Anadarko Petroleum Corporation
2003 Committee Charter : APC
Audit Committee Charter
The Audit Committee (Committee) is appointed by the Board of Directors (Board) to assist the
Board in monitoring (1) the integrity of the financial statements of the Company, (2) compliance
by the Company with legal and regulatory requirements, (3) the independent auditor's
qualifications and independence, (4) performance of the Company's internal and independent
auditors, and (5) the business practices and ethical standards of the Company. The Committee is
also directly responsible for (a) the appointment, compensation, retention and oversight of the
work of the Company's independent auditors, and (b) the preparation of the report that the
Securities and Exchange Commission (Commission) requires to be included in the Company's
annual proxy statement. While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the
Company's financial statements and disclosures are presented fairly in all material respects in
accordance with generally accepted accounting principles. These are the responsibility of
management and the independent auditor.
Independence. The Committee shall consist of three or more independent members of the Board
of Directors. Independence shall be determined as to each member by the full Board. To be
considered independent, each Committee member (1) must meet the independence requirements
of the New York Stock Exchange (NYSE), the Sarbanes-Oxley Act of 2002 (SOX) and the rules
and regulations of the Commission, (2) must not accept any compensation from the Company
either directly or indirectly other than compensation as a Board or Committee member and
(3) must not be an affiliated person of the Company or any of its subsidiaries. Audit Committee
members shall not simultaneously serve on the audit committees of more than two other public
Financial Literacy. All members of the Committee shall be financially literate as defined by the
Commission, or must become financially literate within a reasonable period of time after their
appointment to the Committee, and at least one member of the Committee shall be an audit
committee financial expert, as determined in the judgment of the Board.
The members of the Committee shall be nominated by the Nominating and Corporate
Governance Committee and elected by the Board at the annual organizational meeting of the
Board and shall serve until their successors shall be duly elected and qualified.
Chairman. Unless a Chairman is elected by the full Board, the members of the Committee shall
designate a Chair by majority vote of all the Committee members.
The Committee shall meet at least four times annually or more frequently as circumstances
dictate. Meetings may be in person or by telephone as needed to conduct the business of the
Committee. The Committee may take action by the unanimous written consent of the members
in the absence of a meeting. The Committee shall meet periodically with management, the
internal auditors and the independent auditor in separate executive sessions.
Authority of the Committee
The Audit Committee shall have the authority (1) to exercise all powers with respect to the
appointment, compensation, retention and oversight of the work of the independent auditor for
the Company and its subsidiaries, (2) to retain special legal, accounting or other consultants to
advise the Committee and (3) to approve funds to pay the fees for such advisors. As part of its
oversight role, the Committee may investigate any matter brought to its attention, with the full
power to retain outside counsel or other experts for this purpose. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any member of, or
consultant to, the Committee.
The Audit Committee shall:
Financial Statement and Disclosure Matters
1. Review and discuss prior to public dissemination the annual audited and quarterly unaudited
financial statements with management and the independent auditor, including major issues
regarding accounting, disclosure and auditing procedures and practices as well as the
adequacy of internal controls that could materially affect the Company's financial statements.
In addition, the review shall include the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations." Based on the
annual review, recommend inclusion of the financial statements in the Annual Report on
Form 10-K to the Board.
2. Discuss with management and the independent auditor significant financial reporting issues
and judgments made in connection with the preparation of the Company's financial
statements, including any significant changes in the Company's selection or application of
accounting principles, any major issues as to the adequacy of the Company's internal
controls and any special steps adopted in light of material control deficiencies.
3. Review and discuss reports from the independent auditors on:
A. All critical accounting policies and practices to be used.
B. All alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramification of
the use of such alternative disclosures and treatments, and the treatment preferred
by the independent auditor.
C. Other material written communications between the independent auditor and
management, such as any management letter.
4. Discuss with management the Company's earnings press releases as well as financial
information and earnings guidance provided to analysts and rating agencies. Such
discussion may be done generally consisting of discussing the types of information to be
disclosed and the types of presentations to be made.
5. Discuss with management and the independent auditor the effect on the Company's
financial statements of significant regulatory and accounting initiatives as well as offbalance
6. Discuss with management the Company's major financial risk exposures and the steps
management has taken to monitor and control such exposures, including the Company's
risk assessment and risk management policies.
7. Review with the independent auditor any audit problems or difficulties and
management's response, including, but not limited to (1) any restrictions on the scope of
the auditor's activities, (2) any restriction on the access of the independent auditor to
requested materials, (3) any significant disagreements with management and (4) any audit
differences that were noted or proposed by the auditor but for which the Company's
financial statements were not adjusted (as immaterial or otherwise). The Committee will
resolve any disagreements between the auditors and management regarding financial
8. Review disclosures made to the Audit Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Form 10-Q about any significant
deficiencies in the design or operation of disclosure controls and procedures and any
fraud involving management or other employees who have a significant role in the
Company's internal controls.
9. Discuss at least annually with the independent auditor the matters required to be
discussed by Statement of Auditing Standards No. 61 – Communication with Audit
10. Prepare the report that the Commission requires to be included in the Company's annual
proxy statement and review the matters described in such report.
11. Obtain quarterly assurances from the senior internal auditing executive and management
that the system of internal controls is adequate and effective. Obtain annually a report
from the independent auditor, with attestation, regarding management's assessment of the
effectiveness of the internal control structure and procedures for financial reporting.
Responsibility for the Company's Relationship With the Independent Auditor
12. Be solely responsible for the appointment, compensation, retention and oversight of the
work of the independent auditors employed by the Company. The independent auditor
shall report directly to the Audit Committee. If the appointment of the independent
auditors is submitted for any ratification by stockholders, the Audit Committee shall be
responsible for making the recommendation of the independent auditors.
13. Review, at least annually, the qualifications, performance and independence of the
independent auditor. In conducting such review, the Committee shall: obtain and review
a report by the independent auditor describing (1) the firm's internal quality-control
procedures, (2) any material issues raised by the most recent internal quality-control
review, or peer review, of the firm or by any formal investigation by governmental or
professional authorities regarding services provided by the firm which could affect the
financial statements of the Company, and any steps taken to deal with any such issues,
and (3) all relationships between the independent auditor and the Company that could be
considered to bear on the auditor's independence. This evaluation shall include the
review and evaluation of the lead partner of the independent auditor and shall ensure the
rotation of partners in accordance with Commission rules and the securities laws. In
addition, the Committee shall consider the advisability of regularly rotating the audit firm
in order to maintain the independence between the independent auditor and the Company.
14. Approve in advance any audit or permissible non-audit engagement or relationship
between the Company and the independent auditors. The Committee shall establish
guidelines for the retention of the independent auditor for any permissible non-audit
services. The Committee hereby delegates to the Chairman of the Committee the
authority to approve in advance all audit or non-audit services to be provided by the
independent auditor if presented to the full Committee at the next regularly scheduled
15. Meet with the independent auditor prior to the audit to review the planning and staffing
of the audit including the responsibilities and staffing of the Company's internal audit
department personnel who will assist in the audit.
16. Recommend to the Board policies for the Company's hiring of employees or former
employees of the independent auditor who participated in any capacity in the audit of the
Oversight of the Company's Internal Audit Function
17. Review the appointment and replacement of the senior internal auditing executive.
18. Review the activities and organizational structure of the internal auditing department and
the significant reports to management prepared by the internal auditing department and
19. Discuss with the independent auditor and management the internal audit department
responsibilities, budget and staffing and any recommended changes in the planned scope
of the internal audit department.
Compliance Oversight Responsibility
20. Obtain from the independent auditor assurance that Section 10A(b) of the Securities
Exchange Act of 1934, as amended, has not been implicated.
21. Obtain reports from management and the Company's senior internal auditing executive
that the Company is in conformity with applicable legal requirements and the Company's
Code of Business Conduct and Ethics. Review disclosures required to be made under the
securities laws of insider and affiliated party transactions. Advise the Board with respect
to the Company's policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Conduct and Ethics.
22. Establish and maintain procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal controls or auditing matters.
Also, the Committee shall maintain procedures for the confidential anonymous
submission by employees of the Company of concerns regarding questionable
accounting, internal controls or auditing matters.
23. Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports that raise material issues
regarding the Company's financial statements or accounting policies.
24. Review at least annually legal matters with the Company's General Counsel that may
have a material impact on the financial statements, the Company's compliance policies,
including but not limited to the Foreign Corrupt Practices Act, and any material reports or
inquiries received from regulators or governmental agencies.
25. Report regularly to the Board with respect to any issues that arise 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
Company's independent auditors or the performance of the internal audit function.
26. Review and reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval.
27. Perform an annual performance evaluation of the Committee.