Effective 1 October 2004
is responsible for assisting the Board of Directors (the "Board") in
the Board's oversight responsibilities relating to the integrity of the
Company's financial statements, financial reporting process, and systems of
internal accounting and financial controls; the qualifications, independence,
and performance of the independent auditor and the performance of the Company's
internal audit department; and the Company's legal and regulatory compliance.
its responsibilities, the Committee is not itself responsible for the planning
or conduct of audits or for any determination that the
Company's financial statements and disclosures are complete and accurate or are
in accordance with generally accepted accounting principles and applicable
rules and regulations. This is the responsibility of the Company's management
and the independent auditor.
Structure; Member Qualifications, Appointment, and Removal
shall consist of at least three directors who, along with the chairperson of
the Committee, are appointed by the Board upon recommendation of the Corporate
Governance and Nominating Committee (the "Governance Committee"), and
may be removed by the Board in its discretion.
All members of
the Committee shall be independent directors under the standard adopted by the
New York Stock Exchange and shall also satisfy the New York Stock Exchange's
more rigorous independence and financial literacy requirements for members of
audit committees. All Committee members shall have sufficient financial
experience and ability to enable them to discharge their responsibilities and
at least one member shall have accounting and related financial management
expertise within the meaning of the New York Stock Exchange listing standards
and qualify as an "audit committee financial expert" under applicable
of the Committee's purpose, the Committee shall have the following authority
Financial Statements, Financial Reporting Process, and
Systems of Internal Accounting and Financial Controls
- To review and discuss with
management and the independent auditor the annual audited financial
statements and other financial information to be included in the Company's
Annual Report on Form 10-K, including management's and/or the independent
auditor's judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant judgments, the
clarity of the disclosures in the financial statements, and the adequacy
of internal controls.
- To discuss the results of the
annual audit and any other matters required to be communicated to the
Committee by the independent auditor under generally accepted auditing
standards, applicable law, or listing standards, including matters
required to be discussed by Statement on Auditing Standards
("SAS") No. 61.
- To review with the independent
auditor any management letter provided by the independent auditor and the
Company's response and any problems or difficulties the independent
auditor may have encountered in connection with the annual audit or
- To recommend to the Board,
based on the reviews and discussions with management and the independent
auditor described above, whether the annual audited financial statements
should be included in the Company's Form 10-K Annual Report.
- To review with management and
the independent auditor the Company's quarterly financial information to
be included in the Company's Quarterly Reports on Form 10-Q.
- To review and discuss with
management the types of information to be discussed and the type of
presentation to be made in the Company's earnings press releases, including
the use of "pro forma" or "adjusted" information not
consistent with generally accepted accounting principles in the United States
- To review and discuss with management and the
- material changes in the
Company's accounting policies and practices and significant judgments
that may affect the financial results;
- the nature of any unusual or
significant commitments or contingent liabilities together with the
underlying assumptions and estimates of management;
- the effect of changes in
accounting standards that may materially affect the Company's financial
reporting practices; and
- the Company's procedures with
respect to appropriateness of significant accounting policies and
adequacy of financial controls.
- To review and discuss with the
independent auditor any accounting or auditing issues on which the
national office of the independent auditor was consulted.
- To review analyses prepared by
management and/or the independent auditor setting forth significant
financial reporting issues or judgments made in connection with the
financial statements, including analyses of the effects of alternative
GAAP methods on the financial statements.
- To discuss with management, the
senior internal audit executive and the independent auditor the adequacy
and effectiveness of internal controls.
- To review with the Chief Executive Officer and
the Chief Financial Officer the Company's disclosure controls and
procedures and to review periodically, but in no event less frequently
than quarterly, management's conclusions and the Chief Executive Officer's
and the Chief Financial Officer's certifications about the efficacy of
such disclosure controls and procedures.
Oversight of Independent Auditor and Internal Audit
- To recommend for shareowner
approval the independent auditor to examine the Company's accounts,
controls, and financial statements, nevertheless having sole authority to
appoint or replace the independent auditor, who shall report directly to
- To be directly responsible for
the compensation and oversight of the work of the independent auditor.
- To preapprove
all auditing services and permitted nonaudit
services (including the fees and terms thereof) to be performed for the
Company by the independent auditor, and consider whether the provision of
permitted nonaudit services by the independent
auditor is compatible with maintaining the auditor's independence.
- To review and evaluate the
qualifications, performance, and independence of the Company's independent
auditor at least annually, receive periodic reports from the independent
auditor regarding the auditor's independence, discuss such reports with
the independent auditor, and if so determined by the Committee, take
appropriate action to satisfy itself of the independence of the auditor.
- To consult with management and
the senior internal audit executive and obtain and review a written report
by the independent auditor describing such auditor's internal quality-control
procedures, material issues raised by its most recent internal quality
control review, or peer review (if applicable), or by any inquiry or
investigation by governmental or professional authorities for the
preceding five years and the response of the independent auditor; to
review all relationships between the independent auditor and the Company;
and to assure the regular rotation of the lead audit partner and the
reviewing partner of the independent auditor as required by law.
- To approve guidelines for the
Company's hiring of former employees of the independent auditor who
participated in any capacity in the audit of the Company.
- To review and concur in the
appointment and replacement of the Company's senior internal audit
executive and review the responsibilities, budget, and staffing of the
internal audit department.
- To review the reports to
management prepared by the internal audit department, or summaries
thereof, and management's responses, and periodically review the
experience and qualifications of the members of the internal audit
department and the quality control procedures of the internal audit
- To discuss with the senior internal audit
executive and the independent auditor the overall scope and plans for
their respective audits, including the adequacy of staffing and other
factors that may affect the effectiveness and timeliness of such audits.
- To receive reports on the
Company's compliance program, including a review of the distribution of
and compliance with the Company's Code of Conduct.
- To approve the Audit Committee
report required to be included in the Company's annual proxy statement.
- To discuss with management, the
senior internal audit executive and the independent auditor the Company's
major risk exposures and guidelines and policies to govern the processes
by which risk assessment and risk management is undertaken by the Company,
including discussing the Company's major financial risk exposures and
steps taken by management to monitor and mitigate such exposures and from
time to time conferring with another committee of the Board about risk
exposures and policies within the scope of such other committee's
- To review with management and
the independent auditor (if appropriate) significant legal and regulatory
exposures, including any regulatory inquiries or concerns regarding the
Company's financial statements and accounting policies.
- To establish procedures for the receipt,
retention, and treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters and for the
confidential, anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
Operations: Meetings, Agendas, Reporting, Delegation, and Performance
may determine the procedural rules for its meetings and the conduct of its
business, except as otherwise required by law. Adequate provision is made for
notice to members of all meetings; one-third of the members, but not less than
two, constitute a quorum; and all matters are determined by a majority vote of
the members present. The Committee may delegate all or a portion of the
authority granted to it by the Board to one or more of the Committee members,
senior executives, or committees, subject to applicable law, regulation, and
proposes its regular meeting schedule for each year for approval by the Board,
upon recommendation of the Governance Committee. The Chairman of the Board, the
Corporate Secretary, and the Committee Chairperson agree on the length of
regular meetings and the need to schedule additional special meetings. The
Committee shall meet at least four times per year, or more frequently as
Committee agenda and individual meeting agendas are developed by the Chairman
of the Board and Corporate Secretary in consultation with the Committee
Chairperson, with input from appropriate members of management and staff.
Chairperson reports to the Board on Committee meetings and actions, and the
Secretary or an Assistant Corporate Secretary keeps minutes of all Committee
meetings, which are distributed to Committee members for review and approval.
meets periodically with management, with the senior internal audit executive
and with the independent auditor in separate executive sessions.
evaluates its performance annually and discusses the outcome of the evaluation
with the full Board.
is empowered to conduct its own investigations into issues related to its
responsibilities and to retain independent legal, accounting, or other advisors
to advise the Committee.
The Company shall
provide for appropriate funding, as determined by the Committee in its capacity
as a committee of the Board, for payment of compensation to the independent
auditor employed by the Company for the purpose of rendering or issuing an
audit report, to any advisors employed by the Committee, and for ordinary
administrative expenses of the Committee necessary or appropriate for carrying
out its duties.