2003 Audit Charter: ELK
AUDIT COMMITTEE CHARTER
(Revised August 27, 2002)
One committee of the Board of Directors will be known as the Audit Committee (Audit
Committee or Committee). The Committee will be comprised of three or more directors
as determined by the Board of Directors. Each member of the Committee shall be
independent of management and free from any material relationship with ElkCorp. The
Board must determine in its best judgement that each member of the Committee is
independent and financially literate under the applicable standards. All members of the
Committee will have a working familiarity with basic finance and accounting practices.
At least one member of the Committee will be a financial expert under applicable
Committee members shall be appointed, and each Committee member shall serve for
a period of one year or until such time as his successor has been duly named and
The primary function of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight of the integrity of ElkCorp's financial statements, ElkCorp's
compliance with legal and regulatory requirements, the independent auditors'
qualifications and independence, and the performance of ElkCorp's internal audit
function and independent auditors. The Committee will review: the financial reports
and other financial information provided by ElkCorp (collectively with its subsidiaries,
the Corporation) to any governmental body or the public; the Corporation's systems of
internal controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation's auditing,
accounting and financial reporting process generally. Consistent with this function, the
Audit Committee should encourage continuous improvement of, and should foster
adherence to, the Corporation's policies, procedures and practices at all levels.
The Corporation's independent accountants are ultimately accountable to the Audit
Committee of the Corporation. The Corporation's independent auditors will report
directly and solely to the Audit Committee.
necessary or appropriate, to shareholder ratification).
respect to matters relating to the Corporation's accounting, reporting, audit, and
internal control practices.
independent accountants, the Audit Committee and the Board of Directors.
this responsibility, the Committee will ensure that the independent accountants
submit on a periodic basis to the Committee a formal written statement delineating
all relationships between such accountants and the Corporation. The Committee is
responsible for actively engaging in a dialogue with the independent accountants
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent accountants and for
recommending that the Board of Directors take appropriate action in response to
the independent accountants' report to satisfy itself of the independent accountants'
responsibility. The Committee is authorized, with or without Board approval, to
retain independent counsel, accountants or other advisors as may be necessary or
appropriate to assist the Committee in fulfilling its duties.
warrant. A majority shall constitute a quorum of the Committee. A portion of each
meeting may exclude Corporation employees to provide opportunity for
independent discussion. The Committee members will have sole discretion in
determining the meeting attendees and agenda.
proposed to be provided to the Corporation by its independent auditors, and ensure
that such services do not interfere with the independence of such auditors, and do
not give rise to an appearance of impropriety.
and if required or appropriate, audit firm rotation.
received by the Corporation regarding accounting, internal accounting controls, or
auditing matters, and the confidential, anonymous submission by employees of
concerns regarding accounting auditing or internal control issues.
with independent auditors.
Corporation's independent auditors (including a minimum one-year "cooling off
period" before hire).
members, and the procedures and timing of an annual performance evaluation.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT ACCOUNTANTS AND
REVIEWING INTERNAL AUDIT FUNCTION:
quarterly reviews, and to approve any replacement of the independent accountants
if circumstances warrant such action. The Committee's actions in these areas of
responsibility may be subject to ratification by the Corporation's shareholders. The
Audit Committee also will review and approve fees paid to the independent
independence of independent accountant, including a review of management
consulting services provided by the independent accountant.
coordinate internal and external audit activities to the external process. The
purpose of coordinating this effort is to assure completeness of coverage and to
reduce redundancy and overall costs.
RESPONSIBILITIES FOR REVIEWING THE ANNUAL EXTERNAL AUDIT,
REVIEWING INTERNAL AUDITS AND REVIEWING QUARTERLY AND ANNUAL
independent auditor describing: the 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, respecting one or more
independent audits carried out by the firm, and any steps taken to deal with any
such issues; and (to assess the auditor's independence) all relationships between
the independent auditor and the Corporation.
the Committee with a timely notification and analysis of significant financial
independent accountant about significant risks and exposures and will assess
management's steps to minimize them.
THE AUDIT COMMITTEE WILL REVIEW THE FOLLOWING WITH THE
INDEPENDENT ACCOUNTANT AND THE INTERNAL AUDITORS:
information systems controls and security.
or internal auditors together with management's response.
responsibility for detecting accounting and financial reporting errors, fraud, and
defalcations, illegal acts and noncompliance with the Corporation's Policy on Legal
and Ethical Compliance/Conflicts of Interest/Gifts (General Policy Letter D-2)
("Code of Conduct") and regulating requirements.
financial or accounting practices or controls.
THE AUDIT COMMITTEE WILL REVIEW WITH MANAGEMENT AND THE
financial statements, including all of the Corporation's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
accounting principles and financial disclosures.
as it may be amended, including but not limited to:
accounting or disclosure matters.
of the audit. The Committee is directly responsible for the resolution of
disagreements between management and the Corporation's independent auditors
regarding financial reporting.
standards, rules or regulations require the independent accountant to discuss with
the Committee or vice versa.
THE AUDIT COMMITTEE WILL CONSIDER AND REVIEW WITH MANAGEMENT
AND THE INTERNAL AUDITORS:
THE AUDIT COMMITTEE WILL REVIEW THE ANNUAL REPORTS FILED WITH THE
SEC (FORM 10-K) AND OTHER PUBLISHED DOCUMENTS CONTAINING THE
CORPORATION'S FINANCIAL STATEMENTS AND WILL CONSIDER AND
RECOMMEND TO THE BOARD WHETHER THE FINANCIAL STATEMENTS BE
INCLUDED IN THE CORPORATION'S ANNUAL REPORT ON FORM 10-K.
THE AUDIT COMMITTEE WILL REVIEW EACH QUARTERLY FINANCIAL REPORT
(FORM 10-Q) WITH MANAGEMENT AND THE INDEPENDENT ACCOUNTANTS
BEFORE THOSE INTERIM REPORTS ARE RELEASED TO THE PUBLIC OR FILED
WITH SEC OR OTHER REGULATORS.
separate executive sessions to discuss matters that should be discussed privately
with the Committee.
performance and institute appropriate changes to improve performance or reflect
changes in the business environment.
Committee in accordance with Regulations of the Securities and Exchange
Commission and other applicable law.
General Policy and Administrative Procedure Letters that pertain to the
Corporation's financial reporting process, system of internal control, and
compliance and ensure that management has established a system to enforce
these policies. Review management's monitoring of employees' compliance with
laws, regulations and the Corporation's Code of Conduct.
corporate securities trading policies.
significant impact on the Corporation's financial statements.
as well as financial information and earnings guidance provided to analysts and
INDIVIDUAL AGENDAS FOR EACH OF THE THREE SCHEDULED MEETINGS ARE
First Meeting (With External Auditors – May or earlier)
as it relates to independence of the external auditor and other matters disclosed in
the independent accountants' disclosure statement.
Second Meeting – (With External Auditors – before release of year-end financial
(With Legal Counsel)
Directors, Officers and Employees Under Securities Laws (General Policy Letter D-
Corporation's financial statements.
Third Meeting – (With Internal and External Auditors – before release of Form 10-K)
controls and security.
exchange or self-regulatory organization regarding Committee matters.
Code of Conduct.