Audit Committee Charter
Cytec Industries Inc.

Adopted by resolution of
the Board of Directors
January 22, 2004

I. Purpose

The primary function of the Audit Committee (the "Committee") is to assist the Board of Directors (the "Board") in the oversight of the Company's:

  • accounting and financial reporting processes and the integrity of the Company's financial statements;
     
  • annual audit of the financial statements, including the qualifications, independence and performance of the independent accountants;
     
  • internal audit function; and
     
  • compliance with legal and regulatory requirements as they may impact the financial statements.

The Committee shall also perform the other specific responsibilities assigned to it in this Charter or by the Board.

The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent accountants and internal auditors as well as anyone in the organization. The Committee has the ability to retain, without seeking Board approval and at the Company's expense, special legal, accounting, or other consultants or experts it deems appropriate in the performance of its duties.

Management of the Company is responsible for financial reporting, accounting integrity and the preparation of the financial statements of the Company in conformity with accounting principles generally accepted in the United States of America appropriate in the circumstances and necessarily including some amounts based on management's estimates and judgments. The independent accountants are responsible for expressing an opinion on the conformity of the financial statements, in all material respects, with accounting principles generally accepted in the United States of America. Nothing in this charter shall be interpreted as making the Audit Committee or any member of the Audit Committee responsible for the financial statements of the Company or the audit of the financial statements of the Company.

II. Composition

The Committee will be comprised of a minimum of three directors as elected by the Board, including the Chair. Membership on the Committee will be limited to directors who have no relationship to the Company that, in the opinion of the Board, may interfere with the exercise of his or her independence from management and the Company and who are independent within the meaning of, and otherwise qualify to serve as Audit Committee members under, applicable New York Stock Exchange ("NYSE") and Securities and Exchange Commission ("SEC") rules as from time to time in effect.

All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, and at least one member of the Committee shall be an "audit committee financial expert" within the meaning of applicable SEC rules as from time to time in effect, or prior to effective date of any such rule, as interpreted by the Board.

The Chair must have accounting or related financial management expertise as the Board interprets such qualifications in its business judgment.

III. Meetings

The Committee will meet at least four times annually, or more frequently as circumstances dictate. The Committee has the right to set its own agenda.

  • In addition to regularly scheduled meetings, meetings may be called by the Chair of the Board, the Chair of the Committee or by a majority of the members of the Committee upon giving the Notice specified in Article III, Section 5, of the Company's By-laws.
     
  • The Committee will meet at least quarterly with management, the independent accountants and the internal auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believes should be discussed.
     
  • The Committee shall maintain minutes of meetings and shall regularly report to the Board on the Committee's activities.

IV. Responsibilities and Duties

To fulfill its responsibilities and duties the Committee will:

General

  1. Review and reassess the adequacy of this Charter at least annually and recommend to the Board updates as circumstances dictate.
     
  2. Receive from the internal auditors lists of the regular reports to management prepared by the internal auditors and select for review those reports, including with management's response, which it wishes to review. The review may by made by individual members of the Committee on behalf of the entire Committee.
     
  3. In consultation with management, the independent accountants, and the internal auditors, consider the integrity of the Company's financial reporting processes and controls. Discuss policies with respect to risk assessment and risk management. Discuss significant financial risk exposures and the steps management has taken with respect thereto. Periodically review the functions of departments that make significant accounting estimates or risk management decisions or otherwise may significantly affect financial operations, including, but not limited to the risk management and tax departments, and the adequacy of their resources.
     
  4. Discuss any significant changes to the Company's accounting principles and any items required to be communicated by the independent accountants in accordance with applicable statements of auditing standards. The Chair of the Committee may represent the entire Committee for the purposes of this review.
     
  5. Prior to the release of earnings, review with financial management and the independent accountants the Company’s financial results, and discuss with the independent accountants the results of their audit or review, as applicable. Discuss the matters required to be communicated to the Committee in accordance with applicable statements of auditing standards.
     
  6. Review and discuss with financial management and the independent accountants drafts of the Company's annual audited financial statements and quarterly financial statements including the Company’s disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operation. Determine whether to recommend to the Board items to be included in the Company's annual Report on Form 10-K to be filed with the SEC.
     
  7. Prepare and approve a written report of the Committee for inclusion in the Company's proxy statement, as required by rules of the SEC.
     
  8. Discuss generally the type of information to be disclosed and the type of presentation to be made in the Company’s earnings press releases, and financial information and earnings guidance provided to analysts and rating agencies.

     
  9. Periodically consult with management about internal controls, the fullness and accuracy of the Company's financial statements, and any difficulties encountered during the course of the audit, including any matters the Committee or management wish to discuss.
     
  10. Review any unusual material transactions.

    Reporting Relationships
     
  11. Have sole authority to retain, dismiss and compensate the Company's independent accountants and internal auditors, subject, in the case of hiring independent accountants, to ratification by the shareholders of the Company. The Committee will require that the independent accountants and the internal auditors report to, and are accountable to, the Committee. The day to day administrative aspects of the relationship may be delegated by the Committee to the Company's financial management staff. It is understood that the independent accountants and the internal auditors have free access to the Committee, or any member of the Committee.
     
  12. Establish policies for the advance approval of non-audit relationships between the Company and the independent accountants.

    Independent Accountants
     
  13. Consider the qualifications and performance of the independent accountants.
     
  14. Ensure that the independent accountant submits on an annual basis to the Committee a formal written statement delineating all relationships between the independent accountant and the Company consistent with Independence Standard Board Standard No. 1 as in effect from time to time; actively engage in a dialogue with the independent accountant with respect to any relationships or services that may impact the objectivity and independence of the independent accountant; and take appropriate action in response to the independent accountants' report to satisfy itself of the independent accountants' independence.
     
  15. At least annually, obtain and review a report by the independent accountants describing such firm's internal quality control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, relating to one or more independent audits conducted by such firm, and any steps taken to deal with any such issues, consistent with requirements of the NYSE as in effect from time to time.
     
  16. Review the independent accountants' annual audit plan--including scope, staffing, locations, interactions with the internal auditors and general audit approach.
     
  17. Periodically consult with the independent accountants out of the presence of management, about internal controls, the fullness and accuracy of the Company's financial statements, any difficulties encountered during the course of the audit, including any restriction on the scope of work or access to required information and significant judgments made in management's preparation of the financial statements and the appropriateness of such judgments and any other matters the Committee or the independent accountant wishes to discuss.
     
  18. Review with financial management and the independent accountants the critical accounting policies and practices of the Company and alternative accounting treatments and consider the independent accountants' judgments about the quality and appropriateness of the Company's accounting principles.
     
  19. Review material written communications between the independent accountants and management.
     
  20. Discuss any significant disagreement between management and the independent accountants in connection with the preparation of the financial statements.

     
  21. Consider and, if appropriate, approve major changes to the Company's accounting principles and practices as suggested by management, the independent accountants, or the internal auditing function.
     
  22. Establish policies for hiring employees or former employees of the independent accountants.

    Internal Audit Function
     
  23. Review the internal auditor's annual audit plan including scope, qualifications of staff, locations to be visited and interaction with the independent accountants and general audit approach.
     
  24. Periodically consult with the internal auditors out of the presence of management, about internal controls, any difficulties encountered during the course of internal audits, including any restriction on the scope of work or access to required information and significant judgments made in management's preparation of the applicable financial statements and the appropriateness of such judgments and any other matters the Committee or the internal auditor wishes to discuss.
     
  25. Discuss matters requiring communication to the Committee (as defined by the Committee) with the internal auditors.
     
  26. Discuss any significant disagreement between management and the internal auditors.

    Ethical and Legal Compliance
     
  27. Review the Company's Code of Employee Conduct and the Company's Code of Ethics for Financial Executives (collectively, the "Codes") and periodically, if appropriate, recommend to the Board and management changes to the Codes.
     
  28. Discuss with management the system they have established to enforce the Codes and review management's monitoring of compliance with the Codes.
     
  29. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, including the confidential anonymous submission of such complaints by employees. Receive reports from management on disposition of any complaints.

     
  30. Review, with the Company's general counsel, significant legal compliance matters including corporate securities trading policies.
     
  31. Review, with the Company's general counsel, any legal matter that could have a significant impact on the Company's financial statements.

    Self-Evaluation

     
  32. Conduct an annual self-evaluation of its performance.

    Other
     
  33. Perform any other activities consistent with this Charter, the Company's By-laws and governing law, as the Committee or the Board deems necessary or appropriate, including, but not limited to any procedures they are required to perform under applicable NYSE or SEC rules as from time to time in effect.

     
 
 
  © 2003 Cytec Industries Inc. All Rights Reserved.