2003 Audit Charter: ENRNQENRON CORP.
AUDIT AND COMPLIANCE COMMITTEE CHARTER
(AS AMENDED FEBRUARY 12, 2001)
The Board of Directors of Enron Corp. (the "Company") has heretofore
constituted and established an Audit and Compliance Committee (the "Committee")
with authority, responsibility and specific duties as described in this Audit
and Compliance Committee Charter. This document replaces and supersedes in its
entirety that certain document adopted by the Board of Directors of the Company
on August 9, 1988, entitled "Authority and Responsibility of the Audit and
Compliance Committee of the Board of Directors."
The Committee shall be comprised of three or more directors who, in the
opinion of the Board of Directors, as evidenced by its election of such
Committee members, have no relationship to the company that may interfere with
the exercise of independent judgement as a Committee member. All members of the
Committee shall be financially literate or become financially literate within a
reasonable period of time after appointment to the Committee, and at least one
member of the Committee shall have accounting or related financial management
expertise, in each case as interpreted by the Board of Directors.
MISSION STATEMENT AND PRINCIPAL FUNCTIONS
The Committee shall serve as the overseer of the Company's financial
reporting process and internal controls. As such, the Committee will have direct
access to financial, legal, and other staff and consultants of the Company. Such
consultants may assist the Committee in defining its role and responsibilities,
consult with Committee members regarding a specific audit or other issues that
may arise in the course of the Committee's duties, and conduct independent
investigations, studies, or tests. The Committee has the authority to employ
such other accountants, attorneys, or consultants to assist the Committee as it
deems advisable. The Committee's principal functions shall include:
Ensure Audit Function Independence
- Recommend to the Board of Directors, for subsequent submission to the
shareholders of the Company, the firm to engage as the Company's
independent auditor; and, if warranted in the discretion of the
Committee, recommend to the Board of Directors the termination of that
engagement. Furthermore, ensure that the independent auditor is
ultimately responsible and accountable to the Committee and the Board of
Directors as representatives of the Company's shareholders.
- Review the independent auditor's compensation, the terms of its
engagement, and its independence. On a periodic basis, the Committee
should obtain a formal written statement from the independent auditors
delineating all relationships between the auditor and the Company and
hold active discussions with the auditor with respect to any disclosed
relationships or services that may impact the objectivity or independence
of the auditor. In response to the report and if necessary, the Committee
should take action or recommend that the Board take appropriate action,
to satisfy itself of the outside accountant's independence. In addition,
review the planning of the independent audit, the performance of the
independent auditors, and review any special audit procedures required.
- Serve as a channel of communication between the independent auditor and
the Board of Directors and between the executive responsible for the
audit functions provided internally or by contract and the Board of
Directors of the Company.
- Review the Company's annual financial statements and any significant
disputes between management and the independent auditor that arose in
connection with the preparation of those financial statements, including
any restrictions on the scope of work or access to required information.
Assess Internal Controls and Quality of Financial Reporting
- Discuss with the independent auditor information relating to the
auditor's judgments about the quality of the Company's accounting
principles, including such matters as the consistency of application of
the Company's accounting policies, as well as the clarity and
completeness of the Company's accounting information contained in the
financial statements and related disclosures filed with the Securities
and Exchange Commission and distributed to the Company's shareholders.
- Review, in consultation with the independent auditor and the executive
having responsibility for the internal and contract audit functions, the
adequacy of the Company's internal financial controls. Among other
things, determine whether these controls provide reasonable assurance
that the Company's publicly reported financial statements are presented
fairly in conformity with generally accepted accounting principles.
- Review the Company's electronic data processing procedures and controls
on a periodic basis. Also review any deficiencies noted by the
independent auditor in such electronic data processing procedures and
- Approve major changes and other major questions of choice regarding the
appropriate accounting principles and practices to be followed when
preparing the Company's financial statements for the purpose of making
recommendations to the Board of Directors as necessary.
Review Financial Statements
- Review financial statements included in the Annual Report to
Shareholders, footnotes, and management commentaries, Form 10-K filings
made with the Securities and Exchange Commission prior to release of such
statements and filings. In addition, review findings of any examinations
by regulatory agencies, such as the Securities and Exchange Commission.
- Publish a written report in the annual proxy statement indicating that
(a) the Committee has reviewed and discussed the financial statements
with management, (b) the Committee has discussed the quality of the
Company's accounting principles as applied in its financial reporting,
(c) the Committee has received the written report from the independent
auditors delineating all relationships between the auditor and the
Company, (d) the Committee has discussed with the independent auditors
their independence and taken or recommended action, if necessary, related
to independence concerns and (e) nothing has come to the Committee's
attention that would cause them to believe that the financial statements
included in the Annual Report on Form 10-K contain an untrue statement or
omit a material fact, and thus recommend to the Board that the audited
financial statements be included in the Company's Annual Report on Form
10-K. Furthermore, the Committee will take action where necessary to be
in compliance with all applicable rules and regulations.
- Review with management and the independent auditor each quarterly Form
10-Q prior to its filing. The Chair of the Committee may represent the
entire Committee for purposes of this review.
- Review with management the Company's policies and practices for
communications with analysts.
- Approve for recommendation to the Board of Directors the Company's
policies and procedures regarding compliance with the law and with
significant Company policies, including but not limited to, codes of
conduct expressing principles of business ethics, legal compliance, the
Foreign Corrupt Practices Act, and other matters relating to business
conduct, and programs of legal compliance designed to prevent and detect
violations of law.
- Review with the general counsel any legal and regulatory matters that may
have a material effect on the Company's financial statements, compliance
policies, and programs.
- If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist.
- Perform other oversight duties and responsibilities as may be assigned to
the Committee, from time to time, by the Board of Directors of the
Company and/or the Chairman of the Board of Directors.
- Review and, to the extent that the Committee determines is appropriate,
update this Charter periodically, at least annually, as conditions
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. Meetings may be called by the Chairman of the
Committee and/or management of the Company. In addition, the Committee will make
itself available to the independent auditors of the Company as requested by such
independent auditors. All meetings of the Committee shall be held pursuant to
the Bylaws of the Company with regard to notice and waiver thereof, and written
minutes of each meeting shall be duly filed in the Company records. Reports of
meetings for the Committee shall be made to the Board of Directors approved by
the Committee. On a regular basis the Committee will meet with the independent
auditor independent of management, and it will meet with Company management
independent of the independent auditor on a regular basis.
While the Audit and Compliance Committee has the responsibility and power
set forth in this charter, it is not the duty of the Audit and Compliance
Committee to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of management and/or
the independent auditors.