2003 Audit Charter: CURE
CURATIVE HEALTH SERVICES, INC.
AUDIT COMMITTEE CHARTER
(as amended through December 11, 2002)
The purpose of the Audit Committee (the "Committee") is (i) to provide
assistance to the Board of Directors (the "Board") of Curative Health Services,
Inc. (the "Company") in the oversight of (a) the integrity of the Company's
financial statements, (b) the Company's compliance with financial reporting and
other Securities and Exchange Commission ("SEC") and listing exchange legal and
regulatory requirements, (c) the independence, qualifications and performance of
the Company's internal and external auditors, and (d) the adequacy of the
Company's internal controls; and (ii) to prepare the report that the rules of
the SEC require be included in the Company's annual proxy statement.
The Committee shall consist of at least three directors of the Company, the
specific number of such members to be determined from time to time by the Board.
The members of the Committee shall be nominated by the Governance Committee of
the Board, and appointed by and serve at the discretion of the Board.
Each member of the Committee shall be independent of the management of the
Company and free of any relationship that, in the reasonable judgment of the
Board of Directors, would interfere with their exercise of independent judgment
as a Committee member, considering applicable legal and regulatory requirements
in effect from time to time. Each member of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
financial statements. At least one member of the Committee shall have accounting
or related financial management expertise, in accordance with applicable legal
and regulatory requirements.
The Committee shall fulfill its responsibilities with the following aims in
mind: (i) to facilitate and maintain free and open means of communications among
the Board, the Committee, the independent auditors, any individual performing
significant internal audit functions and the management of the Company; (ii) to
keep the Committee's policies and procedures flexible in order to react to
changing conditions; and (iii) to assure 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.
Duties and Responsibilities
The Committee shall have the following duties and responsibilities, in addition
to any other duties and responsibilities prescribed by the Board from time to
o Review and reassess the adequacy of this charter annually,
recommend any proposed changes to the Board for approval, and have
the charter published at least every three years in accordance
with the regulations of the SEC.
o Select and engage independent auditors for the Company and approve
the scope of the independent auditors' annual examination of the
o Approve in advance any engagement of the independent auditors to
provide audit or non-audit services to the Company.
o Meet annually with the independent auditors and management of the
Company prior to the audit to review the scope of the proposed
audit for the current year and the audit procedures to be
o Review with the independent auditors and financial and accounting
personnel, the adequacy, effectiveness and integrity of the
accounting and financial controls of the corporation, and elicit
any recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed controls
are needed to expose any payments, transactions, or procedures
that might be deemed illegal or otherwise improper.
o Review with management their certifications required regarding the
integrity of financial statements and information contained in
periodic reports of the Company, and the procedures and processes
constituting disclosure controls or otherwise supporting the
o Review with management and the independent auditors the Company's
quarterly and annual releases of earnings, the Company's quarterly
and annual financial statements, and the forms of 10Q and 10K
filings (including the Management Discussion and Analysis
portions), all prior to filing or distribution, and review whether
the findings in connection with such releases and filings are
consistent. Such review shall also include discussions with
management and the independent auditors of significant issues
regarding accounting principles, practices and judgments, any
significant changes to the Company's accounting principles, and
any items required to be communicated by or to the independent
o Meet with the independent auditors at least once each quarter
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, internal controls, and the cooperation that the
independent auditors received during the course of their most
recent review or audit of the Company's financial statements.
o Review and approve in advance any agreement, transaction or other
arrangement between the Company and any related party which would
be reportable pursuant to Item 404 of Regulation S-K.
o Review the resources allocated, activities, organization
structure, appointment, qualifications, performance and
replacement of any individual performing significant internal
o Review significant reports prepared by any individual performing
significant internal audit functions together with management's
response and follow-up to these reports.
o On at least an annual basis, review with the Company's counsel any
legal matters that could have a significant impact on the
Company's financial statements, the Company's compliance with
applicable laws and regulations, and any significant inquiries
received from regulators or governmental agencies.
o Provide procedures for the receipt, retention and treatment of
complaints regarding the Company's accounting practices, internal
accounting controls or auditing matters, including a procedure for
the confidential and anonymous submission to the Audit Committee
by employees of the Company of concerns regarding questionable
accounting or auditing matters.
o Investigate any matter brought to the attention of the Committee
within the scope of its duties, with the power to consult with and
retain outside legal, accounting and other experts for this
purpose if, in the judgment of the Committee, that is appropriate.
o Prepare the annual report to shareholders required by the rules of
the SEC to be included in the Company's annual proxy statement.
Committee's Relationship with Independent Auditors and Any Individual
Performing Significant Internal Audit Functions
o The independent auditors, in their capacity as independent public
accountants, shall report directly to the Committee.
o The independent auditors shall report all relevant issues to the
Committee responsive to agreed-on Committee expectations. In
executing its oversight role, the Committee shall review the work
of the external auditors.
o The Committee shall annually review the performance
(effectiveness, objectivity and independence) of the external
auditors. The Committee shall ensure the receipt of a formal
written statement from the independent auditors delineating all
relationships between the auditors and the Company, consistent
with Independence Standards Board Standard 1. Additionally, the
Committee shall discuss with the independent auditors
relationships or services that may affect the auditors'
objectivity or independence. If the Committee is not satisfied
with the auditors' assurances of independence, it shall take
appropriate action to ensure the independence of the Company's
o If either the external auditors or an individual performing
significant internal auditing functions identify significant
issues relating to matters within the scope of the Committee's
responsibilities that have been communicated to management but, in
their judgment, have not been adequately addressed, they should
communicate these issues to the Committee chairperson.
It is anticipated that the Committee will meet at least five times each year.
The Committee will maintain written minutes of its meetings, which minutes will
be filed with the minutes of the meetings of the Board.
The Committee will regularly report to the Board of the Company regarding (i)
all determinations made or actions taken pursuant to its duties and
responsibilities, as set forth above, and (ii) any recommendations of the
Committee submitted to the Board for action.