2003 Audit Charter: AICOOBAUDIT, FINANCE AND PENSION COMMITTEE CHARTER
I. Committee Role and Purpose.
The Committee's role is to act on behalf of the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of all material aspects of the Company's financial reporting, control and audit functions, except those specifically related to the responsibilities of another standing committee of the Board, and to select, retain, compensate, oversee and terminate the Company's external auditors subject to ratification by the shareholders. The Committee's role also includes coordination with other Board committees and the maintenance of strong, positive working relationships with management, external auditors, internal auditors, counsel and other Committee advisors. The Committee is further responsible for overseeing the Company's Code of Business Conduct and reviewing and approving any waivers thereto for directors or senior management. As to the Company's pension plans, the Committee is responsible for overseeing all such plans, including regulatory compliance; investment manager and trustee selection, retention and performance; and audits but excluding administration and oversight of pension plan benefits and amendments.
The Committee is expected to have open communications, including regular, private executive sessions, as appropriate, with the independent auditors, internal auditors and management and to report regularly to the Board.
II. Committee Membership and Qualification.
The Committee shall be appointed by the Board of Directors and shall consist of at least three directors, each of whom shall be independent of management and not own directly or indirectly in excess of five percent of the Company's outstanding shares. The members shall be financially literate (or shall become financially literate within a reasonable period after appointment to the Committee), as required by the New York Stock Exchange (NYSE). The Chair shall be literate in business and financial reporting and control, including knowledge of applicable regulatory requirements and have past employment experience in finance or accounting or other comparable experience or background.
The Committee shall have access to its own counsel and other advisors at the Committee's sole discretion.
III. Meeting Frequency.
The Committee shall meet at least quarterly to review and assess quarterly and/or annual financial results, public releases and guidance to analysts and rating services. It shall also meet in conjunction with at least two meetings of the full Board to carry out an annual plan of reviews and discussions with the independent and internal auditors and management, which covers the areas of primary Committee responsibility, next discussed.
IV. Primary Committee Responsibilities
The Committee shall review and assess:
Risk Management—In reliance on management's representations and the independent auditors' review, the Company's business risk and management process, including insurance coverage and the scope thereof, and the adequacy of the Company's overall control environment and controls in selected areas representing significant financial and business risk.
Internal Controls and Regulatory Compliance—In reliance on management's representations and the independent auditors' review, the Company's system of internal controls for detecting and reporting financial errors, fraud and defalcations, legal violations, noncompliance with the Company' Code of Business Conduct and significant conflicts of interest and related-party transactions.
Financial Reporting and Controls—Financial statement issues and risks that may have a material impact or effect on reported financial information, the processes used by management to address such matters, related auditor views and the basis for audit conclusions. Material conclusions on audit work in advance of the public release of financials.
Auditor Recommendations—Important external and internal auditor recommendations on financial reporting, controls, other matters and management's response. The views of management and auditors on the overall quality of annual financial reporting.
External Audit Responsibilities—Auditor independence and the overall scope and focus of the annual audit, including the scope and level of involvement with unaudited quarterly or other period information.
Internal Audit Responsibilities—The annual internal audit plan and the process used to develop the plan. Status of activities, significant findings, recommendations and management's response. Internal audit performance and changes in internal audit leadership and/or financial management.
Regulatory Examinations—SEC inquiries and the results of examinations by other regulatory authorities in terms of important findings, recommendations and management's response.
Annual Reports and Other Major and Quarterly Regulatory Filings—Annual and quarterly financial information and such other information that the Committee deems necessary in advance of filings and/or distribution.
Corporate Officer and Director Transactions—Management and Board member transactions with the Company to include reimbursement of expenses, personal use of Company assets, loans, stock transactions and/or paid advisory or other services performed for the Company. In addition, the Committee will be responsible for reviewing and overseeing the Company's Code of Business Conduct and shall review and be responsible for approving any waivers thereof by directors or senior management.
While the Committee has the responsibilities and powers noted above, it is not the duty of the Committee to plan or conduct audits or to independently determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles and/or regulatory requirements. Management remains responsible for preparing the Company's financial
statements and the independent auditors remain responsible for auditing them. Further, it is not the duty of the Committee to conduct investigations or to assure compliance with laws and regulations and the Company's Code of Business Conduct. These are also responsibilities of management.
V. Committee's Relationship with External Auditors.
The Committee shall:
Select the firm of public accountants to audit the Company's financial statements, determine and approve their compensation, evaluate their performance and, where appropriate, terminate their services to the Company, subject to shareholder ratification. The Committee shall also verify the independence of such firm, discussing with the Board any relationships that may adversely affect the independence of the auditor.
Have a clear understanding with management and the independent auditors that the independent auditors are ultimately accountable to the Board and the Committee as representatives of the Company's shareholders.
Discuss with the independent auditors their qualifications and independence from management and the Company and the matters included in the written disclosures required by the Independent Standards Board. The Committee recognizes that it is the policy of the Company that employees of the independent auditors may not be employed by the Company as associates for at least five years following their departure from the firm.
Secure and review annually from the independent auditors their report describing the firm's internal quality control procedures, material issues raised in any recent internal quality control or peer reviews, and any inquiry or investigation by governmental or professional authorities issued or commenced within the proceeding five years and the resolution thereof.
Discuss with the independent auditors the overall scope and plans for its external audits and the fit with those being done internally, including the adequacy of staffing and compensation. Also, the Committee shall discuss with management and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor business risk and legal and ethical compliance programs. Further, the Committee shall meet separately with the independent auditors, with and without management present, to discuss the results of their examinations.
Review the financial statements contained in the Company's annual report to shareholders with management and the independent auditors to determine that the independent auditors are satisfied with the disclosure and content of the financial statements presented to shareholders. The Committee shall also review with the independent auditors their assessment of the quality, not just the acceptability, of the Company's significant accounting principles and underlying estimates as applied in its financial reporting and any important changes in accounting principles and the application thereof in both interim and annual financial reports.
Review the quarterly financial statements and earnings releases and selected financial data with management and the independent auditors prior to public release. Particular attention should be given to the quality and integrity of the results, including discussion of the adequacy and propriety of
reserves and accruals, income and expense recognition practices and off-balance sheet transactions, if any. The Committee also shall determine that the independent auditors are satisfied with the quarterly results and the disclosure and content of the proposed press release.
Review management's discussion and analysis of financial condition and results of operations contained in annual and quarterly financial statements with both management and the independent auditors.
Review and assess any non-audit service to be provided by the independent auditors. As part of such review, the Committee will assess, among other things, whether the role of those performing the non-audit service would be inconsistent with the auditor's role, whether the audit firm personnel would be assuming a management role or creating a conflicting interest with management, whether the project must be completed very quickly and whether the size of the fees for the non-audit services are appropriate.
Discuss periodically with the independent auditors their evaluation of the quality and effectiveness of the financial organization and its principal personnel in carrying out their duties on the Company's behalf.
Discuss with the independent auditors their evaluation of the impact of opinions of the Financial Accounting Standards Board (FASB), releases of the Securities and Exchange Commission (SEC), rules of the NYSE, and changes in tax laws and any other pertinent laws or regulations that could have a material impact on the Company's financial condition and statements.
Review with the independent auditors any audit problems or difficulties encountered in performing their services and the response of management.
VI. Committee's Relationship with Internal Auditor.
The Committee shall:
Meet, at least annually, with the Company's Director, Internal Audits, to review the internal audit program of the Company and its annual plan.
Receive periodic reports on such program, including information on audits completed and in progress and audits added to or deleted from the program. Such reports shall include a discussion of any major findings disclosed during the course of such audits, their implications and management's response and plan of corrective action, as appropriate.
Meet periodically, but at least annually, with the internal auditors in executive session to discuss any matters which the Committee seeks to raise or which the internal auditors judge they should identify to the Committee.
VII. Committee's Pension Review Duties.
The Committee shall:
Oversee the Company's defined benefit and defined contribution plans and review any recommended changes thereto.
Oversee the selection, retention, compensation and performance of all investment managers and trustees for such plans.
Meet periodically with plan investment managers and actuaries.
Select and retain consultants and advisors as deemed necessary.
Review and approve investment manager objectives and guidelines.
Oversee the Company's Pension Committee.
Select the independent auditors for such plans and review the results of their examination.
VIII. Committee's Code of Business Conduct Duties.
The Committee shall:
Annually review with management and report to the Board on the implementation of the Company's Code of Business Conduct and the periodic certification by associates of the Company.
Discuss and secure annual certifications from all directors as to their compliance with the Code.
Review and approve or reject any request for waiver of material deviations or exceptions from the provisions of the Code by any director or senior management associate and provide for such disclosure thereof as is required.
IX. Charter Review and Audit Committee Report.
In accordance with the NYSE listing standards, the Committee will review and reevaluate annually the adequacy of its Charter and, where review requires amending the Charter, request that the Board of Directors approve such amendments. The Committee will also include a report in the annual proxy statement provided to shareholders in connection with the Company's annual meeting and shall recommend that the Board provide such written affirmation as is required by the NYSE listing standards.