THE BOARD OF DIRECTORS
The primary purposes of the committee are to oversee on behalf of the board of directors:
company’s accounting and financial reporting processes and the integrity of its
audits of the company’s financial statements and the appointment, compensation,
qualifications, independence and performance of the company’s independent
· the company’s compliance with legal and regulatory requirements; and
performance of the company’s internal audit function and internal control over
The committee also has the purpose of preparing the audit committee report that SEC rules require the company to include in its annual proxy statement.
The committee’s function is one of oversight only and does not relieve management of its responsibilities for preparing financial statements that accurately and fairly present the company’s financial results and condition, nor the independent auditors of their responsibilities relating to the audit or review of financial statements.
Number of members. The committee must consist of at least three directors. The board may designate a
committee member as the chairperson of the committee, or if the board does not
do so, the committee members will appoint a committee member as chairperson by
a majority vote of the authorized number of committee members.
Financial literacy. Each committee member must be
financially literate upon appointment to the committee, as determined by the
board in accordance with the listing standards. At all times, there should be
at least one committee member who, as determined by the board, is an audit
committee financial expert as defined in the SEC rules.
Appointment. Subject to any requirements of the listing standards, the board may
appoint and remove committee members in accordance with the company’s bylaws.
Committee members will serve for such terms as the board may fix, and in any
case at the board’s will, whether or not a specific term is fixed.
Service on other audit committees. No director is eligible to serve on the committee if he or she serves on more than two other public companies’ audit committees.
auditors and their services
Overall authority. The committee has the sole authority and direct responsibility for the appointment, compensation, retention, termination, evaluation and oversight of the work of the independent auditors engaged by the company for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the company. The independent auditors report directly to the committee. The committee’s authority includes resolution of disagreements between management and the auditors regarding financial reporting and the receipt of communications from the auditors as may be required under professional standards applicable to the auditors.
Terms of audit and non-audit engagements. The committee must pre-approve all audit, review, attest and permissible non-audit services (including any permissible internal control-related services) to be provided to the company or its subsidiaries by the independent auditors. The committee may establish pre-approval policies and procedures in compliance with applicable SEC rules.
Annual quality control report and review. The committee
must obtain and review, at least annually, a report by the independent auditors
· the firm’s internal quality-control procedures; and
· any material issues raised by the most recent internal quality-control review, or peer review, of the auditing 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.
In addition, the committee’s annual review of the independent
auditors’ qualifications must also include the review and evaluation of the
lead partner of the independent auditors for the company’s account, and
evaluation of such other matters as the committee may consider relevant to the
engagement of the auditors, including views of company management and internal
finance employees, and whether the lead partner or auditing firm itself should
Policy on hiring employees of the auditors. The committee
will from time to time establish hiring policies that will govern the company’s
hiring of employees or former employees of the independent auditors, taking
into account possible pressures on the auditors’ personnel who might seek a
position with the company, and report these policies to the full board.
As often and to the extent the committee deems necessary or
appropriate, but at least annually in connection with the audit of each fiscal
year’s financial statements, the committee will:
Discuss financial statements
and internal control reports with management. Meet to review and discuss with appropriate members of management, the
independent auditors, and, if appropriate, internal auditors:
· the audited financial statements;
· related accounting and auditing principles and practices; and
· management’s assessment of internal control
over financial reporting and the related report and attestation on internal
control over financial reporting to be included in the company’s annual report
on Form 10-K (as and when these reports are required under SEC rules).
Critical accounting policy
report. Timely request and
receive from the independent auditors (before the filing of any audit report)
the report or update required pursuant to applicable SEC rules, concerning:
· all critical accounting policies and
practices to be used;
· all alternative treatments within generally accepted accounting principles for policies and practices relating to material items that have been discussed with company management, including ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent auditors; and
· other material written communications
between the independent auditors and company management, such as any management
letter or schedule of unadjusted differences.
SAS 61 review. Discuss with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, including
such matters as:
· the quality and acceptability of the
accounting principles applied in the financial statements;
· new or changed accounting policies, the
effect of regulatory and accounting initiatives, and significant estimates,
judgments, uncertainties or unusual transactions;
· the selection, application and effects of
critical accounting policies and estimates applied by the company;
· issues raised by any “management” or
“internal control” letter from the auditors, problems or difficulties
encountered in the audit (including any restrictions on the scope of the work
or on access to requested information) and management’s response to such
problems or difficulties, significant disagreements with management, or other
significant aspects of the audit; and
· any off-balance sheet transactions, and
relationships with any unconsolidated entities or any other persons, which may
have a material current or future effect on the financial condition or results
of the company and are required to be reported under SEC rules.
MD&A. Review and discuss with appropriate members
of management and the independent auditors the specific intended disclosures
under “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” to be included in the company’s annual report on Form 10-K.
ISB 1 disclosure. Receive from the independent auditors a
formal written statement of all relationships between the auditors and the
company consistent with Independence Standards Board Standard No. 1.
Auditor independence. Actively discuss with the independent
auditors any disclosed relationships or services that may impact their
objectivity and independence, and take any other appropriate action to oversee
Material issues. To the extent the committee deems necessary
or appropriate, discuss with the independent auditors material issues on which
the company’s audit team consulted the independent auditors’ national office.
Recommend filing of audited
Recommend to the board whether the company’s annual report on Form 10-K to be
filed with the SEC should include the audited financial statements.
The committee’s quarterly review will normally include:
Quarterly review. Meet to review and discuss the quarterly
financial statements of the company and the results of the independent
auditors’ review of these financial statements with appropriate members of
management and the independent auditors.
Discussion of significant
matters with management.
Review and discuss with company management and, if appropriate, the independent
auditors, significant matters relating to:
· the quality and acceptability of the
accounting principles applied in the financial statements;
or changed accounting policies, and significant estimates, judgments,
uncertainties or unusual transactions;
selection, application and effects of critical accounting policies and
estimates applied by the company; and
off-balance sheet transactions and relationships with any unconsolidated
entities or any other persons that may have a material current or future effect
on the financial condition or results of the company and are required to be
reported under SEC rules.
MD&A. Review and discuss with appropriate
members of management and the independent auditors the specific intended
disclosures under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” to be included in the company’s quarterly report on Form
Annual review of this charter. The committee will review
and assess the adequacy of this charter annually and recommend any proposed
changes to the full board.
Annual review of performance. The committee will evaluate
its performance as the audit committee on an annual basis.
Earnings releases and other financial guidance. The
committee will discuss with management earnings press releases and other
published financial information or guidance provided to analysts and rating
agencies. This may be conducted generally as to types of information and
presentations, and need not include advance review of each release, other
information or guidance.
Compliance. The committee, to the extent it deems
necessary or appropriate, will periodically review with management the
company’s disclosure controls and procedures, internal control over financial
reporting and systems and procedures to promote compliance with laws.
Risk assessment. The committee will periodically:
· inquire of management, the members of the
internal audit department and the independent auditors about the company’s
major financial risks or exposures;
· discuss the steps management has taken to monitor and control such exposures; and
· discuss guidelines and policies with respect
to risk assessment and risk management.
Conduct codes. The committee will conduct any activities
relating to the company’s code(s) of conduct and ethics as may be delegated
from time to time to the committee by the board.
Complaints and anonymous submissions. The committee will
establish and maintain 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
If the committee or the board so determines, the submission
procedures may also include a method for interested parties to communicate
directly with the board’s presiding director or with the non-management directors
as a group.
Internal audit. The committee will monitor that the
company maintains an internal audit function (which may be outsourced to a firm
other than the company’s independent auditors). The committee will oversee the
internal auditors (or other personnel responsible for the internal audit
function), who will report directly to the committee.
Related party transactions. It is
the company’s policy that the company will not enter into transactions required
to be disclosed under item 404 of the SEC’s Regulation S-K unless the committee
or another independent body of the board first reviews and approves the
Internal control over financial reporting. The committee will periodically discuss and review, as appropriate, with the internal auditor, management and the independent auditors:
· the design and effectiveness of the
company’s internal control over financial reporting; and
· any significant deficiencies or material weaknesses in that internal control, any change that has materially affected or is reasonably likely to materially affect that internal control (including special steps adopted in light of such a deficiency or weakness), and any fraud (whether or not material) that involves management or other employees who have a significant role in that internal control, that have been reported to the committee.
Reports from legal counsel. The committee will review and
take appropriate action with respect to any reports to the committee from legal
counsel for the company concerning any material violation of securities law or
breach of fiduciary duty or similar violation by the company, its subsidiaries
or any person acting on their behalf.
Other reviews and functions. The committee, as it may consider
appropriate, may consider and review with the full board of directors, company
management, internal or outside legal counsel, the independent auditors or any
other appropriate person any other topics relating to the purposes of the
committee that may come to the committee’s attention. The committee may perform
any other activities consistent with this charter, the company’s corporate
governance documents and applicable listing standards, laws and regulations as
the committee or the board of directors considers appropriate.
Meetings. The committee will meet as often as it
determines is necessary, but not less than quarterly. The committee may also
act by unanimous written consent in lieu of a meeting. The committee will meet
separately and periodically with management (including the
chief financial officer and chief accounting officer),
internal auditors (or other personnel responsible for the internal audit
function) and independent auditors. To the extent the committee deems necessary or
appropriate, it will also discuss with the company’s general counsel any legal
matters that may materially impact the company’s financial statements, internal
control over financial reporting or compliance policies. In addition, the committee may meet from time to time with any other
persons, as it deems necessary or appropriate.
Procedures. The committee may establish its own procedures, including the formation and delegation of authority to subcommittees, in a manner not inconsistent with this charter, the bylaws or the listing standards and SEC rules. The chairperson or a majority of the committee members may call meetings of the committee. A majority of the authorized number of committee members constitutes a quorum for the transaction of committee business, and the vote of a majority of the committee members present at a meeting at which a quorum is present will be the act of the committee, unless in either case a greater number is required by this charter, the bylaws or the listing standards. The committee will keep written minutes of its meetings and deliver copies of the minutes to the corporate secretary for inclusion in the corporate records.
Reports. The committee will timely prepare the audit committee
report required to be included in the company’s annual meeting proxy statement,
and report to the board on the other matters relating to the committee or its
purposes, as required by the listing standards or SEC rules. The committee will
also report to the board annually the overall results of its annual review of
the independent auditors’ qualifications, performance and independence and the
annual review by the committee of its own performance. The committee also will
report to the board on the major items covered by the committee at each
committee meeting, and provide additional reports to the board as the committee
may determine to be appropriate, including review with the full board of any
issues that arise from time to time with respect to the quality or integrity of
the company’s financial statements, the company’s compliance with legal or
regulatory requirements, the performance and independence of the independent
auditors or the performance of the internal audit function.
Committee access and investigations. The committee is at all times authorized to have direct, independent and confidential access to the independent auditors and to the company’s other directors, management and personnel to carry out the committee’s purposes. The committee is authorized to conduct or authorize investigations into any matters relating to the purposes, duties or responsibilities of the committee.
Committee advisers and funding. As the committee deems
necessary to carry out its duties, it is authorized to select, engage
(including approval of the fees and terms of engagement), oversee, terminate
and obtain advice and assistance from outside legal, accounting or other
advisers or consultants. The company will provide for appropriate funding, as
determined by the committee, for payment of:
· compensation to the independent auditors for
their audit and audit-related, review and attest services;
· compensation to any advisers engaged by the
ordinary administrative expenses of the committee that are necessary or appropriate in carrying out its duties.