AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to: (a) assist the Board in its oversight of (i) the integrity of the Company's financial statements, (ii) the Company's compliance with legal and regulatory requirements, (iii) the independent auditor's qualifications and independence, (iv) the performance of the Company's internal audit function and its independent auditor; and (b) prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's Proxy Statement.
B. RESPONSIBILITIES AND DUTIES
1. Review and assess the adequacy of this Charter on an annual basis and submit any proposed amendments to the Board for approval.
2. Review and discuss with management and the independent auditor:
a. the selection, application, and disclosure of critical accounting policies and practices;
b. the Company's system of internal controls and policies relating to risk assessment and management;
c. all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of using such alternative disclosures and treatments, and the treatment preferred by the independent auditor;
d. the effects on the Company's financial statements of regulatory and accounting initiatives;
e. any material off-balance-sheet transactions, arrangements, obligations (including contingent obligations), and any other relationships of the Company with unconsolidated entities that may have a current or future material effect on the Company's financial statements;
f. any pro forma or non-GAAP information proposed to be included in the Company's financial statements or any other public disclosure, and the reasons for such pro forma or non-GAAP information;
g. the 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" in its SEC filings; and
h. the presentation of the financial statements and any judgments made in connection with the preparation of such financial statements.
3. Recommend to the Board of Directors whether the audited consolidated financial statements should be included in the Company's Annual Report filed with the SEC on Form 10-K.
4. Review and discuss the earnings press releases, Forms 10-K and 10-Q, as well as financial information and earnings guidance (if any) given to analysts and rating agencies.
5. Discuss policies with respect to risk assessment, risk management, the Company's major financial risk exposures, and the steps management has taken to monitor and control such exposures.
6. Obtain reports from management, the Company's senior internal auditing executive, and the independent auditor that the Company and its subsidiary/foreign-affiliated entities are in conformity with applicable legal requirements and the Company's Code of Conduct and Financial Code of Ethics. Review reports and disclosures of insider and affiliated party transactions. 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 Financial Code of Ethics.
7. Review with the Company's General Counsel any legal matter that could have a significant impact on the Company's financial statements and the effectiveness of the Company's compliance program in detecting and preventing violations of the Company's Code of Conduct.
8. Establish procedures for the receipt, retention, and treatment of complaints received from employees or other parties about the Company's accounting policies, internal controls, or the audit of the Company's financial statements and for the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters.
1. The Audit Committee shall have the sole authority to appoint or replace the independent auditor (subject, if applicable, to shareholder ratification). The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.
2. Review at least annually a report by the independent auditor describing: (a) the firm's internal quality-control procedures; (b) 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; (c) any steps taken to deal with such issues; and (d) all relationships between the independent auditor and the Company.
3. The Audit Committee shall annually evaluate the qualifications, performance, and independence of the independent auditor and the lead partner of the independent auditor, taking into consideration: the foregoing reports and the independent auditor's work throughout the year, the disclosures of the independent auditor required by Independence Standards Board Standard No.1, and the views of the Internal Auditor and management and report its conclusions to the Board.
4. Review and approve the audit fees and any other compensation proposed to be paid to the independent auditor in accordance with the Audit Committee's Pre-Approval Policy and Procedures.
5. Pre-approve the retention of the independent auditor for any auditing service or any non-audit service that is not prohibited under Section 10A (g) of the Securities Exchange Act and the terms of engagement and fee for such service, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may delegate the authority to grant such pre-approvals to one or more designated members of the Audit Committee, provided that the approvals granted by such members shall be reported to the full Audit Committee at the next regular Audit Committee meeting.
6. Discuss with the independent auditor any relationships or services that may affect the objectivity and independence of the independent auditor as stipulated in Independence Standards Board Standard No.1, and matters relating to the conduct of audits required to be disclosed by Statement on Auditing Standards No. 61.
7. Discuss with the independent auditor: (a) accounting adjustments that were identified or proposed by the independent auditor and not implemented, (b) communications between the audit team and the firm's national office relating to auditing or accounting issues arising out of the engagement, (c) the "management letter" issued or proposed to be issued by the independent auditor to the Company and any other material written communications between the independent auditor and management, and (d) any issues identified or problems encountered by the independent auditor with management's response to such adjustments, communications, or letter.
8. Resolve any disagreements between management and the independent auditor.
9. Review the annual audit plans of the independent auditor.
10. Ensure the rotation of the audit partners as required by law.
11. Set clear hiring policies for employees and former employees of the independent auditor.
12. Obtain assurance from the independent auditor that section 10A (b) of the Securities Exchange Act has not been implicated.
1. Review the annual audit plans of the Internal Auditor, including any audit plans of audit firms retained to provide internal audit services, to ensure that there is an appropriate control process for reviewing and approving the Company's internal transactions and accounting.
2. Review the appointment and replacement of the senior internal auditing executive.
3. Review the responsibilities, organizational structure, budget, and qualifications of the internal audit function.
4. Review reports of the Internal Auditor, including reports of audit firms retained to provide internal audit services, management responses, plans for corrective actions, and reports on the completion of the corrective actions.
Financial Reporting Processes
1. Review with management and the independent auditor any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding the Company's financial statements or accounting policies.
2. Review any significant difficulties reported by the independent auditor in conducting the audit, including any restrictions on the scope of work or access to required information.
3. Review any significant changes in the Company's internal controls or in other factors that could significantly affect these controls.
4. Review the reports of the CEO and CFO (in connection with their required certifications) regarding internal controls and the independent auditor's attestation of the reports prior to the filing of the Company's Form 10-K, any significant deficiencies or material weaknesses in the design or operation of internal controls, and any fraud that involves management or other employees who have a significant role in the Company's internal controls.
5. Review major issues regarding the adequacy of the Company's internal controls and any special audit steps adopted in light of control deficiencies.
1. Perform any other activities consistent with this Charter, the Company's Bylaws, and Certificate of Incorporation as the Committee or the Board of Directors deems necessary or appropriate.
2. Report regularly to the Board of Directors.
C. MEMBERSHIP AND ORGANIZATION
1. The Audit Committee shall consist of at least three members. Each member shall meet the independence requirements of the New York Stock Exchange, the Company's Corporate Governance Principles, Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission. In addition, each member shall meet the financial literacy requirements of the New York Stock Exchange. At least one member shall qualify as an "Audit Committee Financial Expert" as that term is defined by the rules and regulations of the Securities and Exchange Commission.
2. The members of the Committee shall be elected annually by resolution passed by a majority of the Board of Directors (based on the recommendation of the Nominating and Corporate Governance Committee) at its first meeting following the Annual Meeting of Shareholders and shall serve until the first meeting of the Board of Directors following the next Annual Meeting of Shareholders and until their successors are elected and qualified or until their earlier death, resignation, or removal, with or without cause, in the discretion of the Board. Unless a Chair is elected by the Board of Directors, the members of the Committee shall elect a Chair by majority vote of the full Committee membership.
3. The Committee may delegate its authority to a subcommittee or subcommittees.
4. The Committee shall promptly inform the Board of the actions taken or issues discussed at its meetings. This will generally take place at the Board meeting following a Committee meeting.
1. The Committee shall meet at least quarterly. Committee meetings shall be called and conducted in the manner provided for in the Bylaws of the Company. The Committee shall meet in executive session periodically with each of the Chief Financial Officer (and other members of management, as it deems appropriate), the Internal Auditor, and the independent auditor separately.
2. 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.
E. ADVISORS AND AUTHORITY
1. The Committee shall have the authority, at the expense of the Company, to retain such accounting, legal, and other advisors as it deems appropriate without Board or management approval.
2. The Committee will receive from the Company appropriate funding, as determined by the Committee, for the payment of: (i) any advisors employed by the Committee, as described above; or (ii) ordinary administrative expenses of the Committee that are necessary and appropriate in carrying out its duties.
F. PERFORMANCE EVALUATIONS
1. The Committee shall evaluate its performance annually.