Audit Committee Charter
The purpose of the Audit Committee of the Board of Directors (the “Board”) of ABM Industries Incorporated (the “Company”) is to assist Board oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of the Company’s internal audit function and the independent auditor. The Committee will undertake those specific duties, responsibilities and processes listed below, perform such other duties and responsibilities enumerated in and consistent with this Charter, and such other duties as the Board from time to time may prescribe. In fulfilling this role, the Committee will ensure that there is effective communication among the Board, management and independent auditors. In this way, this Charter will help the Board fulfill its oversight responsibility to the stockholders and the investment community relating to the Company’s financial statements and financial reporting process.
The Committee will be comprised of no fewer than three members of the Board. The members will be appointed by and serve at the pleasure of the Board. Committee members shall serve until they are replaced, they resign, or their successors are duly elected and qualified.
Each member shall meet an objective test of “independence” which has been established by the Board, or in the absence of such test, the Board shall make an individual determination that such director is independent within the meaning of Section 10A of the Securities Exchange Act of 1934 (the “Exchange Act”) and any other applicable law or any listing standard or rule established by the New York Stock Exchange and applicable to the Committee.
Each member of the Committee also must be “financially literate” as interpreted by the Board, in its business judgment, or must become “financially literate” within a reasonable period of time after his or her appointment to the Committee. In addition, at least one member of the Committee must have accounting or related financial management expertise as interpreted by the Board in its business judgment.
The Committee shall meet as often as may be deemed necessary or appropriate, but no fewer than four times annually. The Committee as a group will meet individually with the Company’s independent auditors, Chief Executive Officer and Chief Financial Officer upon completion of the annual audit, and at such other times as it deems appropriate, to review the independent auditors’ examination and management report. The Committee may also meet with the Company’s internal auditors to the extent the Committee deems necessary or advisable.
The Committee may ask members of management or others to attend meetings or to provide relevant information. The Committee periodically shall meet in executive session without management.
Duties and Responsibilities
The Company’s management is responsible for preparing financial statements; the Committee’s primary responsibility is oversight. To fulfill its responsibilities, the Committee shall perform the following duties:
A. Auditor Oversight Responsibilities
1. Be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor, with the independent auditor reporting directly to the committee;
2. Preapprove all auditing services and all non-audit services that the independent auditor is permitted to and engaged to perform (other than de minimus non-audit services approved in accordance with Section 10A of the Exchange Act);
3. Approve the fees for audit and non-audit services at least annually;
4. Ensure the receipt of, and review, a formal written statement from the Company’s independent auditors delineating all relationships between the independent auditor and the Company, consistent with Independence Standards Board Standard 1;
5. Review and actively discuss with the Company’s independent auditors, the auditor’s independence, including any disclosed relationship or service that may impact the objectivity and independence of the independent auditor; and
6. At least annually, obtain and review reports by the independent auditor describing: the firm’s internal quality control procedures; any material issues raised by the most recent internal quality control review, or peer review, of the 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; and (to assess the auditor’s independence) all relationships between the independent auditor and the Company.
B. Financial Review and Reporting Responsibilities
1. Review the quarterly
and annual financial statements, and review and discuss the audited annual
financial statements with both the Company’s independent auditors and the
Company’s management, including the Company’s disclosures under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,”
prior to any
public filing of those reports; and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K;
2. Review any disclosures made to the Committee by the Chief Executive Officer or Chief Financial Officer in connection with their certifications of the Company’s periodic reports about any significant deficiencies in the design or operation of internal controls or material weaknesses in internal controls or any fraud involving management or other employees who have a significant role in internal controls;
3. Discuss with the Company’s independent auditors the quality of accounting principles applied in the Company’s financial statements and the other matters required by SAS 61 and amendments or supplements thereto, such as management judgments and accounting estimates that affect financial statements, significant new accounting policies and disagreements with management, and review with the independent auditor any difficulties the auditor encountered in the course of its audit work (including any restrictions on the scope of the auditor’s activities, or on access to information) and management’s response;
4. Oversee the Company’s compliance with SEC requirements for disclosure of auditor’s services and Committee members and activities; and 5. Review the Company’s system of internal accounting controls.
C. Other Responsibilities
1. Discuss the Company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
2. Discuss policies with respect to risk assessment and risk management;
3. Meet separately, periodically, with management, with internal auditors (or other personnel responsible for the internal audit function) and with independent auditors;
4. Set clear hiring policies for employees or former employees of the independent auditors and take any other appropriate actions to ensure the independence of the independent auditors; and
5. Establish procedures for the receipt, retention, and treatment of complaints from the Company’s employees on accounting, internal accounting controls, or auditing matters, as well as for confidential, anonymous submissions by the Company’s employees of concerns regarding questionable accounting or auditing matters, as required by Exchange Act Rule 10A-3(b)(3).
Finally, the Committee will ensure that the independent auditors understand both: (i) their ultimate accountability to the Board and to the Committee, as representatives of the Company’s stockholders, and (ii) the Committee’s ultimate authority and responsibility to select, evaluate and, where appropriate in the exercise of its business judgment, replace the Company’s independent auditors.
Self-Evaluation and Charter Review
The Committee will annually conduct a self-evaluation of this Committee to review the Committee’s performance, including its effectiveness and compliance with this Charter. In connection with the evaluation, the Committee will review and reassess the adequacy of this Charter annually and recommend to the Board any appropriate changes.
The Chair of the Committee will report orally to the Board at its regularly scheduled meetings on the matters considered by the Committee. The Committee will, to the extent deemed appropriate, record its summaries of recommendations to the Board in written form that will be incorporated as a part of the minutes of the Committee and distributed to the Board. This Charter will be posted on the Company’s web site to be available to all stockholders. To the extent required, the Committee also will prepare and sign a report for inclusion in the Company’s proxy statement for its annual meeting of stockholders.
The Committee shall undertake any other action or exercise such other powers, authority and responsibilities as necessary or appropriate to the discharge of the responsibilities and duties set forth in this Charter or the Company’s Bylaws, or otherwise required by the Listing Standards of the New York Stock Exchange or other applicable laws, rules or regulations, or as shall otherwise be determined by the Board.
In discharging its responsibilities and duties, the Committee is empowered to investigate any matter brought to its attention that it determines to be within the scope of its authority with full access to all books, records, facilities and personnel of the Company. The Committee has the power to retain outside counsel or other consultants or experts as the Committee may deem appropriate in its sole discretion, and shall receive funding from the Company to engage such advisors, and have sole authority to approve related fees and retention terms.
The Committee may delegate authority to individuals or subcommittees when it deems appropriate. However, in delegating authority it shall not absolve itself from the responsibilities it bears under the terms of this Charter.