corporate governance > DTE Energy board committee charters > audit committee charter

November 17, 2005

 

Purpose:

The purpose of the Audit Committee is to assist the Board of Directors in its oversight of the:

1.        Integrity of the Company's financial statements.

2.        Company's compliance with legal and regulatory requirements.

3.        Company's independent registered public accounting firm's qualifications and independence.

4.        Performance of the Company's internal audit function and oversight of the independent registered public accounting firm.

Limitation of Committee Role:

The Committee does not itself prepare financial statements, perform audits, or determine that the Company's financial statements are complete, accurate and in accordance with Generally Accepted Accounting Principles ("GAAP") or laws and regulations. This is the responsibility of management.

Discharge of Duties:

The Committee will consider recommendations from the independent registered public accounting firm and internal auditors.

 

The Committee will consider risk issues associated with the Company's overall financial reporting and disclosure process.

General Duties:

The Committee will assist the Board of Directors by reviewing:

1.        The Company's system of internal controls.

2.        The presentation of and disclosures in the Company's external financial statements.

3.        The overall audit (both internal and external) process.

4.        The Committee will also assist the Board of Directors on any additional items as directed.

Duties - Risk Assessment Process, Issues & Concerns:

The Committee will oversee the risk assessment process and any issues or concerns related to that process as follows:

1.        Meet at least quarterly with the Chief Financial Officer, the General Auditor, and the Director of Risk Management, and the independent registered public accounting firm accountants in separate executive sessions. Meet with the General Counsel on a quarterly basis or as determined from time to time by the Committee.

2.        Review and discuss the Company's policies regarding risk assessment and risk management, major accounting risk exposures, and the action management takes to monitor and control such exposures.

3.        Review summaries of significant reports to management prepared by the independent registered public accounting firm (including any audit scope or access restrictions) and management's response.

4.        Review with the Company's internal and external auditors their risk assessment in preparation for future audit plans.

5.        Review with the Company's General Counsel legal matters that may have a material impact on the financial statements or the Company's compliance policies.

6.        Review with management and the independent registered public accounting firm accountants significant correspondence with regulators or governmental agencies, and published reports or employee complaints that raise material issues regarding the Company's financial statements or accounting policies.

7.        Review and discuss with management and the independent registered public accounting firm accountants transactions or dealings with related parties if the transactions are significant in size or involve terms that differ from those that would likely be negotiated with independent parties.

8.        Establish procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding the Company's accounting, internal controls and auditing matters.

Duties - Audit Planning and Management:

The audit planning and management responsibilities of the Committee include the following:

1.        In connection with its oversight of the Company's relationship with the independent registered public accounting firm, the Committee will:

a.        Review and evaluate the lead partner of the independent registered public accounting firm's team.

b.        At least annually, obtain and review a report by the independent registered public accounting firm in relation to:

                                                          i.            the independent registered public accounting firm's internal quality-control procedures;

                                                         ii.            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 regarding one or more independent audits carried out by the firm;

                                                        iii.            any steps taken to deal with any such issues; and

                                                       iv.            all relationships between the independent registered public accounting firm and the Company.

c.        Evaluate the qualifications, performance and independence of the independent registered public accounting firm, including considering whether the auditors' quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditors' independence and present conclusions to the Board of Directors.

d.        Ensure the rotation of the independent audit partners as required by law.

e.        Set policies for hiring employees or former employees of the independent registered public accounting firm who participated in the audit of the Company.

f.         Meet with the independent registered public accounting firm before the audit to discuss the planning and staffing of the audit and to approve the scope of the audit and the fees to be charged.

g.        At least every 10 years, consider a rotation of the independent registered public accounting firm.

2.        Discuss with the independent registered public accounting firm accountants matters required by Statement of Auditing Standards No. 61 (Communications with Audit Committees), as amended.

3.        Annually confirm and obtain receipt from the independent registered public accounting firm of the written independence disclosure required by the Independence Standards Board Standard No. 1.

4.        Review and pre-approve permitted non-audit services (including the fees and terms thereof) to be provided by the independent registered public accounting firm.

5.        Review a report of fees charged by the independent registered public accounting firm and a projection of fees for the remainder of the year compared to fees approved previously.

6.        Meet and review with management and the independent registered public accounting firm the Company's quarterly and annual financial statements, including reviewing the Company's specific disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the report of the annual audit (including the management comment letter, the schedule of unadjusted differences and any other material communications), prior to submission to the Board of Directors. Based on this review, the Committee should make a recommendation to the Board of Directors regarding inclusion of the audited financial statements in the Company's Annual Report on Form 10-K.

7.        In connection with its oversight of the Company's relationship with the Internal Audit Department, the Committee will:

a.        At least annually review the internal auditors audit plan (including responsibilities, budget and staffing), its scope and coverage for the upcoming year, and performance from the prior year.

b.        Provide advice and consent to the Chief Executive Officer regarding the appointment to, and removal from, the position of General Auditor.

Duties - Financial Statement Reporting:

The Committee will oversee the Company's financial reporting process and:

1.        Discuss with management 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.

2.        Review with management major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, and major issues regarding the adequacy of internal controls and any special audit steps adopted in light of material control deficiencies.

3.        Review analyses prepared by management setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.

4.        Discuss critical accounting policies and practices and all alternative treatments of financial information within GAAP that have been discussed by management and the independent registered public accounting firm, ramifications of the use of such alternative disclosure and treatments, and the treatment preferred by the independent registered public accounting firm.

5.        Review contemplated changes in accounting policies proposed by the Company and its independent registered public accounting firm, as well as proposed changes in accounting, reporting and auditing policy promulgated by professional bodies that may have a significant impact on the Company's financial statements.

Reports to the Board of Directors:

The Committee will report regularly to the Board of Directors, and will:

1.        Prepare and publish an annual Committee report in the Company's proxy statement.

2.        Review any issues that arise with respect to the quality or integrity of the company's financial statements or the Company's compliance with legal or regulatory requirements.

3.        Present its conclusions with respect to the qualifications, performance and independence of the independent registered public accounting firm, or the performance of the internal audit function, to the Board of Directors.

Review of Internal Controls:

The Committee will:

1.        Review the Company's system of internal controls, including those for computerized information systems, and its accounting policies and procedures with management, internal auditors, and the independent registered public accounting firm.

2.        At least annually, review management's report on internal controls and corresponding independent registered public accounting firm's attestation, once applicable.

Other Miscellaneous Duties:

At least annually, the Committee will:

1.        Evaluate the adequacy of this Charter and recommend proposed changes to the Board for approval.

2.        Conduct a performance evaluation of itself and report results to the Board.

3.        Review with management and the Company's independent registered public accounting firm new regulatory and accounting requirements, as well as off-balance sheet structures, that may affect the Company's financial statements or that may affect the Committee's duties or obligations.

Composition:

1.        The Committee shall consist of at least three directors, all of whom meet the independence and experience requirements of the New York Stock Exchange, the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission ("SEC"). Committee members are appointed for one-year terms and can be re-appointed for additional terms.

2.        At each annual meeting of the Board of Directors, the Committee Chair and the Chairman of the Board will recommend directors to the Committee, for consideration and approval by the Corporate Governance Committee and subsequent approval by the Board. One of the directors recommended will be designated as the Committee Chair and at least one member of the Committee must be an "audit committee financial expert" as defined by the SEC. All members of the Committee must be financially literate.

3.        Committee members will not simultaneously serve on the audit committee of more than two other public companies unless the Board of Directors determines that such simultaneous service would not impair the ability of such director to serve effectively on the Committee, and such determination is disclosed in the Company's proxy statement.

Authority:

1.        The Committee will have the sole authority and direct responsibility for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm (subject, if applicable, to shareholder ratification). These responsibilities include the resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services. The independent registered public accounting firm will report directly to the Committee.

2.        The Committee may establish subcommittees consisting of one or more members, and may delegate the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittees will be presented to the full Committee at its next scheduled meeting.

3.        The Committee has the authority to perform the duties listed in this Charter, as it determines to be necessary or advisable in its business judgment, with full access to all books, records, facilities and personnel of the Company and its subsidiaries. The Committee is empowered to investigate any activity of the Company and its subsidiaries.

4.        The Committee has the authority to retain independent outside professional advisors or experts as it deems advisable or necessary, including the sole authority to retain and terminate any such advisors or experts, to carry out its duties. The Committee shall have sole authority to approve related fees and retention terms.

Meetings:

The Committee will meet a minimum of four times per year. The Committee will keep minutes or other records of its meetings, except meetings of executive sessions.