CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS OF HANGER ORTHOPEDIC GROUP, INC.
The purpose of the Audit Committee of the Board of Directors of Hanger Orthopedic Group, Inc. (the "Company") is to assist the Board in carrying out its oversight responsibilities with respect to the Company’s
financial statements and financial information
provided to shareholders,
• compliance with legal and regulatory requirements,
• internal and external audit processes, and
• internal financial and accounting controls.
The Committee will consist of not less than three members of the Board of Directors. Each member of the Committee will meet the requirements of the rules of the New York Stock Exchange and the Securities and Exchange Commission and, accordingly, (i) will have no relationship to the Company that may interfere with the exercise of his or her independence from management and the Company nor receive consulting or other fees from the Company (other than Board or Committee fees); and (iii) will be financially literate, or be able to become financially literate within a reasonable period of time after appointment to the Committee. At least one member of the Committee shall be deemed to be an “audit committee financial expert” within the meaning of Securities and Exchange Commission rules. No member will serve as a member of the audit committee of more than two other public company boards of directors.
Meetings and Subcommittees
The Committee shall meet at least four times per year or more frequently as circumstances require. The Committee may form and delegate authority to subcommittees when appropriate.
Committee’s oversight responsibilities will include the following:
1. The Committee, subject to any action that may be taken by the full Board of Directors, will have the ultimate authority and responsibility to select (or nominate for shareholder approval), evaluate and, where appropriate, replace the independent auditor.
2. The Committee will (i) review the annual written report from the independent auditor discussing all relationships between the independent auditor and the Company in accordance with Independence Standards Board Standard No. 1 ("ISB") as in effect at that time; (ii) monitor and pre-approve all fees paid to the independent auditor for consulting and other non-audit services; (iii) discuss with the independent auditor any such disclosed relationships and their impact on the independent auditor’s objectivity or independence; and (iv) take appropriate action in response to the independent auditor’s report to satisfy itself of the auditor’s independence.
3.. The Committee will review and discuss with the independent auditor the annual audit plan and its scope.
4. . The Committee shall serve as the Board’s primary avenue of communication with the independent accountant and shall ensure understanding by the independent accountant and management that the independent accountant is ultimately accountable to the Board and the Audit Committee.
5. . The Committee shall provide the opportunity for the independent auditor to meet with the full Board as deemed necessary and appropriate by the Committee.
6. The Committee shall be responsible for establishment of policies for the Company’s hiring of employees or former employees of the independent auditor.
7. . The Committee shall serve as the Board’s primary avenue of communication with the Director of Internal Audit.
8.. The Committee shall review and concur in the appointment, replacement, reassignment or dismissal of the Director of Internal Audit.
9. . The Committee shall confirm and assure the independence of the internal auditors.
10. . The Committee shall review the scope of the annual internal audit plan and the degree of coordination with the independent auditor.
11. Committee shall review periodically the internal audit activities, staffing and budget.
12. The Committee shall inquire of the independent auditor and management as to the acceptability and appropriateness of financial accounting practices and disclosures used or proposed by the Company in connection with the preparation of the financial statements.
13.. The Committee shall review and discuss with management and the independent auditor prior to releasing the year-end earnings and at the completion of the annual audit examination:
14. The Committee will review with management and the independent auditor prior to releasing the quarterly earnings, the Company’s quarterly financial statements including the “Management’s Discussion and Analysis of Financial Condition” to be included in the Company’s Quarterly Reports on Form 10-Q and review with the independent auditor the matters required to be discussed by SAS 61 as in effect at that time.
Internal Financial and Accounting Control and Compliance Oversight Responsibilities
15. The Committee shall consider and review with the independent auditor, internal auditor and other members of management:
16. The committee is responsible to establish Whistleblower procedures to receive, retain and address complaints regarding accounting and auditing matters, including procedures for employees’ anonymous submission of concerns.
17. . The Committee shall discuss with the Company’s general counsel legal matters that may have a material impact on the Company’s financial statements or the Company’s compliance policies and internal controls; and consult with the Board’s Quality and Technology Committee with respect to the Company’s healthcare standards compliance policies.
18. The Committee will review its own performance and the adequacy of this Charter on an annual basis and recommend changes, as necessary, to the Board.
19. . The Committee shall report its activities to the Board on an annual basis and make recommendations to the Board with respect to matters within the purview of the Audit Committee, as necessary or appropriate.
20. The Committee will prepare a report each year for inclusion in the Company’s annual proxy statement stating whether (i) the Committee reviewed and discussed the audited financial statements with management, (ii) the Committee discussed with the independent auditor the matters required to be discussed by SAS 61, (iii) the Committee received the written disclosures from the auditor required by ISB 1, and (iv) the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K.
Access and Communication
21. . The Committee shall meet separately and privately with the independent auditor, the internal auditor and with the Company’s Chief Financial Officer and accounting officers at least annually to discuss any matters the Committee or these groups believe should be discussed privately with the Audit Committee. The Committee will also inquire if management has placed any restrictions on the scope of activity of the independent or internal auditors.
22. The Committee has unrestricted access to members of management, employees and any relevant information.
23. The Committee shall have the authority to engage outside legal, accounting and other advisors without Board approval.
24. . The Committee shall review the Company’s earnings press releases and financial information and earnings guidance provided by the Company to shareholders, analysts and rating agencies.
Risk Assessment and Management
25. The Committee shall review with management and the independent auditor compliance with laws, regulations and internal procedures and contingent liabilities and discuss policies with respect to risk assessment and risk management.