HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

AUDIT COMMITTEE CHARTER

(Amended and Restated as of June 10, 2004)

Purpose:  The Audit Committee is a standing committee of the Board.  The Committee’s purpose is to assist the Board in carrying out its oversight responsibilities relating to the Company’s financial reporting.  In this regard, the Committee will assist Board oversight of (1) the integrity of the Company’s financial statements, (2) the Company’s compliance with legal and regulatory requirements, (3) the qualifications and independence of the Company’s independent auditor, and (4) the performance of the Company’s internal audit function and independent auditor.  The Company recognizes, however, that:

·                 management is responsible for determining that the Company’s financial statements and related disclosures are prepared in accordance with applicable requirements;

·                 the Committee does not have the responsibility to conduct audits or other reviews; rather, the Committee will take such actions as it determines to be appropriate to assure that the Company has procedures and processes in place to provide reasonable assurance that the Company’s financial statements and related disclosures comply with applicable requirements; and

·                 in carrying out their oversight responsibilities, the Committee and the Board will necessarily rely on the expertise, knowledge and integrity of management, the Company’s internal and independent auditors and such other persons, if any, with whom the Committee may consult from time to time.

The Committee will have the authority to take all actions on behalf of the Board as the Committee or its Chairperson may from time to time determine to be consistent with its purpose, this Charter and applicable law.

Composition:  The Committee will have such number of members as the Board from time to time designates.  Based upon the recommendation of the Nominating and Governance Committee, the Board will designate the members of the Committee at least annually and will take such actions as it from time to time determines to be appropriate to assure that the Committee and its members comply with applicable independence requirements.  Management is directed to take such steps as are necessary to assure that the Company does not take actions that would compromise the independence of any Committee member.  No Committee member may simultaneously serve on the audit committees of more than two other public companies unless the Board determines such simultaneous service would not impair the member’s ability to serve on the Committee.  Furthermore, each member of the Committee shall be financially literate or shall become financially literate within a reasonable period of time after his or her appointment to the Committee.  Committee members shall serve at the pleasure of the Board and for such term or terms as the Board may determine. 

The Board will from time to time designate the Chairperson, and may designate a Co-Chairperson or Vice Chairperson, of the Committee.

Resources:  Management, the internal auditor and the independent auditor are each directed to bring to the attention of the Committee such matters that the Committee is required by law or listing requirements to review or as the Committee or its Chairperson may from time to time designate.  Without limitation, management is responsible for providing the Committee with the information and assistance contemplated by this Charter and educational and other resources as may be required by law, listing requirements or GAAP or as the Committee or the Chairperson may request, and such funding as may be herein contemplated, including funding to pay fees and disbursements of the independent auditor and any advisor retained by the Committee or its Chairperson.  The Committee or its Chairperson may retain at the Company’s expense (in such amount as the Committee or its Chairperson determines to be appropriate) legal counsel and other third-party advisors as the Committee or its Chairperson determines to be appropriate. 

Proceedings:  The Committee will periodically meet in executive session and meet separately with representatives of management, the internal auditor and the independent auditor to aid in assuring direct communications relevant to the discharge of the Committee’s responsibilities.  The Chairperson of the Committee shall, in consultation with the other members of the Committee and the appropriate officers of the Company, establish Committee meeting agendas.  Additionally, the Chairperson of the Committee or a majority of the Committee members may call a meeting of the Committee at any time and any Committee member may submit items to be included in the agenda for, and may raise subjects that are not on the agenda at, any meeting.  A majority of the number of Committee members will constitute a quorum for conducting business at a meeting of the Committee.  The act of a majority of the Committee members present at a meeting at which a quorum is in attendance will be the act of the Committee, unless a greater number is required by law, the Company’s certificate of incorporation, its bylaws, or this Charter.  The Committee may adopt such other procedures as it may from time to time determine to be appropriate to assist in the discharge of its responsibilities. 

Except as the Committee or its Chairperson may otherwise determine, the Secretary or another person designated for this purpose by the Committee Chairperson will prepare appropriate records of all Committee meetings and actions, copies of which when approved by the Committee or its Chairperson will be furnished to the Board, and will maintain copies of all materials furnished or presented to the Committee.  In addition, the Committee Chairperson will regularly report the Committee’s activities to the Board (in such manner and at such times as the Committee Chairperson or the Board deems appropriate).

Responsibilities:  The Committee will:

·                 act as the direct contact with the Company’s independent auditor, which firm must report directly to the Committee and will ultimately be accountable to the Committee and the Board;

·                 be directly responsible for the appointment, compensation, retention 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 performing other audit, review or attest services for the Company;

·                 pre-approve all audit and non-audit work provided to the Company by the independent auditor (except for items exempt from pre-approval requirements under applicable law);

·                 prepare the Committee’s report, made pursuant to the Securities Exchange Act of 1934, to be included in the Company’s annual report on Form 10-K or in the Company’s proxy statement in connection with annual meetings of stockholders;

·                 act in respect of such other matters as to which Committee action is required by law or listing requirements, including in respect of the matters specified in the Audit Committee Responsibilities Checklist attached to and made a part of this Charter; and

·                 annually evaluate the Committee’s performance.

Each member of the Committee has authority to preapprove all audit and non-audit services to be performed for the Company by the Company’s independent auditor; provided, that if any Committee member preapproves services pursuant to this authority, then that member or his or her proxy shall present the details of such preapproval, including but not limited to cost estimates and a detailed description of the preapproved services, to the full Committee at the Committee’s next scheduled meeting.  The Committee may ratify, amend or revoke any preapproval of services granted by an individual Committee member pursuant to the authority delegated under this Charter; provided, that any amendment or revocation by the Committee will not affect the validity of the interim preapproval.

          Charter:  The Committee will review this Charter from time to time and will recommend to the Nominating and Governance Committee changes to the Charter as it determines to be appropriate.  Any changes will be effective when recommended by the Nominating and Governance Committee and approved by the Board.

 


 

Audit Committee Responsibilities Checklist

The following is a checklist of actions that the Audit Committee anticipates that it will engage in during any fiscal year.  This checklist is merely a guideline for the members of the Audit Committee and, as such, is not intended to limit the actions of the Audit Committee.  Unless otherwise required by applicable law or listing requirements, an action listed below may be conducted by the Audit Committee at any time (not solely the quarter or quarters indicated below).           

 

 

WHEN PERFORMED
Audit Committee Meetings

 

 

 

Q1

Q2

Q3

Q4

As Needed

 

1. 

Based on the advice and with the assistance of counsel, prepare a report relating to the Audit Committee’s activities as required by law.

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2. 

Review the independent auditor’s reports as to:

 

 

 

 

 

 

 

·                                 services performed and fees and expenses incurred;

 

 

 

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·                                 critical accounting policies, alternate treatments of financial information within GAAP and the audit firm’s internal quality-control procedures;

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·                                 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 (including the results of any inspection of the independent auditor conducted by PCAOB), within the preceding five years, respecting one or more independent audits carried out by the independent auditor, and any steps taken to deal with any such issues; and 

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·                                 the independent auditor’s independence and all relationships between the independent auditor and the Company.

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Also review any other significant written communications between the independent auditor and management, and report the Audit Committee’s conclusions with respect to the independent auditor to the full Board.

 

 

 

 

 

 

3. 

Discuss with management, internal auditor and independent auditor policies with respect to risk assessment and risk management, including inquiry about significant risks or exposures and assess steps management is taking in light of these risks.

 

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4. 

Review with management, the internal auditor and the independent auditor the audit scope and plan and coordination of audit efforts to assure completeness of coverage, reduction of redundant efforts and the effective use of audit resources.

 

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5. 

Consider and review with each of the internal auditor and independent auditor:

 

 

 

 

 

 

 

·                                 the adequacy of the Company’s internal controls, including computerized information system controls and security;

 

 

 

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·                                 any related significant findings and recommendations of the auditors, together with management’s responses thereto;

 

 

 

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·                                 any audit problems or difficulties and management’s response; and

 

 

 

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·                                 any significant changes in GAAP or the Company’s accounting policies or standards.

 

 

 

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6. 

Discuss with management and the independent auditor at the completion of the annual audit and each quarterly review:

 

 

 

 

 

 

 

·                                 the financial statements, including the Company’s MD&A disclosure;

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·                                 the results of the independent auditor’s audit or review, as applicable, and related report;

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·                                 MD&A disclosure, and other published documents containing the Company’s financial statements, including (1) management’s disclosure to the Audit Committee under Section 302 of the Sarbanes-Oxley Act, (2) the contents of the certificates to be filed under Sections 302 and 906 of that Act, and (3) assurance from management and the auditors that the matters disclosed in these documents are consistent with the information contained in the financial statements;

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·                                 any significant changes required in the audit or review plan;

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·                                 any significant difficulties or disputes with management encountered during the course of the audit or review;

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·                                 other matters related to the conduct of the audit or review which are to be communicated to the Audit Committee under GAAP;

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·                                 any significant financial reporting issues and judgments made in connection with preparation of the financial statements; and

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·                                 the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements.

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7. 

Review and discuss with the independent auditor, the internal auditor and management the adequacy of the Company’s internal accounting controls and the Company’s policies and compliance procedures with respect to business practices, including (1) the disclosures regarding internal controls and matters required by Section 302 and 404 of the Sarbanes-Oxley Act and any rules promulgated thereunder by the SEC and (2) a review with the independent auditor of its opinion regarding management’s assessment of internal controls over financial reporting and the independent auditor’s analysis of matters requiring modifications to management’s certifications pursuant to Section 302 of the Sarbanes-Oxley Act.

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8. 

Review policies and procedures with respect to transactions between the Company and officers and directors, or affiliates of officers or directors, or transactions that are not a normal part of the Company’s business.

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9. 

Review with management and the internal auditor:

 

 

 

 

 

 

 

·                                 significant findings during the year and management’s responses thereto;

 

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·                                 any difficulties encountered in the course of their audits, including any restrictions on the scope of their work or access to required information;

 

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·                                 any changes required in planned scope of their audit plan; and

 

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·                                 the responsibilities, budget and staffing of the internal auditor.

 

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10. 

The Chairperson of the Audit Committee (or another committee member designated for this purpose by the Chairperson) will participate in a telephonic meeting with management and the independent auditor prior to earnings releases, as well as financial information and earnings guidance provided to analysts and rating agencies.

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11. 

Review a report prepared by the Company’s General Counsel regarding compliance with the Company’s code of conduct, and such legal, regulatory and matters identified to the Audit Committee by management as reasonably likely to have a material impact.

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12. 

Review policies as to hiring employees or former employees of the independent auditor.

 

 

 

 

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13. 

Review procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

 

 

 

 

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14. 

Review correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company’s financial statements, accounting policies or internal controls.

 

 

 

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15. 

Meet separately, periodically, with management, the internal auditor and the independent auditor.

 

 

 

 

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16. 

Perform a performance evaluation of the Audit Committee.

 

 

 

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