AUDIT COMMITTEE CHARTER

 

 

 

 

 

AUTHORITY

 

 

            The Board of Directors of Meadowbrook Insurance Group, Inc. (the “Company”) by Resolution dated August 6, 2002, established the Audit Committee (“Committee”). 

 

 

 

Purpose

 

 

The Audit Committee Charter was adopted by the Board of Directors on November 5, 2002.  The purpose of the Committee is to provide oversight relating to financial reporting, selection, compensation and rotation of the Company’s independent auditors and oversight of the internal audit functions of the Company. 

 

 

 

Duties and Responsibilities

 

 

 

¨       The Committee shall review the independence and performance of the auditors and annually recommend to the Board of Directors the appointment of the independent auditors or discharge of the auditors when circumstances warrant. 

 

 

 

¨       Approve the fees and other significant compensation paid to the independent auditors. 

 

 

 

¨       On an annual basis, the Committee shall review and discuss with the independent auditors any relationship it may have with the Company that might impair the auditors’ independence. 

 

 

 

¨       Review the independent auditors audit plan, scope, staffing, involvement of management and general audit approach.

 

 

 

¨       Review and assure the Company implements any regulatory actions adopted by the Securities and Exchange Commission (“SEC”).

 

 

 

¨       Establish, review and update periodically the Company’s Code of Business Conduct and assure that management has established a process to enforce the Code, as well as, avoid any transactions which would create a conflict of interest between directors and officers of the Company.

 

 

 

¨       Assure the audit partner serves for no more than five (5) consecutive years on the Company’s audit. 

 

 

 

¨       Review the quarterly and annual financial statements and determine whether they are complete and consistent with the information known to committee members, and assess whether the financial statements reflect appropriate accounting principles.

 

 

 

¨       Discuss with the Board of Directors those matters required to be communicated to the Audit Committee, in accordance with AICPA SAS 61, which shall include the following:

 

 

 

§         Auditors responsibility under generally accepted auditing standards (GAAS);

 

§         Significant accounting policies;

 

§         Management judgments and accounting estimates;

 

§         Significant audit adjustments;

 

§         Other information and documents containing audited financial statements;

 

§         Disagreements with management, including accounting principles, scope of audit, disclosures;

 

§         Consultation with other accountants by management;

 

§         Major issues discussed with management prior to retention; and

 

§         Difficulties encountered in performing the audit.

 

 

 

¨       Develop and implement a Code of Ethics for the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller in accordance with Section 406 of the Sarbanes-Oxley Act of 2002.

 

 

 

¨       Monitor and assure the Chief Executive Officer and Chief Financial Officer have complied with the certification requirements of Section 906 and 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

¨       Review the budget, plan activities, audits and organization of the internal audit department.

 

 

 

¨       Pre-approve all permitted non-audit services to be provided by the independent auditors unless a) such non-audit services provided to the Corporation constitute less than 5% of the total amount of revenues paid by the Corporation to its auditors during the fiscal year when the non-audit services are performed, or b) such services were not recognized by the Corporation at the time of the engagement to be non-audit services; and such services are promptly brought to the attention of the audit committee and approved prior to completion of the audit. 

 

 

 

¨       Establish procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal controls, and auditing. 

 

 

 

¨       Engage independent counsel and other advisers as the Audit Committee determines necessary to carry out its duties, including investigation of suspected improprieties, with the Company to provide appropriate funding therefore. 

 

 

 

¨       Review annually with management and the independent auditors their assessments of the adequacy of the internal control structure and procedures for financial reporting.

 

 

 

¨       Meet and discuss with the Company’s auditors and management the Company’s quarterly and year-end earnings before filing with SEC and disclosure to the public.

 

 

 

¨       Establish policies and procedures relating to the Company’s earnings, press releases, public disclosure of financial information and earnings guidance provided to analysts and rating agencies.

 

 

 

¨       Discuss guidelines and policies relating to govern the process by which risk assessment and risk management is undertaken by the Chief Executive Officer and senior management.

 

 

 

¨       Conduct separate and periodic meetings with management, independent auditors and the internal auditors.

 

 

 

¨       Establish hiring policies for employees or former employees of the Company’s independent auditors.

 

 

 

¨       Adopt and disclose Corporate Governance Guidelines for publication of the Company’s website.

 

 

 

¨       Annually prepare a report to shareholders as required by the Securities Exchange Commission, which shall be included in the Company’s Annual Proxy Statement.

 

 

 

¨       Perform any other activities consistent with its Charter, as the Committee or the Board deems necessary or appropriate. 

 

 

 

Membership

 

 

            The Committee will have a Chairman and a minimum of two (2) other directors all of whom shall be independent directors.

 

 

 

            The Committee must include at least one Audit Committee financial expert as defined by the SEC.

 

 

 

            The Board of Directors will appoint the Committee members and the Chairman.

 

 

 

            The Board of Directors will approve all appointments to the Committee.

 

 

 

            The Board of Directors may remove a member from the Committee at any time with or without cause.

 

 

 

COMMITTEE MEETINGS/ACTION

 

 

¨       A majority of the Committee members will be a quorum for the transaction of business.

 

 

 

¨       The action of the majority of those present at a meeting when a quorum is present will be the actions of the Committee.

 

 

 

¨       The Committee will meet at least four (4) times per year and at such other times as may be requested by its Chairman.

 

 

 

¨       The Committee Chairman will from time to time report to the Board of Directors on Committee actions.

 

 

 

¨       The Secretary of the Company will keep Minutes of all Committee meetings.

 

 

 

¨       A preliminary agendas will be prepared by either Secretary or the Chairman of the Board.  The Chairman of the Committee will make the final decision regarding the agenda.

 

 

 

¨       The agenda and all materials to be reviewed at the meeting shall be received by the Committee members as far in advance of the meeting date as practicable.