FREMONT GENERAL CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the
Board in monitoring (1) the integrity of the financial statements of Fremont
General Corporation, a
The Audit Committee shall consist of three or more directors and all members of the Audit Committee will be directors who meet the knowledge and independence requirements of applicable law and The New York Stock Exchange in effect from time to time. The members of the Audit Committee shall be appointed by the Board of Directors. At least one member of the Audit Committee will qualify as an "audit committee financial expert" as defined in the Instructions to Item 401 of Regulation S-K of the Securities and Exchange Commission and any applicable New York Stock Exchange rules. The "audit committee financial expert" determination will be made by the Company's Board of Directors.
The Audit Committee shall have the authority to retain special legal, accounting or other consultants to advise the Committee. The Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
Review and reassess the adequacy of this Charter annually and submit it to the Board for approval.
Be solely responsible for the appointment, compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and, where appropriate, the termination and replacement of such firm. The independent auditor shall report its findings to and be ultimately accountable to the Audit Committee.
Pre-approve all auditing services and non-auditing services to be performed by the independent auditor. Such pre-approval can be given as part of the Audit Committee's approval of the scope of the engagement of the independent auditor, on an individual basis or pursuant to policies and procedures established by the Audit Committee in accordance with Section 2-01 of Regulation S-X of the Securities and Exchange Commission. The pre-approval of non-auditing services can be delegated by the Audit Committee to one or more of its members but the decision must be reported to the full Audit Committee at the next regularly scheduled meeting.
Review and evaluate the lead partner of the independent auditor and ensure that audit partners of the independent auditor rotate as required by Section 2-01 of Regulation S-X of the Securities and Exchange Commission.
Set hiring policies for employees and former employees of the independent auditor.
Review the annual audited financial statements (including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K) with management and the independent auditor, including major issues regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect the Company's financial statements.
Review an analysis prepared by management and the independent auditor of significant financial reporting issues and judgments, if any, made in connection with the preparation of the Company's financial statements.
Review with management and the independent auditor the Company's quarterly financial statements prior to the release of quarterly earnings and the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Quarterly Report on Form 10-Q.
Meet periodically with management to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.
Review major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management.
Receive periodic reports from the independent auditor regarding the auditor's independence, discuss such reports with the auditor, and if so determined by the Audit Committee, take appropriate action to insure the independence of the auditor.
Evaluate the performance of the independent auditor and, if so determined by the Audit Committee, replace the independent auditor.
Review the appointment and replacement of senior internal auditing executives.
Review the significant reports to management prepared by the internal auditing department and management's responses.
Meet with the independent auditor prior to the audit to review the planning and staffing of the audit.
Obtain from the independent auditor assurance that Section 10A of the Private Securities Litigation Reform Act of 1995 has not been implicated.
Obtain reports from management, the Company's senior internal auditing executives and the independent auditor that the Company's subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Company's Code of Conduct and Ethics.
Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit.
Discuss with the independent auditor any accounting adjustments that were noted or proposed by the independent auditor but were not made.
Discuss periodically with management, internal auditors and the independent auditor the Company's policies with respect to risk assessment and risk management.
Review with management, internal auditors and the independent auditor the adequacy and effectiveness of the Company's accounting and financial controls controls and the effect of any regulatory or accounting initiatives, as well as off-balance sheet structures, on the Company's financial statements.
Obtain a report or reports from the independent auditor regarding all critical accounting policies and practices used by the Company, all alternative treatments of financial information within GAAP that have been discussed with management (including the ramifications of the use of such treatments and the treatments preferred by the independent auditors), and other material written communications between the independent auditor and management.
Obtain a report from the independent auditor at least annually regarding the independent auditor's internal quality control procedures and addressing the issues required by the rules of The New York Stock Exchange.
Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding accounting and auditing matters.
Discuss with management earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
Review with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company's response to that letter. Such review should include:
(a) Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information.
(b) Any changes required in the planned scope of the audit.
(c) The audit staff's responsibilities, budget and staffing.
(d) Any material communications between the audit team and the independent auditor's national office regarding auditing or accounting issues the engagement presents.
Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's annual proxy statement.
Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's Code of Conduct and Ethics.
Review with the Company's General Counsel legal matters that may have a material impact on the financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies.
Meet at least annually with the chief financial officer, the senior internal auditing executive and the independent auditor in separate executive sessions.
Annually evaluate the performance of the Audit Committee
The Audit Committee will meet with such frequency, and at such times as its Chairperson, or a majority of the Audit Committee, determines. A special meeting of the Audit Committee may be called by the Chairperson and will be called promptly upon the request of two Audit Committee members. The agenda for each meeting will be approved by the Chairperson and circulated to each member prior to the meeting. Unless the Audit Committee or the Board adopts other procedures, the provisions of the Company's Bylaws applicable to meetings of Board committees will govern meetings of the Audit Committee. The Audit Committee has the power to appoint subcommittees.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit 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 the independent auditor.