Audit Committee

CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS OF APPLIED MATERIALS, INC.

TABLE OF CONTENTS

I. PURPOSE

II. COMPOSITION

III. MEETINGS

IV. RESPONSIBILITIES AND DUTIES
        • Documents/Reports Review
        • Control Processes
        • Independent Accountants
        • Internal Audit
        • Legal and Ethical Compliance
        • Other Responsibilities

 

I. PURPOSE

The primary function of the Audit Committee (the “Committee”) is to assist the Board of Directors (the “Board”) of Applied Materials, Inc. (the “Company”) in fulfilling its oversight responsibilities with respect to: (i) the financial reports and other financial information provided by the Company to its stockholders and others; (ii) the Company’s financial policies and procedures and disclosure controls and procedures; (iii) the Company’s system of internal control over financial reporting; and (iv) the Company’s auditing, accounting and financial reporting processes. The Committee shall also review and approve related-party transactions (as defined and required by applicable law, including Securities and Exchange Commission (“SEC”) and Nasdaq Marketplace (“Nasdaq”) rules). The Committee further aids the Board in its oversight of the Company’s tax, legal, regulatory and ethical compliance.

In carrying out this function, the Committee shall (i) serve as an independent and objective party to oversee the Company’s financial reporting process and internal control system; (ii) review and evaluate the qualifications and independence of the Company’s independent registered public accounting firm (“independent accountants”); (iii) approve all audit and permissible non-audit services provided by the Company’s independent accountants; (iv) review and evaluate the audit efforts of the Company’s independent accountants and the Internal Auditor; and (v) provide open communication among the independent accountants, financial and senior management, legal counsel, the Internal Auditor, Ombudsman and the Board.

The Committee will fulfill its oversight role primarily by carrying out the activities enumerated in Section IV of this Charter.

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II. COMPOSITION

The Committee shall be comprised of three or more directors, as determined by the Board, each of whom shall: (i) be independent as determined in accordance with Nasdaq rules; (ii) meet the criteria for independence set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended; and (iii) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the last three (3) years. All members of the Committee shall be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement, or meet such other standard required by applicable law (including SEC and Nasdaq rules). At least one member of the Committee shall be an “audit committee financial expert” as defined by SEC rules and “financially sophisticated” as defined by Nasdaq rules. The Committee Chair must have accounting or financial expertise.

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III. MEETINGS

The Committee shall meet regularly, but at least quarterly (or more frequently as appropriate). The quarterly meetings shall include separate executive sessions with management, the Internal Auditor and the independent accountants. The Committee shall report its activities to the Board on a regular basis and shall make such recommendations to the Board as it deems appropriate.

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IV. RESPONSIBILITIES AND DUTIES

The Committee’s role is one of oversight. Company management is responsible for maintaining the Company’s books of account and preparing periodic financial statements based thereon. The independent accountants are responsible for auditing the Company’s annual financial statements.

The Committee shall prepare any report from the Committee that SEC rules require be included in the Company’s periodic SEC reports. The Committee shall review and approve all related-party transactions for which audit committee approval is required by applicable law (including SEC and Nasdaq rules). The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any independent accountants employed by the Company (including resolution of disagreements between management and such independent accountants regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent accountants shall report directly to the Committee.

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To fulfill its responsibilities, the Committee will:

Documents/Reports Review

Review with senior financial management and the independent accountants prior to filing the Company’s interim financial information, earnings press release and the financial information contained in the Company’s quarterly reports on Form 10-Q, including: (i) the selection, application and disclosure of the critical accounting policies and practices used; and (ii) any management certifications related thereto. The Committee Chair may represent the Committee for purposes of this review.

Review the Company’s annual financial statements and any other reports or financial information deemed appropriate by the Committee, including: (i) the selection, application and disclosure of the critical accounting policies and practices used; (ii) any management certifications related thereto; and (iii) any certification, report, opinion or review rendered by the independent accountants.

Prepare a report to be included in the Company’s proxy statement for each annual meeting that discloses whether the Committee (i) has reviewed and discussed the audited financial statements with management; (ii) has discussed Statement on Auditing Standards No. 61 (“SAS 61”) (Communication with Audit Committees) and Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) with the independent accountants; and (iii) has recommended to the Board that the consolidated financial statements be included in the Annual Report on Form 10-K for the last fiscal year.

Review any reports submitted by the independent accountants, including a report, if prepared, relating to: (i) all critical accounting policies and practices used; (ii) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent accountants; and (iii) other material written communications between the independent accountants and management, such as any management letter or schedule of unadjusted differences.

At least annually, obtain and review a report by the independent accountants describing: (i) the independent accountants’ internal quality control procedures; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the independent accountants, or by any inquiry or investigation by governmental or professional authorities, within the preceding five (5) years, respecting one or more independent audits carried out by the independent accountants, and any steps taken to deal with any such issues; and (iii) all relationships between the independent accountants and the Company (to assess the independent accountants’ independence).

Review this Charter at least annually; recommend to the Board appropriate changes to the Charter; and assure that the Charter is included as an appendix to the annual stockholders’ meeting proxy statement at least every three (3) years, or promptly after any significant amendment to the Charter.


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Control Processes

Review with management and the independent accountants at the completion of the annual audit of the Company’s consolidated financial statements and prior to filing of the Annual Report on Form 10-K the following:
       • The Company’s annual consolidated financial statements and related footnotes;
       • The independent accountants’ audit of the financial statements and their report thereon;
       • Any significant changes required in the independent accountants’ audit plan;
       • Any difficulties or disputes with management encountered during the course of the audit; and
       • Any additional matters related to the conduct of the audit required to be communicated to
          the Committee under generally accepted auditing standards, including the independent
          accountants’ judgment about such matters as the quality (not just the acceptability)
          of the Company’s accounting practices, as well as other items set forth in SAS 61.

Review with management, the independent accountants and the Internal Auditor on a continuing basis (i) the adequacy and integrity of the Company’s system of auditing and accounting procedures; (ii) the Company’s financial reporting processes, both internal and external; (iii) the Company’s system of internal control over financial reporting; (iv) the Company’s disclosure controls and procedures; (v) the disclosure regarding internal control over financial reporting and disclosure controls and procedures required by SEC rules to be contained in the Company’s periodic reports; and (vi) the attestations or reports relating to such disclosure.

Review with the independent accountants, management and/or the Internal Auditor the appropriateness of accounting principles followed by the Company, changes in accounting principles and their impact on the financial statements.


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Independent Accountants
The Committee is directly responsible for the appointment, compensation, oversight, evaluation and, when appropriate, replacement of the registered public accounting firm that serves as the Company’s independent accountants. The Committee shall have the sole authority to engage and remove the independent accountants and to approve all audit engagement fees and terms and all non-audit engagements, as may be permissible, with the independent accountants. The independent accountants shall report directly to the Committee.
The Committee will:

Pre-approve in accordance with applicable law (including SEC and Nasdaq rules) all audit and permissible non-audit services provided to the Company by the independent accountants. The Committee may delegate this responsibility to one or more members of the Committee.

Obtain annually from the independent accountants a formal written statement delineating all of its relationships with the Company, including all non-audit services and associated fees.

Review and discuss with the independent accountants any disclosed relationships or services that might impact the independent accountants’ objectivity or independence.

Take appropriate action, if any, to ensure the independence of the independent accountants.

Conduct other reviews, as appropriate, to assist in the Committee’s oversight of the performance of the independent accountants, including, for example, reviewing the proposed audit plan each year, reviewing the proposed work plans of the independent accountants and Internal Audit for overlap and coordination, and reviewing comments from prior periods.

Review any reports submitted to the Committee by the independent accountants.


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Internal Audit

Review with management and the Internal Auditor: (i) the annual audit plan and any changes thereto; (ii) significant findings during the year and management’s responses thereto; (iii) the effectiveness and adequacy of the Internal Audit department; and (iv) the performance, evaluation, and/or the appointment and replacement of the head of Internal Audit.


Legal and Ethical Compliance

Oversee and review periodically with management, legal counsel, the Ombudsman, and other experts, as appropriate, the programs and policies of the Company designed to ensure compliance with applicable laws and regulations and with the Company’s ethical standards, and the results of these compliance efforts.

Review and investigate any matters pertaining to the integrity of management, including conflicts of interest and adherence to standards of business conduct, as required by the policies of the Company.

Oversee the Ombudsman process as a procedure for receiving, retaining and treating complaints or concerns, including confidential and anonymous submissions, received by the Company regarding accounting, internal accounting controls, auditing or other matters in compliance with applicable law (including SEC rules).

Review periodically with management, legal counsel and other experts, as appropriate, any legal and regulatory matters that may have a material impact on the financial statements.


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Other Responsibilities

Oversee and review periodically with management the Company’s policies relating to finance, capital expenditures, investment, risk management, asset management, information management, and the security of its intellectual and physical assets.

Review with management other finance, tax, legal and/or administrative issues that the Committee or the Board deems necessary or appropriate.

Make reports and recommendations to the Board of Directors on matters within the scope of its functions.

Review and approve all related-party transactions for which audit committee approval is required by applicable law (including SEC and Nasdaq rules).

Have the authority to engage independent counsel and other advisors, as it deems necessary or appropriate to carry out its duties, with funding provided by the Company.

Assess the effectiveness of the Audit Committee.


In addition to the activities described above, the Committee will perform such other functions as necessary or appropriate under law, the Company’s charter and/or Bylaws, and the resolutions and other directives of the Board