the Committee's approval of non-audit
services, the Committee shall consider, among other things, whether the
independent auditor's performance of any non-audit services is compatible with
the independence of the independent auditor.
In connection with the Committee's approval of non-audit services, the Committee shall consider, among other things, whether the independent auditor's performance of any non-audit services is compatible with the independence of the independent auditor.
3. The Committee shall obtain and review a report by the independent auditor describing all relationships between the independent auditor and the Corporation, in order to assess the auditor's independence, consistent with Independence Standards Board Standard 1. The Committee shall actively engage in dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the auditor's objectivity and independence and shall take, or recommend to the Board to take, appropriate action to oversee the independence of the auditor.
4. The Committee shall review the report by the independent auditor, which is required by Section 10A of the Securities Exchange Act of 1934, as amended, concerning:
a. all critical accounting policies and practices to be used;
b. alternative treatments of financial information within generally accepted accounting principles (GAAP) that have been discussed with management officials, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and
c. any other material written communications between the independent auditor and the Corporation's management.
5. The Committee shall discuss the annual audited financial statements and quarterly financial statements with management, the internal auditor and the independent auditor, including the Corporation's disclosures under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Corporation's reports filed with the Securities and Exchange Commission (the "SEC"), including its Annual Reports on Form 10 K and its Quarterly Reports on Form 10 Q.
6. In connection with its review of the Corporation's financial statements, the Committee shall review and discuss with management, the internal auditor and the independent auditor the matters relating to the conduct of the audit required to be discussed by Statements on Auditing Standards Nos. 61 and 90 (Communications with Audit Committees), as they may be modified or supplemented, including the auditor's judgment about the quality, not just acceptability, of the Corporation's accounting principles as applied in its financial reporting.
7. Based on its review and discussions with management, the internal auditors and the independent auditor, the Committee shall recommend to the Board whether the Corporation's financial statements should be included in the Corporation's Annual Report on Form 10 K (or the annual report to stockholders if distributed prior to the filing of the Annual Report on Form 10 K).
8. The Committee shall prepare or cause the preparation of the report required by SEC rules to be included in the Corporation's annual stockholders' meeting proxy statement.
9. The Committee shall ensure that management includes a copy of this Charter with the Corporation's proxy statement at least once every three years or after any significant amendment to this Charter.
10. The Committee shall generally discuss earnings press releases as well as financial information and earnings guidance provided to financial analysts, investors and rating agencies before such information is communicated publicly.
11. Periodically, the Committee shall meet separately with each of management, the internal auditors and the independent auditors.
12. The Committee shall review with the independent auditor any audit problems or difficulties and management's response.
13. The Committee shall establish the Corporation's hiring policies for employees or former employees of the Corporation's independent auditors.
14. The Committee shall discuss the Corporation's policies with respect to risk assessment and risk management.
15. Periodically, the Committee shall review with management, the internal auditor and the independent auditor the adequacy and effectiveness of the Corporation's systems and controls for monitoring and managing legal and regulatory compliance, including the Corporation's disclosure controls and procedures and the Corporation's internal control over financial reporting.
16. The Committee shall establish procedures for:
a. the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and
b. the confidential, anonymous submission by the Corporation's employees of concerns regarding accounting or auditing matters.
17. The Committee shall formulate and recommend to the Board a code of ethics and business conduct for directors, officers and employees of the Corporation (the "Code of Ethics"). The Committee shall obtain reports from management concerning compliance with the Code of Ethics and the Corporation's other compliance policies and guidelines, and advise the Board with respect to such compliance. The Committee shall from time to time recommend to the Board any revisions to the Code of Ethics and other compliance policies and guidelines that the Committee deems appropriate or to ensure compliance with applicable securities laws or regulations and securities listing requirements.
18. The Committee shall communicate to the Board any issues and recommendations for action, if any, with respect to the quality or integrity of the Corporation's financial statements, the Corporation's compliance with legal or regulatory requirements, the performance and independence of the Corporation's independent auditors or the performance of the independent audit function.
19. The Committee shall review with the Chief Financial Officer the scope and plan of the work to be done by the internal audit function and the results of such work.
Reliance on Information Provided
In adopting this Charter, the Board acknowledges that the Committee members are not necessarily legal experts and are not providing any expert or special assurance as to the Corporation's legal compliance. Each member of the Committee shall be entitled to rely on the integrity of those persons and organizations within and outside the Corporation that provide information to the Committee and the accuracy and completeness of the information provided to the Committee by such persons or organizations absent actual knowledge to the contrary.
This Charter, and any provision contained herein, may be amended or repealed by the Board.