AUDIT COMMITTEE CHARTER
The Board of Directors (the "Board")
of Harte-Hanks, Inc., a Delaware
corporation (the "Company"), adopted this Audit Committee Charter
(the "Charter") on January
The Audit Committee of Harte-Hanks,
Inc. (the "Company") is appointed by the Board of Directors (the
"Board") to assist the Board in fulfilling its oversight of:
- The integrity of the Company's financial
statements, including the financial reporting process and systems of
internal controls regarding finance, accounting, and legal compliance.
- The qualifications and independence of the
Company's independent auditors.
- The performance of the Company's internal audit
function and independent auditors.
- The Company's compliance with legal and
Committee shall provide an avenue of communication among the independent
auditors, management, the internal auditing department and the Board of
Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities, and it shall have direct access to the
independent auditors as well as anyone else in the organization. The Audit
Committee shall have the authority to retain, at the Company's cost and
expense, special independent legal, accounting, or other advisors or experts it
deems necessary in the performance of its duties. The Company shall provide
appropriate funding, as determined by the Audit Committee, for payment of ordinary
administrative expenses of the Audit Committee that are necessary or
appropriate in carrying out its duties, for payment of compensation to the
outside legal, accounting or other advisors employed by the Audit Committee and
compensation to the independent auditors or any other registered public
accounting firm for the purpose of rendering or issuing an audit report or
related work or performing other audit, review or attest services for the
Company and to any independent counsel or other advisers employed by the Audit
COMMITTEE COMPOSITION AND MEETINGS.
Audit Committee members shall meet
the independence and experience requirements of the New York Stock
Exchange, Inc. ("NYSE"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of
the Securities and Exchange Commission (the "SEC" or the
"Commission"). The Audit Committee shall be comprised of three
(3) or more directors as determined by the Board, each of whom the Board
has determined has no material relationship with the Company and each of
whom is otherwise "independent" under the rules of the NYSE, the
Exchange Act, the Sarbanes Oxley Act of 2002 and the rules promulgated
thereunder. All members of the Committee shall be financially literate (as
determined by the Board in its business judgment) or must become
financially literate within a reasonable period of time after appointment
to the Audit Committee, and at least one member of the Committee shall be
an "audit committee financial expert" as defined by the SEC (who
shall be presumed to have "accounting or related financial management
expertise" as required by the NYSE). Audit Committee members shall
not simultaneously serve on the audit committee of more than two (2) other
Audit Committee members shall be
appointed, and may be replaced, by the Board. If an Audit Committee Chair
is not designated or present, the members of the Committee may designate a
Chair by majority vote of the Committee membership.
The Committee shall meet at least
quarterly, or more frequently as circumstances dictate, to discuss with
management the Company's annual audited financial statements and quarterly
financial statements, as applicable. The Audit Committee shall prepare
and/or approve an agenda in advance of each meeting. The Committee should
periodically meet privately in executive session with management, the
director of the internal auditing department, the independent auditors,
and as a committee to discuss any matters that the Committee or each of
these groups believe should be discussed.
AUTHORITY AND RESPONSIBILITIES.
The function of the Audit Committee
is oversight. The Audit Committee is directly responsible for the
appointment, retention, compensation, evaluation, oversight of the work
and termination of the Company's independent auditors and any other
registered public accounting firm engaged for the purpose of performing
review or attest services for the Company (including resolution of
disagreements between management and the independent auditors or such
other registered public accounting firm regarding financial reporting).
The independent auditors and any such other registered public accounting
firm shall report directly to the Audit Committee.
The management of the Company is
responsible for the preparation, presentation and integrity of the
Company's financial statements, for maintaining appropriate accounting and
financial reporting principles and policies and internal controls and
procedures that provide for compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible
for planning and carrying out a proper audit of the Company's annual financial
statements, reviews of the Company's quarterly financial statements prior
to the filing of each quarterly report on Form 10-Q and other procedures.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not full-time employees of the Company
and are not, and do not represent themselves to be, performing the
functions of auditors or accountants. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field
work" or other types of auditing or accounting reviews or procedures
or to set auditors independence standards.
The Audit Committee shall preapprove
all permitted non-audit services to be performed for the Company by its
independent auditors, subject to the deminimis exceptions for
permitted non-audit services described in the Exchange Act. The Audit
Committee may form and delegate authority to subcommittees consisting of
one or more members when appropriate, including the authority to grant
preapprovals of non-audit services, provided that decisions of such
subcommittee to grant preapprovals shall be presented to the full Audit
Committee at its next scheduled meeting.
The Audit Committee shall make
regular reports to the Board. The Audit Committee shall review and
reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval. The Audit Committee shall annually
evaluate the Audit Committee's own performance, which evaluation must
compare the performance of the Audit Committee with the requirements of
The Audit Committee, to the extent it
deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
- Review and discuss with management and the
independent auditors the annual audited financial statements, including
disclosures made in the "Management's Discussion and Analysis"
portion of any documents filed with the Commission, and recommend to the
Board whether the audited financial statements should be included in the
Company's Form 10-K.
- Review and discuss with management and the
independent auditors the Company's quarterly financial statements prior
to the filing of each Form 10-Q, including disclosures made in the
"Management's Discussion and Analysis" portion of any
documents filed with the Commission and the results of the independent
auditors' review of the quarterly financial statements.
- Review and discuss with management and the
independent auditors significant matters arising from any audit,
including any audit problems or difficulties and management's response
including any accounting adjustments that were noted or proposed by the
auditors but were "passed" (as immaterial or otherwise). The
review should also include discussion of the responsibilities, budget
and staffing of the Company's internal audit function.
- Review and discuss quarterly reports from the
independent auditors on:
- All critical accounting
policies and practices to be used.
- All alternative treatments
of financial information within generally accepted accounting
principles ("GAAP") that have been discussed with management,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditors.
- Other material written
communications between the independent auditors and management, such as
any "management" or "internal control" letter
issued or proposed to be issued or schedule of unadjusted differences.
- All discussions between the
independent audit team and the firm's national office regarding the
- Discuss with management the Company's earnings
press releases, including the use of "pro forma" or
"adjusted" non-GAAP financial measures, as well as financial
information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types of
presentations to be made) and need not take place in advance of each
earnings release or each instance in which the Company may provide
- Discuss with management and the independent
auditors the effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial statements.
- Discuss with management the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures, including the Company's risk assessment and
risk management policies.
- Discuss with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No.
61 relating to the conduct of the audit, including any communications
- deficiencies noted in the
audit in the design or operation of internal controls;
- consideration of fraud in a
financial statement audit;
- detection of illegal acts;
- the independent auditors'
responsibility under generally accepted auditing standards;
- any restriction on audit
- significant accounting
- significant issues discussed
with the national office respecting auditing or accounting issues
presented by the engagement;
- management judgments and
- any accounting adjustments
arising from the audit that were noted or proposed by the auditors but
were passed (as immaterial or otherwise);
- the responsibility of the
independent auditors for other information in documents containing
audited financial statements;
- disagreements with
- consultation by management
with other accountants;
- major issues discussed with
management prior to retention of the independent auditors;
- difficulties encountered
with management in performing the audit;
- the independent auditors'
judgments about the quality of the entity's accounting principles;
- reviews of interim financial
information conducted by the independent auditors; and
- the responsibilities, budget
and staffing of the Company's internal audit function.
- Review disclosures made to the Audit
Committee, if any, by the Company's CEO and CFO during their
certification process for each Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal controls
that could adversely affect the Company's ability to record, process,
summarize and report financial data, any material weaknesses therein and
any fraud involving management or other employees who have a significant
role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditors
- Obtain and review a report from the
independent auditors, at least annually, describing (a) the independent
auditors' 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 (and any
steps taken to deal with any such issues) respecting one or more
independent audits carried out by the firm, and (c) (to assess the
auditor's independence) all relationships between the independent
auditors and the Company including each non-audit service provided to
the Company and discuss with the independent auditors any relationships
or services that may impact the quality of audit services or the objectivity
and independence of the independent auditors.
- Obtain and review a formal written statement
from the independent auditors of the fees billed in each of the last two
fiscal years for each of the following categories of services rendered
by the independent auditors: (i) the audit of the Company's annual
financial statements and the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q or services
that are normally provided by the independent auditors in connection
with statutory and regulatory filings or engagements; (ii) assurance and
related services not included in clause (i) that are reasonably related
to the performance of the audit or review of the Company's financial
statements, in the aggregate and by each service, (iii) tax compliance,
tax advice and tax planning services, in the aggregate and by each
service; and (iv) all other products and services rendered by the
independent auditors' in the aggregate and by each service.
- Receive from the independent auditors the
written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees) and discuss with the independent auditors the independent
- Evaluate the qualifications, performance and
independence of the independent auditors (including the lead partner),
including considering whether the auditors' quality controls are
adequate and the provision of permitted non-audit services is compatible
with maintaining the auditors' independence, taking into account the
opinions of management and internal auditors.
- Ensure the rotation of the
lead audit partner, the concurring partner and any other active audit
engagement team partner as required by law and consider whether, in
order to assure continuing auditor independence, it is appropriate to
adopt a policy of rotating the independent auditing firm on a regular
- Set clear policies for the
Company's hiring of employees or former employees of the independent
auditors who participated in any capacity in the audit of the Company.
- Take into account the
opinions of management and the Company's internal auditors in assessing
the independent auditors' qualifications, performance and independence.
Oversight of the Company's Internal Audit Function
- Review the appointment and
replacement of the senior internal auditing executive.
- Review the significant
reports to management prepared by the internal auditing department and
- Discuss with the independent
auditors and management, the internal audit department's
responsibilities, budget and staffing and any recommended changes in the
planned scope of the internal audit.
Compliance Oversight Responsibilities
- 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 submission by employees of concerns
regarding questionable accounting or auditing matters.
- Discuss with management and
the independent auditors any correspondence with regulators or
governmental agencies and any published reports which raise material
issues regarding the Company's financial statements or accounting
- Discuss with the Company's
General Counsel legal matters that may have a material impact on the
financial statements or the Company's compliance policies.
Other Audit Committee Responsibilities
- Annually prepare a report to
stockholders as required by the SEC. The report shall be included in the
Company's annual proxy statement.
- Perform any other activities
consistent with this Charter, the Company's By-laws, and governing law,
as the Committee or the Board deems necessary or appropriate.
- Maintain minutes of meetings
and periodically report to the Board of Directors on significant results
of the foregoing activities.
- Periodically review the
Company's policies and Code of Ethics, with particular focus on related
party transactions and conflicts of interest involving, directly or
indirectly, the principal executive officer, principal financial officer
and principal accounting officer, and consider whether changes are
- Evaluate, decide whether to
approve and monitor on an ongoing basis any related party transactions
covered by the Company's policies and Code of Ethics and make decisions
regarding the grant of any waiver of or deviation from the Company's
policies and Code of Ethics.
OF AUDIT COMMITTEE'S ROLE.
While the Audit Committee has the
responsibilities, duties 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 auditors. It is also not
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditors or
to assure compliance with laws and regulations.