2003 Audit Charter: CAH

I. PURPOSE

The primary function of the Audit Committee (the "Committee") is to assist the Board of Directors of Cardinal Health, Inc. (the "Company") in fulfilling its oversight responsibilities by reviewing: the financial reports and other financial information provided by the Company to any governmental body or the public; the Company's systems of internal controls regarding finance, accounting, legal and code of ethics compliance; the Company's internal auditing function; and the Company's accounting and financial reporting processes. Consistent with this function, the Committee should encourage continuous improvement of, and should foster adherence to, the Company's policies, procedures and practices at all levels. The Committee's primary duties and responsibilities are to:

  • Serve as an independent and objective party to monitor the Company's financial reporting processes and system of internal accounting controls.

  • Annually review and appraise the efforts and qualifications of the Company's independent auditor and its Corporate Audit Department.

  • Provide an open avenue of communication among the independent auditor, financial and executive management, the Corporate Audit Department, and the Board of Directors.

    The Committee shall also be responsible for reviewing and approving reports required by the Securities and Exchange Commission (the "Commission"), e.g., "audit committee reports" and "selection of independent auditors" sections in the Company's annual proxy statement to shareholders.

    The Committee will primarily fulfill these responsibilities by carrying out the specific activities enumerated in Section IV of this Charter and, upon the direction and approval of the Board of Directors, to direct an investigation into any activity of the Company. The Committee is empowered to retain such advisors as it deems appropriate to assist the Committee in fulfilling its responsibilities, and shall receive appropriate funding from the Company, as determined by the Committee, to compensate such advisors.


    II. COMPOSITION

    The Committee has been created by the Board of Directors pursuant to the authority of Section 1701.63, Ohio Revised Code, and Article 2, Section 2.18 of the Company's code of regulations.


    The Committee shall be comprised of no fewer than three directors as determined by the Board of Directors. The members of the Committee shall meet the independence and experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 and the rules and regulations of the Commission. Audit Committee members shall not simultaneously serve on the audit committees of more than two other public companies. All members of the Committee shall have a working familiarity with basic finance and accounting practices. In addition, at least one Committee

    member must have accounting or related financial management expertise as determined by the Board in accordance with Commission rules.

    The members of the Committee shall be elected by the Board of Directors and serve until their successors shall be duly elected and qualified. The Committee shall be subject to the control and direction of the Board of Directors. Unless a Chair is appointed by the Board of Directors, the members of the Committee may designate a Chair by majority vote of the full Committee membership.


    III. MEETINGS

    The Committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee should meet periodically with management, the principal internal auditor and the independent auditor in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. The 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.


    IV. RESPONSIBILITIES AND DUTIES

    To fulfill its responsibilities and duties, the Audit Committee shall:

    Documents/Reports Review
    1. Review and update this Charter periodically, at least annually, as conditions dictate. In conjunction with this update, the Committee should perform an annual self-assessment of its processes and communications with management, the independent auditor and the Board of Directors.
    2. Review the Company's annual financial statements and any reports or other financial information submitted to any governmental body, or the public, including any certification, report, opinion, or review rendered by the independent auditor.
    3. Review summaries of reports to management prepared by the Corporate Audit Department and management's responses.
    4. Review with financial management of the Company any public announcement of financial results and SEC Form 10-Q's or 10-K's prior to filing or public release.

    Independent Auditor

    5. The Committee shall have the sole authority to appoint or replace the independent auditor. The Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor for the purposes of preparing or issuing an audit report or related work). The independent auditor shall report directly to the Committee. The Committee is also responsible for actively engaging in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact their objectivity and independence and for taking, or recommending that the full board take, appropriate action to ensure such independence. In addition, the Committee shall assess, at least annually, the independent auditor's internal quality assurance procedures.


    The Committee shall pre-approve the audit and non-audit services provided by the Company's independent auditor. Pre-approval of such services along with discussions with the independent auditor will support the Committee's statement in the Company's proxy statement that it has considered whether the provision of non-audit services to the Company is compatible with the independence of its independent auditor. The Committee has adopted and the Board of Directors has ratified the Audit and Non-Audit Services Pre-Approval Policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor must be pre-approved.
    6. Periodically meet privately with the independent auditor to discuss a) internal controls and any special steps adopted in light of material control deficiencies, and b) fullness and accuracy of the Company's financial statements.
    7. Obtain assurance that the independent auditor is not aware of any illegal acts as provided in Section 10A(b) of the 34 Act.
    8. Review and evaluate the lead partner of the independent auditor's team. Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.
    9. Establish and monitor 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 Company.

    Financial Statement and Disclosure Matters

    10. In consultation with the independent auditor and the corporate auditors, review the integrity of the organization's financial reporting process.
    11. Consider the independent auditor's judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting.
    12. Consider and approve, if appropriate, changes to the Company's accounting principles and practices as suggested by the independent auditor, management, or the Corporate Audit Department.
    13. Review and discuss quarterly information from the independent auditor on:
    (a) All critical accounting policies and practices used.
    (b) 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 auditor.
    (c) Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
    14. Discuss with management the Company's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussion may be done generally i.e., consisting of discussing the types of information to be disclosed and the types of presentations to be made.
    15. Discuss with management and the independent auditor the effect of proposed or pending regulatory and accounting requirements on the Company's financial statements.
    16. 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 1
    17. 0-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls.
    18. Review any significant disagreement among management and the independent auditor which, if not resolved to the independent auditor's satisfaction, would have caused them to issue a qualified report on the Company's financial statements. "Disagreements" for this purpose shall be those contemplated by item 304 of SEC Regulation S-K or successor rule.

    Process Improvement
    19. Establish regular and separate systems of reporting to the Committee by each of management, the independent auditor and the corporate auditors regarding any significant judgments made in management's preparation of the financial statements and the view of each as to the appropriateness of such judgments.
    20. Following completion of the annual audit, review separately with each of management, the independent auditor and the corporate auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of the work or access to required information.
    21. Review with the independent auditor, the corporate auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.
    22. 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.

    Ethical, Legal and Other Compliance Activities
    23. Review Company's compliance procedures regarding its Ethics Guide and to ensure that management is maintaining a system to enforce this code.
    24. Ensure that management has the proper review system in place to ensure that the Company's financial statements, reports and other financial information disseminated to governmental organizations, and the public satisfy legal requirements.
    25. Review Company's procedures regarding receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding ethical matters. Establish that the Company's communications regarding such process allows for direct communication to the Audit Committee of any such issues.
    26. Review with management and the independent auditor activities, organizational structure, qualifications and budget of the Corporate Audit Department including appointment and replacement of the senior audit executive.
    27. Review, with the Company's internal counsel, legal compliance matters including corporate securities trading policies.
    28. Review, with the Company's internal counsel, any legal matter that could have a significant impact on the Company's financial statements.
    29. Perform any other activities consistent with the Charter, the Company's Code of Regulations and governing law, as the Committee of the Board deems necessary or appropriate.
    30. Submit minutes of all audit committee meetings to the Board of Directors of the Company.
    31. Recommend to the Board of Directors any changes in the authority, responsibility or duties of the Committee.

    Limitation of Audit Committee's Role
    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 complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor.