2003 Committee Charter : FITB

CHARTER
OF THE
AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS OF FIFTH THIRD BANCORP
AS APPROVED BY THE BOARD OF DIRECTORS
ON JANUARY 21, 2003
I. AUTHORITY AND MEMBERSHIP
The members of the Committee are appointed annually by the Board of Directors
of Fifth Third Bancorp (the "Corporation") on the recommendation of the Nominating
and Corporate Governance Committee. The members shall serve until their successors
are duly elected and qualified by the Board. The Board determines the number of
members in the Committee from time to time, but the number will not be less than the
minimum number prescribed by applicable law, the Code of Regulations or by
requirements applicable to Nasdaq National Market issuers or such other exchange or
system upon which the Corporation's securities are listed, quoted and/or traded
("Nasdaq"). In no event will such number of members be less than three (3). Committee
members must fully satisfy independence and experience requirements as prescribed by
Nasdaq, Section 10A of the Securities Exchange Act of 1934 (the "Exchange Act") and
the rules and regulations of the Securities and Exchange Commission ("SEC"), and the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and
applicable rules and regulations thereunder. At least one member of the Committee shall
be a "financial expert" as defined by the rules of the SEC, and all members of the
Committee shall have a strong level of accounting or financial acumen and shall be able
to read and understand fundamental financial statements at the time of their appointment
to the Committee. No member of the Committee may be an "affiliated person" of the
Corporation or any of its subsidiaries (as defined in the federal securities laws) nor may
any member of the Committee simultaneously serve on the audit committee of more than
two other public companies.
Director's fees are the only compensation that a Committee member may receive
directly or indirectly from or on behalf of the Corporation.
The Board will appoint one of the members of the Committee to serve as
Committee Chair. The Committee may also appoint a Secretary, who need not be a
Director.
The Committee has the authority, to the extent it deems necessary or appropriate,
to retain independent legal, accounting or other advisors. The Committee shall also have
the authority, to the extent it deems necessary or appropriate, to ask the Corporation to
provide the Committee with the support of one or more Corporation employees to assist it
in carrying out its duties. The Corporation shall provide for appropriate funding, as
determined solely by the Committee, for payment of compensation to the independent
auditors for the purpose of rendering or issuing an audit report and to any other advisors
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employed by the Committee. The Committee may request any officer or employee of the
Corporation or the Corporation's outside counsel, independent auditors or other advisors
to attend a meeting of the Committee or to meet with any members of, or consultant to,
the Committee.
The Committee is directly and solely responsible for the appointment,
compensation, and oversight of the work of the independent auditor (including resolution
of disagreements between management and the auditors regarding financial reporting) for
the purpose of preparing or issuing an audit report or related work. The independent
auditors shall report directly to the Committee.
II. PURPOSE OF THE COMMITTEE
The Committee's primary purpose is to:
Provide assistance to the Board by monitoring:
1) the integrity of the financial statements of the Corporation,
2) the independent auditors' qualifications and independence,
3) the performance of the Corporation's and its subsidiaries' internal audit
function and independent auditors,
4) the Corporation's system of internal controls,
5) the Corporation's financial reporting and system of disclosure
controls, and
6) the compliance by the Corporation with legal and regulatory
requirements and with the Corporation's Corporate Governance
Guidelines and Code of Business Conduct and Ethics; and
Prepare the Committee report required by the rules of the SEC to be included in
the Corporation's annual proxy statement.
The Committee will also perform the duties required by law to be performed by
an audit committee for any subsidiary bank of the Corporation that does not have its own
audit committee and by a fiduciary audit committee for any subsidiary bank of the
Corporation exercising fiduciary powers that does not have its own audit committee, in
each case to the extent permitted, and in the manner required, by applicable laws and
regulations.
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With respect to joint sessions of the Committee:
(a) The Committee may meet simultaneously as a committee of the Corporation
and any subsidiary of the Corporation that does not have its own Audit
Committee, though it should hold separate sessions if necessary to address
issues that are relevant to one entity but not the other(s) or to consider
transactions between the entities or other matters where the Corporation and
one or more subsidiaries may have different interest; and
(b) The Committee should consult with internal or outside counsel if, in the
opinion of the Committee, any matter under consideration by the Committee
has the potential for any conflict between the interests of the Corporation and
those of the Corporation's subsidiaries in order to ensure that appropriate
procedures are established for addressing any such potential conflict and for
ensuring compliance with the Corporation's policies regarding Sections 23A
and 23B of the Federal Reserve Act.
The Committee's job is one of oversight as set forth in this charter. It is not the
duty of the Committee to prepare the Corporation's financial statements, to plan or
conduct audits, or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting principles
("GAAP"). The Corporation's management is responsible for preparing the
Corporation's financial statements and for maintaining internal controls, and the
independent auditors are responsible for auditing the financial statements. Nor is it the
duty of the Committee to conduct investigations or to assure compliance with laws and
regulations and the Corporation's Corporate Governance Guidelines and Code of
Business Conduct and Ethics.
III. RESPONSIBILITIES OF THE COMMITTEE
A. Charter Review
Review and reassess the adequacy of this charter at least annually and
recommend to the Board any proposed changes to this charter; and
Publicly disclose the charter and any such amendments at the times and in
the manner as required by the SEC and/or any other regulatory body or
stock exchange having authority over the Corporation, and in all events
post such charter and amendments to the Corporation's website.
B. Financial Reporting / Internal Controls
Review and discuss with the internal auditors and the independent auditors
their respective annual audit plans, reports and the results of their
respective audits;
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Review and discuss with management, the Corporation's Disclosure
Committee and the independent auditors the Corporation's quarterly
financial statements and its Form 10-Q (prior to filing the same as required
by the Exchange Act), including disclosures made in the section regarding
management's discussion and analysis, the results of the independent
auditors' reviews of the quarterly financial statements, and determine
whether the quarterly financial statements should be included in the
Corporation's Form 10-Q;
Review and discuss with management, the Corporation's Disclosure
Committee and the independent auditors the Corporation's annual audited
financial statements and its Form 10-K (prior to filing the same as required
by the Exchange Act), including disclosures made in the section regarding
management's discussion and analysis, and recommend to the Board
whether the audited financial statements should be included in the
Corporation's Form 10-K;
Review and discuss with management, the Corporation's Disclosure
Committee and, where appropriate, the independent auditors, the
Corporation's financial disclosures in its registration statements, press
releases, earnings releases, current reports, real time disclosures, call
reports or other public disclosures before the same are filed, posted,
disseminated or released, including the use of "pro forma" or "adjusted"
non-GAAP information, all reconciliations of the same, and any earnings
guidance, as well as all financial information provided to rating agencies
and/or securities analysts including presentations at industry, investor or
other conferences;
Review and discuss with the Corporation's Chief Executive Officer and
Chief Financial Officer all matters such officers are required to certify in
connection with the Corporation's Form 10-Q and 10-K or other filings or
reports;
Discuss with management, the Corporation's Disclosure Committee and
the independent auditors significant financial reporting issues and
judgments made in connection with the preparation of the Corporation's
financial statements, including any significant changes in the
Corporation's selection or application of accounting principles, the
development, selection and disclosure of critical accounting estimates and
principles and the use thereof, and analyses of the effect of alternative
assumptions, estimates, principles or generally accepted accounting
principles ("GAAP") methods on the Corporation's financial statements;
Discuss with management and the independent auditors the effect of
regulatory and accounting initiatives and off-balance sheet transactions on
the corporation's financial statements, conditions or results and any
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necessary disclosures related thereto;
Discuss with management the Corporation's major financial risk
exposures and the steps management has taken to monitor and control
such exposures, including the Corporation's risk assessment and risk
management policies;
Discuss with the independent auditors the matters required to be discussed
by Statement of Auditing Standards No. 61;
Ensure that the Corporation's independent auditors reports to the
Committee all of the Corporation's critical accounting policies and
procedures and alternative accounting treatments of financial information
within GAAP that have been discussed with management, including the
ramifications of the use of such alternative treatments and disclosures and
the treatment preferred by the independent auditors;
Ensure that the Corporation's independent auditors shares with the
Committee all material written communication between the auditors and
management;
Discuss with the Corporation's independent auditors, internal auditors, and
management (including the Corporation's Disclosure Committee) their
assessments of the adequacy of the Corporation's internal controls and
disclosure controls and procedures;
Assess whether management is resolving any internal control weaknesses
diligently;
Discuss with the Corporation's independent auditors, internal auditors and
management (including the Corporation's Disclosure Committee) as
appropriate the Corporation's FDICIA internal controls report and the
attestation of the Corporation's independent auditors to the same;
Discuss with the Corporation's independent auditors, internal auditors and
management (including the Corporation's Disclosure Committee) as
appropriate any weaknesses or deficiencies that any of the foregoing have
identified relating to financial reporting, internal controls or other related
matters and their proposals for rectifying such weaknesses or deficiencies;
Monitor the Corporation's progress in promptly addressing and correcting
any and all identified weaknesses or deficiencies in financial reporting,
internal controls or related matters;
Receive periodic reports from the independent auditors and appropriate
officers of the corporation on significant accounting or reporting
developments proposed by the Financial Accounting Standards Board or
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the SEC that may impact the Corporation; and
Receive periodic reports from independent auditors and appropriate
officers of the Corporation on significant financial reporting, internal
controls or other related matters of the Corporation's subsidiaries.
C. Independent Auditors
Hire, fire, compensate, review and oversee the work of the independent
auditors (including resolution of disagreements between management and
the auditors regarding financial reporting);
Review the experience, rotation and qualifications of the senior members
of the independent auditors' team;
Monitor the independence, qualifications and performance of the
independent auditors by, among other things:
1) Obtaining and reviewing a report from the independent auditors at
least annually regarding (a) the independent auditors' internal
quality-control procedures, (b) any material issues raised by the
most recent quality-control review, or peer review, of the
independent auditors, 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
same, (c) any steps taken to deal with any such issues, and (d) all
relationships between the independent auditors and the
Corporation;
2) Evaluating the qualifications, performance and independence of
the independent auditors, including considering whether the
auditors' quality controls are adequate and whether the provision
of any non-audit services is compatible with maintaining the
auditors' independence, and taking into account the opinions of
management and the internal auditors;
3) Establishing and overseeing restrictions on the actions of directors,
officers, or employees of the Corporation in illegally influencing,
coercing, manipulating or misleading the Corporation's
independent auditors including violations of Rule 13b2-2
promulgated under the Exchange Act; and
4) If so determined by the Committee, taking additiona l action to
satisfy itself of the qualifications, performance and independence
of the auditors.
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Meet with the independent auditors prior to each annual audit to discuss
the planning and staffing of the audit;
Pre-approve all auditing services and permitted non-audit services to be
performed for the Corporation by the independent auditors or any other
auditing or accounting firm, except as provided in this paragraph. In no
event shall the independent auditors perform any non-audit services for the
Corporation which are prohibited by Section 10A(g) of the Exchange Act
or the rules of the SEC or the Public Corporation Accounting Oversight
Board (or other similar body as may be established from time to time).
The Committee shall establish general guidelines for the permissible scope
and nature of any permitted non-audit services in connection with its
annual review of the audit plan and shall review such guidelines with the
Board. Pre-approval may be granted by action of the full Committee or, in
the absence of such Committee action, by the Committee Chair whose
action shall be considered to be that of the entire Committee. Preapproval
shall not be required for the provision of non-audit services if (i)
the aggregate amount of all such non-audit services constitutes no more
than 5% of the total amount of revenues paid by the Corporation to the
auditors during the fiscal year in which the non-audit services are
provided, (ii) such services were not recognized by the Corporation at the
time of engagement to be non-audit services, and (iii) such services are
promptly brought to the attention of the Committee and approved prior to
the completion of the audit. Approvals of a non-audit service to be
performed by the auditors and, if applicable, the guidelines pursuant to
which such services were approved, shall be disclosed when required as
promptly as practicable in the Corporation's quarterly or annual reports
required by Section 13(a) of the Exchange Act;
Oversee the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit at least once every five years and considering whether,
in order to assure continuing auditor independence, it is appropriate to
rotate the auditing firm itself from time to time;
Recommend to the Board policies for the Corporation's hiring of
employees or former employees of the independent auditors who
participated in any capacity in an audit of the Corporation, including in
particular the prohibition on employment under Section 10A(1) of the
Exchange Act as chief executive officer, controller, chief financial officer,
chief accounting officer, or any person serving in an equivalent position
for the Corporation, during the preceding one- year period;
If appropriate, discuss with the national office of the independent auditors
issues on which it was consulted by the Corporation's audit team and any
matters of audit quality and consistency; and
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Ensure that the independent auditors have access to all necessary
Corporation personnel, records or other resources.
D. Internal Audit Function
Review and oversee the appointment, performance and replacement of the
senior internal audit executive;
Review the internal audit plan and assess whether it is consistent with the
Corporation's needs;
Review the significant reports to management prepared by the internal
auditing department and management's responses;
Review and discuss with the internal auditors the results of their work
(including their audit report) as well as their control risk assessment;
Discuss with the independent auditors and approve the internal audit
department responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit; and
Ensure that the internal auditors have access to all necessary Corporation
resources.
E. Compliance Oversight
Discuss with management and the internal auditors the Corporation's
processes regarding compliance with applicable laws and regulations and
with the Corporation's Corporate Governance Guidelines and Code of
Business Conduct and Ethics, obtain reports from management, the
Corporation's senior internal auditing executive and the independent
auditors regarding compliance by the Corporation and its
subsidiary/foreign affiliated entities with applicable legal requirements
(including suspicious activity reports and regulatory exam reports) and the
Corporation's Corporate Governance Guidelines and Code of Business
Conduct and Ethics and from time to time advise the Board of Directors
with respect to the same. Obtain from the independent auditors any
reports required to be furnished to the Committee under Section 10A of
the Exchange Act or an assurance that Section 10A of the Exchange Act
has not been implicated;
Review procedures designed to identify related party transactions that are
material to the financial statements or otherwise require disclosure;
Establish procedures and require the Corporation to obtain or provide the
necessary resources and mechanisms fo r (i) the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
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internal accounting controls or auditing matters, and (ii) the confidential,
anonymous submission by employees of the Corporation of concerns
regarding questionable accounting or auditing matters;
Discuss with management and the independent auditors any
correspondence with regulators or governmental agencies and any
employee complaints or published reports which raise material issues
regarding the Corporation's financial statements or accounting policies or
compliance with the Corporation's Corporate Governance Guidelines and
Code of Business Conduct and Ethics; and
Discuss with the Corporation's General Counsel and Chief Risk Officer
legal matters that may have a material impact on the financial statements
and that may have an impact on the Corporation's compliance policies.
F. Subsidiaries of the Corporation
Where the Committee is performing the duties required by law to be
performed by an audit committee for a subsidiary bank of the Corporation
that does not have its own audit committee, review with management and
the independent auditors the basis for the reports required to be filed by
management and by the independent auditors with the FDIC pursuant to
12 C.F.R. Sections 363.2 (a) and (b) and Sections 363.3 (a) and (b),
respectively; and
Perform the duties required to be performed by the fiduciary audit
committee for any bank and non-bank subsidiary of the Corporation
exercising fiduciary powers that does not have its own audit committee, in
each case to the extent permitted, and in the manner required, by
applicable laws and regulations.
G. General
Meet as often as the Committee or the Committee Chair determines, but
not less frequently than quarterly;
On a regular basis, as appropriate, meet separately with management
(especially the Chief Financial Officer), the Corporation's Disclosure
Committee, the internal auditors, and with the independent auditors;
Report to the Board on the Committee's activities at each Board meeting;
Maintain minutes or other records of the Committee's meetings and
activities;
Review and assess the quality and clarity of the information provided to
the Committee and make recommendations to management, the
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Corporation's Disclosure Committee and the independent auditors as the
Committee deems appropriate from time to time for improving such
materials;
Form and delegate authority to subcommittees or members when
appropriate;
Prepare the audit committee report to be included in the Corporation's
proxy statement when and as required by the rules of the SEC; and
Annually review the performance of the Committee.
In performing their duties and responsibilities, Committee members are entitled to
rely in good faith on information, opinions, reports or statements prepared or presented
by:
One or more officers or employees of the Corporation whom the Committee
member reasonably believes to be reliable and competent in the matters
presented;
Counsel, independent auditors, or other persons as to matters which the
Committee member reasonably believes to be within the professional or
expert competence of such person; or
Another committee of the Board as to matters within its designated authority
which committee the Committee member reasonably believes to merit
confidence.