THE FIRST AMERICAN CORPORATION
AUDIT COMMITTEE CHARTER

  1. PURPOSE

The purposes of the audit committee (the "Committee") of the Board of Directors (the "Board") of The First American Corporation (the "Company") shall include the following:

To provide assistance to the Board in fulfilling its responsibility to the shareholders, potential shareholders and investment community with respect to the oversight of:

    1. The quality and integrity of the Company's financial statements;
    2. The Company's compliance with legal and regulatory requirements;
    3. The independent auditor's qualifications and independence; and
    4. The performance of the Company's internal audit function and independent auditors.


To prepare the report that Securities and Exchange Commission ("SEC") rules in effect from time to time require to be included in the Company's annual proxy statement.

  1. STRUCTURE AND OPERATIONS

Composition and Qualifications

The Committee shall be comprised of three or more members of the Board, each of whom is determined by the Board to be "independent" and "financially literate" under the rules of the New York Stock Exchange ("NYSE") and the Sarbanes-Oxley Act of 2002. No member of the Committee may serve on the audit committee of more than three public companies, including the Company, unless the Board (i) determines that such simultaneous service would not impair the ability of such member to effectively serve on the Committee and (ii) discloses such determination in the Company's annual proxy statement.

All members of the Committee shall have a working familiarity with basic finance and accounting practices or shall acquire such familiarity within a reasonable period after appointment to the Committee. At least one member of the Committee shall be a "financial expert" as defined by the SEC in connection with Section 407 of the Sarbanes-Oxley Act of 2002. Committee members are encouraged to enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or any qualified third party.

No member of the Committee shall receive any compensation from the Company other than (i) director's fees for service as a director of the Company, including reasonable compensation for serving on the Committee or another committee of the Board and regular benefits that other directors receive and (ii) fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent in any way on continued service).

Appointment and Removal of Committee Members

The members of the Committee shall be appointed by the Board and shall serve until such member's successor is duly elected and qualified or until such member's earlier resignation or removal. The members of the Committee may be removed, with or without cause, by a majority vote of the independent directors.

Election of Chairperson

Unless a Chairperson is elected by the full Board, the members of the Committee shall designate a Chairperson by the majority vote of the full Committee membership. The Chairperson shall be entitled to cast a vote to resolve any ties. The Chairperson will chair all regular sessions of the Committee and set the agendas for Committee meetings.

Delegation to Subcommittees

In fulfilling its responsibilities, the Committee shall be entitled to delegate any or all of its responsibilities to a subcommittee of the Committee consisting of two or more Committee members.

  1. MEETINGS

The Committee shall meet at least quarterly, or more frequently as circumstances dictate. As part of its goal to foster open communication, the Committee shall periodically meet separately with each of management, the director of the internal auditing department and the independent auditors to discuss any matters that the Committee or any of these groups believe would be appropriate to discuss privately. In addition, the Committee should meet with the independent auditors and management quarterly to review the Company's financial statements in a manner consistent with that outlined in Section IV of this Charter. The Chairperson of the Board or any member of the Committee may call meetings of the Committee. All meetings of the Committee may be held telephonically.

All non-management directors that are not members of the Committee may attend meetings of the Committee but may not vote. Additionally, the Committee may invite to its meetings any director, management of the Company and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.

  1. RESPONSIBILITIES AND DUTIES

The following functions shall be the common recurring activities of the Committee in carrying out its purposes. The functions specified in this Section IV are intended as a guide with the understanding that the Committee may carry out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time related to its purposes.

The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate.

In fulfilling its duties, the Committee shall have the authority, and the Company shall provide all necessary funding, to retain outside legal, accounting or other advisors as it deems necessary or prudent.

The Committee shall have access to the Company's internal audit group, Board, corporate executives and independent accountants as necessary to carry out these responsibilities. While acting within the scope of its stated purposes, the Committee shall have all the authority of the Board that is delegable to the Committee under applicable law.

Notwithstanding the foregoing, the Committee is not responsible for certifying the Company's financial statements or guaranteeing the auditor's report. The fundamental responsibility for the Company's financial statements and disclosures rests with management and the independent auditors.

Committee Review of Documents and Reports

The Committee shall review with management and the independent auditors prior to public dissemination 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 Operations" and discuss with the independent auditors the matters required to be discussed by Statement of Auditing Standards No. 61.

The Committee shall review and discuss with management and the independent auditors the Company's earnings press releases (paying particular attention to the use of any "pro forma" or "adjusted" non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee's discussion in this regard may be general in nature (i.e., discussion of the types of information to be disclosed and the type of presentation to be made) and need not take place in advance of each earnings release or each instance in which the Company may provide earnings guidance.

The Committee shall perform any functions required to be performed by it or otherwise appropriate under applicable law, rules or regulations, the Company's bylaws and the resolutions or other directive of the Board, including review of any certification required to be reviewed in accordance with applicable law or SEC regulation.

Relationship with Independent Auditor

The Committee shall have the sole authority (subject to shareholder approval if required by law or the Company's Articles of Incorporation or bylaws) to retain and terminate independent auditors and approve all audit engagement fees and terms.

The Committee shall inform each registered public accounting firm that performs work for the Company that such firm shall report directly to the Committee.

The Committee shall be directly responsible to oversee the work of any registered public accounting firm employed by the Company, including the resolution of any disagreement between management and the auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or related work.

The Committee shall pre-approve (and shall be solely responsible for the approval of) any significant audit or non-audit engagement or relationship between the Company and the independent auditor.

Notwithstanding the foregoing, Committee pre-approval is not required for non-audit services if: (i) the aggregate amount of all such non-audit services provided to the Company constitutes not more than five percent of the total amount of revenues paid by the Company to its auditor during the fiscal year in which the non-audit services are provided; (ii) such services were not recognized by the Company at the time of the 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 by the Committee or by one or more members of the Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Committee.

The Committee may delegate to one or more of its members the authority to approve in advance all significant audit or non-audit services to be provided by the independent auditor, so long as decisions made pursuant to such delegation of authority are presented to the full Committee at its next scheduled meeting.

Neither the Committee nor any member to whom the authority to approve in advance all significant audit or non-audit services to be provided by the independent auditor shall approve the provision of any of the non-auditing services that are prohibited from being provided contemporaneously with the provision of audit services under Section 201 of the Sarbanes-Oxley Act and Rule 2-01(c)(4) of Regulation S-X (17 CFR 210.2-01(c)(4)).

Review, at least annually, the qualifications, performance and independence of the independent auditor. In conducting its review and evaluation, the Committee should:

a.      obtain and review a report by the Company's independent auditor describing: (i) the auditing firm's internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the auditing 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 auditing firm, and any steps taken to deal with any such issues; and (iii) the disclosures required by Independence Standards Board Standard No. 1 with respect to the effect of any relationships between the independent auditor and the Company on the auditor's independence;

b.      Ensure the rotation of audit partners as required by applicable law, and consider whether there should be regular rotation of the independent audit firm; and

c.       Take into account the opinions of management and the Company's internal auditors (or other personnel responsible for the internal audit function).

Financial Reporting Process

In consultation with the independent auditors, management and the internal auditors, the Committee shall review the integrity of the Company's financial reporting processes, both internal and external. In that connection, the Committee should obtain and discuss with management and the independent auditor reports from management and the independent auditor regarding: (i) all critical accounting policies and practices to be used by the Company; (ii) analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including all alternative treatments of financial information within generally accepted accounting principles that have been discussed with the Company's management, the ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the independent auditor; (iii) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles; (iv) major issues as to the adequacy of the Company's internal controls and any specific audit steps adopted in light of material control deficiencies; and (v) any other material written communications between the independent auditor and the Company's management.

The Committee shall review periodically the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.

The Committee shall review with the independent auditor (i) any audit problems or other difficulties encountered by the auditor in the course of the audit process, including any restrictions on the scope of the independent auditor's activities or on access to requested information, and any significant disagreements with management and (ii) management's responses to such matters. Without excluding other possibilities, the Committee may wish to review with the independent auditors (i) any accounting adjustments that were noted or proposed by the auditor but were "passed" (as immaterial or otherwise), (ii) any communications between the audit team and the audit firm's national office respecting auditing or accounting issues presented by the engagement and (iii) any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditor to the Company.

Legal Compliance / General

The Committee shall, in its discretion, review periodically with counsel any legal matter that could have a significant impact on the Company's financial statements.

The Committee shall discuss with management and the independent auditors the Company's guidelines and policies with respect to risk assessment and risk management. The Committee should discuss the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.

The Committee shall set clear policies regarding the hiring of employees or former employees of the independent auditors. At a minimum, these policies should provide that:

d.      any registered public accounting firm may not provide audit services to the Company if the CEO, controller, CFO, chief accounting officer or any person serving the Company in a financial reporting oversight role (as defined in Rule 2.01(c)(2)(iii)(B) of Regulation S-X) was employed by the registered public accounting firm and participated in the audit of the Company within one year of the commencement of the current audit (as defined in Rule 2.01(c)(2)(iii)(B)(3) of Regulation S-X); and

e.      the Company shall not hire any person into a position which permits such person to exercise significant authority over accounting or financial reporting if such person has participated in an audit engagement for the Company within the previous 12 months of being hired and held responsibility, with respect to the audit engagement, requiring such person to exercise significant judgment in the audit process, including positions where such person was in charge of the fieldwork, up through positions where such person was a partner on the engagement.


The Committee shall establish procedures for: (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters.

Reports

The Committee shall prepare the reports required to be included in the Company's proxy statement, pursuant to and in accordance with applicable rules and SEC regulations.

The Committee shall report regularly to the full Board including:

f.        with respect to any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors or the performance of the internal audit function;

g.      with respect to issues discussed at meetings of the Committee as the Committee deems appropriate; and

h.      with respect to such other matters as the Committee may deem relevant to the discharge of its responsibilities.


The Committee shall provide the Board with such recommendations as the Committee may deem appropriate. Reports to the Board may take any form, including an oral report by the Chairperson or any other member of the Committee designated by the Committee to make such report.

  1. ANNUAL PERFORMANCE EVALUATION

The Committee shall perform a review and evaluation, at least annually, of the performance of the Committee and its members, including by reviewing the compliance of the Committee with this Charter. In addition, the Committee shall review and reassess, from time to time, the adequacy of this Charter and recommend to the Board any improvements to this Charter that the Committee considers necessary or advisable. The Committee shall conduct such evaluations and reviews in the manner that it deems appropriate.

 

Committee Members

J. David Chatham

James Doti

Paul Fay

Frank O’Bryan

D. Van Skilling

Herbert Tasker