Community First Bankshares, Inc.
2003 Audit Charter: CFBX
2003 AUDIT COMMITTEE OF THE BOARD OF DIRECTORS CHARTER
The Audit Committee of the Board of Directors shall be comprised of at least three directors. Each member of the Audit Committee shall be independent of management and the Company. Members of the Audit Committee shall be considered independent if they have no relationship to the Company that may interfere with the exercise of their independence from management and the Company including the acceptance of any consulting, advisory, or other compensatory fee from the Company. The Audit Committee shall ensure that its determination of "independence" complies with the requirements of the Securities and Exchange Commission (the "Commission"), the Nasdaq National Market or other exchange in which the Company's securities are traded, or other applicable law or regulation governing publicly-held companies. All Audit Committee members will be financially literate, and at least one member will have accounting or related financial management expertise. At least one member shall be designated a "financial expert," as defined by SEC regulations.
The Audit Committee Chair is appointed by the Board of Directors. All Committee members serve on a year-to-year basis and are subject to reconfirmation annually by the Board of Directors.
The Audit Committee Chair and the Director of Internal Audit will establish the meeting agenda, in accordance with this Charter.
The Secretary of the Company will record Committee activities.
Statement of Policy
The Audit Committee shall provide assistance to the directors in fulfilling their responsibility to the shareholders, potential shareholders, and investment community relating to corporate accounting and reporting practices of the Company, the quality and integrity of financial reports of the Company; the financial reporting process; the systems of internal accounting and financial controls; the performance of the Company's internal audit function and independent auditors; the independent auditor's qualifications and independence; and the Company's compliance with ethics policies and legal and regulatory requirements. In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditors, the internal auditors, and management of the Company.
In carrying out its responsibilities, the Audit Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to ensure to the directors and shareholders that the corporate accounting and reporting practices of the Company are in accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
Obtain the full Board of Directors' approval of this Charter and review and reassess this Charter as conditions dictate (at least annually).
Appoint, compensate and oversee the engagement, retention or replacement of the independent auditors to audit the financial statements of the Company and its divisions and subsidiaries.
Approve all audit services to be performed by the independent auditor.
Ensure that the independent auditor is not engaged to perform the following non-audit services:
Ensure that the independent auditor is not engaged to perform any other non-audit services, not listed above, but deemed incompatible with independence by the Commission, the Public Company Accounting Oversight Board or any applicable regulatory authority.
Adopt and implement policies to govern approval of all non-audit services not listed above to be performed by the independent auditor. The committee may delegate pre-approval authority to a member of the audit committee. The decisions of any audit committee member to whom pre-approval authority is delegated must be presented to the full audit committee at its next scheduled meeting.
Ensure regular rotation of partners on the independent audit team so do not participate in audits for more than five consecutive fiscal years, as required by regulation.
Establish hiring policies for employees or former employees of the independent auditors that meet the SEC regulations and stock exchange listing standards.
Receive reports from the outside auditor on, among other things, critical accounting policies and alternative treatments of financial information that have been discussed with management.
Review management's evaluation of the Company's internal procedures related to the preparation of periodic reports filed with the Securities Exchange Commission.
The committee shall review management's assertion on its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the independent auditors' report on management's assertion.
Receive, on an quarterly and annual basis, if so required, any disclosures by management regarding:
Discuss significant accounting estimates with the Company's management and external auditors on an annual basis.
Review the code of ethics for the Company's senior financial officers.
Establish procedures for:
Have the authority to retain and compensate outside advisors without seeking Board approval.
Have the authority to create policies and procedures, as it deems necessary or appropriate, to comply with the requirements of the Securities Exchange Act of 1934, the rules or regulations of the Commission, the Nasdaq National Market, or any other exchange in which the Company's securities are traded or other applicable regulatory authority.
Have a clear understanding with the independent auditors that they are ultimately accountable to the Board of Directors and the Audit Committee, as the shareholders' representatives, who have the ultimate authority in deciding to engage, evaluate, and if appropriate, terminate their services.
Review and concur with management's appointment, termination, or replacement of the Director of Internal Audit.
Meet with the independent auditors and financial management of the Company to review the scope of the proposed audit and timely quarterly reviews for the current year and the procedures to be utilized, the adequacy of the independent auditor's compensation, and at the conclusion thereof review such audit or review, including any comments or recommendations of the independent auditors.
Review with the independent auditors, the Company's internal auditor, and financial and accounting personnel, the adequacy and effectiveness of the accounting and financial controls of the Company, and elicit any recommendations for the improvement of such internal controls or particular areas where new or more detailed controls or procedures are desirable. Particular emphasis should be given to the adequacy of internal controls to expose any payments, transactions, or procedures that might be deemed illegal or otherwise improper. Further, the Audit Committee periodically should review Company policy statements to determine their adherence to the code of conduct.
Review reports received from regulators and other legal and regulatory matters that may have a material effect on the financial statements or related Company compliance policies. Conduct an annual review with the Company's General Counsel on legal matters and obtain comments from General Counsel. Otherwise is free to inquire into, but is not responsible, for legal matters.
The committee shall receive corporate attorneys' reports of evidence of a material violation of securities laws or breaches of fiduciary duty.
Review the internal audit function of the Company including the independence and authority of its reporting obligations, the proposed audit plans for the coming year and the coordination of such plans with the independent auditors.
Review the engagement of third parties, other than the independent auditor, to team with the Company in performing the internal audit function.
Inquire of management, the internal auditor, and the independent auditors about significant risks or exposures and assess the steps management has taken to minimize such risks to the Company.
Receive prior to each meeting, a summary of findings from completed internal audits and a progress report on the proposed internal audit plan, with explanations for any deviations from the original plan.
Consult with management and the independent auditors on new developments in accounting and financial standards.
The committee shall review the interim financial statements and disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operations with management and the independent auditors prior to the filing of the Company's Quarterly Report on Form 10-Q. Also, the committee shall discuss the results of the quarterly review and any other matters required to be communicated to the committee by the independent auditors under generally accepted auditing standards. The Chairman of the Audit Committee may represent the entire Committee for purposes of this review.
The committee shall review with management and the independent auditors the financial statements and disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operations to be included in the Company's Annual Report on Form 10-K, including their judgment about the quality, not just the acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements and particularly, the degree of aggressiveness or conservatism of the organization's accounting principles and underlying estimates, and other significant decisions made in preparing the financial statements.. Also, the committee shall discuss the results of the annual audit and any other matters required to be communicated to the committee by the independent auditors under generally accepted auditing standards. Review with financial management and the independent auditors the results of their timely analysis of significant financial reporting issues and practices, including changes in, or adoptions of, accounting principles and disclosure practices, and discuss any other matters required to be communicated to the Audit Committee by the auditors.
Provide sufficient opportunity for the internal and independent auditors to meet with the members of the Audit Committee without members of management present. Among the items to be discussed in these meetings are the independent auditors' evaluation of the Company's financial, accounting, and auditing personnel, and the cooperation that the independent auditors received during the course of audit.
Review accounting and financial human resources and succession planning within the Company.
Report the results of the annual audit to the Board of Directors. If requested by the Board, invite the independent auditors to attend the full Board of Directors meeting to assist in reporting the results of the annual audit or to answer other directors' questions (alternatively, the other directors, particularly the other independent directors, may be invited to attend the Audit Committee meeting during which the results of the annual audit are reviewed).
On an annual basis, obtain from the independent auditors a written communication delineating all their relationships and professional services as required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. In addition, review with the independent auditors the nature and scope of any disclosed relationships or professional services and take, or recommend that the Board of Directors take, appropriate action to ensure the continuing independence of the auditors.
Review the report of the Audit Committee in the annual report to shareholders and the Annual Report on Form 10-K disclosing whether or not the Audit Committee had reviewed and discussed with management and the independent auditors, as well as discussed within the Audit Committee (without management or the independent auditors present), the financial statements and the quality of accounting principles and significant judgments affecting the financial statements
Submit the minutes of all meetings of the Audit Committee to, or discuss the matters discussed at each Audit Committee meeting with, the Board of Directors.
Investigate any matter brought to its attention within the scope of its duties, with the power to retain outside counsel for this purpose if, in its judgment, that is appropriate.
Review the Company's disclosure in the proxy statement for its annual meeting of shareholders that describes that the Audit Committee has satisfied its responsibilities under this Charter for the prior year. In addition, include a copy of this Charter in the annual report to shareholders or the proxy statement to shareholders at least triennially, the year after any significant amendment to the Charter, or at such frequency as may be required by the Commission or the Nasdaq National Market or other applicable regulatory authority.