2003 Audit Charter: CPWR COMPUWARE CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee is established by and amongst the Board of Directors
for the primary purpose of assisting the board in:
- overseeing the integrity of the Company's financial statements,
- overseeing the Company's compliance with legal and regulatory
- overseeing the independent auditor's qualifications and independence,
- overseeing the performance of the company's internal audit function and
independent auditor, and
- overseeing the Company's system of disclosure controls and system of
internal controls regarding finance, accounting, legal compliance, and
ethics that management and the Board have established.
Consistent with this function, the Audit Committee should encourage
continuous improvement of, and should foster adherence to, the Company's
policies, procedures and practices at all levels. The Audit Committee should
also provide an open avenue of communication among the independent auditors,
financial and senior management, the internal auditing function, and the Board
The Audit Committee has the authority to obtain advice and assistance from
outside legal, accounting, or other advisors as deemed appropriate to perform
its duties and responsibilities.
The Company shall provide appropriate funding, as determined by the Audit
Committee, for compensation to the independent auditor and to any advisers that
the audit committee chooses to engage.
The Audit Committee will primarily fulfill its responsibilities by carrying
out the activities enumerated in Section IV of this Charter. The Audit Committee
will report regularly to the Board of Directors regarding the execution of its
duties and responsibilities.
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors (as defined
by all applicable rules and regulations), and free from any relationship
(including disallowed compensatory arrangements) that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment as a
member of the Committee. All members of the Committee shall have a working
familiarity with basic finance and accounting practices at the time of their
appointment, and at least one member of the Committee shall be a "financial
expert" in compliance with the criteria established by the SEC and other
relevant regulations. The existence of such member(s) shall be disclosed in
periodic filings as required by the SEC. Committee members may enhance their
familiarity with finance and accounting by participating in educational programs
conducted by the Company or an outside consultant. The Board shall elect the
members of the Committee. Unless a chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
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 director of the internal
auditing function and the independent auditors in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately. The Committee should report to the Board of Directors
following the meetings of the Committee.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS/ACCOUNTING INFORMATION REVIEW
1. Review this Charter periodically, at least annually, and recommend to
the Board of Directors any necessary amendments as conditions dictate.
2. Review and discuss with management the Company's annual financial
statements, and quarterly financial statements. Review other relevant
reports rendered by the independent auditors (or summaries thereof).
3. Recommend to the Board whether the financial statements should be
included in the Annual Report on Form 10-K. Review the 10-Q prior to its
4. Appoint, compensate, and oversee the work performed by the independent
auditor for the purpose of preparing or issuing an audit report or
related work. Review the performance of the independent auditors and
remove the independent auditors if circumstances warrant. The
independent auditors shall report directly to the audit committee and
the audit committee shall oversee the resolution of disagreements
between management and the independent auditors in the event that they
5. Review with the independent auditor any problems or difficulties and
management's response; review the independent auditor's attestation and
report on management's internal control report; and hold timely
discussions with the independent auditors regarding the following:
- all critical accounting policies and practices;
- 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;
- other material written communications between the independent auditor
and management including, but not limited to, the management letter and
schedule of unadjusted differences; and
- an analysis of the auditor's judgment as to the quality of the
Company's accounting principles, setting forth significant reporting
issues and judgments made in connection with the preparation of the
6. At least annually, obtain and review a report by the independent auditor
- the firm's internal control procedures;
- any material issues raised by the most recent internal control review,
peer review, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, respecting
one or more independent audits carried out by the firm, and any steps
taken to deal with any such issues.
7. Review and pre-approve nonaudit services to be provided by the
independent auditor. Pre-approval may be given such that broadly defined
predictable or recurring services may be pre-approved as permitted
services by the Committee. Such broadly defined predictable or recurring
permitted services would include such services as tax compliance, tax
consulting and tax audit support. This duty may be delegated to one or
more designated members of the audit committee with any such pre-
approval reported to the Audit Committee at its next regularly scheduled
meeting. Approval of nonaudit services shall be disclosed to investors
in periodic reports required by Section 13(a) of the Securities Exchange
Act of 1934.
FINANCIAL REPORTING PROCESSES AND ACCOUNTING POLICIES
8. In consultation with the independent auditors and the internal auditors,
review the integrity of the organization's financial reporting processes
(both internal and external), and the internal control structure
(including disclosure controls).
9. Review with management the effect of regulatory and accounting
initiatives, as well as off-balance-sheet structures, on the financial
statements of the Company.
10. Review and approve all related-party transactions.
11. Establish and maintain procedures for the receipt, retention, and
treatment of complaints regarding accounting, internal accounting, or
12. Establish and maintain procedures for the confidential, anonymous
submission by Company employees regarding questionable accounting or
13. Review activities, organizational structure, and qualifications of the
internal audit function.
14. Periodically review with the internal audit director any significant
difficulties, disagreements with management, or scope restrictions
encountered in the course of the function's work.
ETHICAL AND LEGAL COMPLIANCE
15. Periodically review Compuware's Code of Conduct and ensure that
management has established a system to monitor and enforce this Code.
Ensure that the code is in compliance with all applicable rules and
16. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
17. Review, with the organization's counsel, any legal matter that could
have a significant impact on the organization's financial statements.