I. Purposes of the Audit Committee
2004 Committee Charter : HNI
The Audit Committee shall (i) assist the Board in fulfilling the Board's oversight responsibilities with respect to (a) the integrity of the financial statements of the Company, (b) the Company's compliance with legal and regulatory requirements, (c) the independent auditor's qualifications and independence, and (d) the performance of the Company's internal audit function and independent auditor, and (ii) prepare the Audit Committee's report, made pursuant to the federal securities laws, to be included in the Company's annual proxy statement (the "Audit Committee Report").
Consistent with the NYSE listing requirements and federal securities laws, this Charter will be included on the Company's website, will be periodically published in the proxy statement relating to the Company's annual meeting of shareholders and will be made available upon request sent to the Company's Secretary.
B. Membership; Qualifications
The Audit Committee shall consist of at least three independent, outside Directors.
Each member of the Audit Committee shall meet the independence, experience and financial literacy requirements under the policies and requirements of the NYSE, the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and the rules and regulations of the Securities and Exchange Commission (the "Commission").
At least annually, the Board of Directors shall review and confirm the qualifications of each Audit Committee member.
The Board on the recommendation of the Public Policy and Corporate Governance Committee shall appoint the members and the Chairperson of the Audit Committee. The Board may replace the Audit Committee members.
No member of the Audit Committee shall serve on the audit committees of more than two other public companies.
Consistent with the policies and requirements of the NYSE, directors' fees shall be the sole compensation paid by the Company to Audit Committee members. The total amount and form of compensation paid to Audit Committee members shall be determined from time to time by the Board of Directors in consultation with the Public Policy and Corporate Governance Committee and otherwise in accordance with the independence criteria of the NYSE and Section 301 of the Sarbanes-Oxley Act.
The Audit Committee shall meet in person or telephonically at least quarterly, or more frequently as it may determine necessary to comply with its responsibilities as set forth herein. The Audit Committee may also take action permitted hereunder by unanimous written consent.
The Audit Committee may request any officer or employee of the Company or the Company's outside legal counsel or independent auditor to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee. The Audit Committee will meet with management, the internal auditor and the independent auditor at least once each quarter in separate private sessions to discuss any matter that the Audit Committee, management, the independent auditor or such other persons believe should be discussed privately.
The chairperson of the Audit Committee will, in consultation with the other members of the Audit Committee, the Company's independent auditor and the appropriate officers of the Company, be responsible for calling meetings of the Audit Committee, establishing an agenda therefor and supervising the conduct thereof. Each Audit Committee member may submit items to be included on the agenda. Audit Committee members may also raise subjects that are not on the agenda at any meeting.
F. Resources; Advisors
The Audit Committee shall have the resources, including funding in such amount as the Audit Committee deems necessary, and authority appropriate to discharge its responsibilities, including the authority to engage outside auditor for special audits, reviews and other procedures, and to retain independent counsel or other experts or consultants to the extent the Committee determines it to be necessary or appropriate to assist the Committee in fulfilling its responsibilities. The 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 member of, or consultant to, the Committee.
The Audit Committee will:
A. Retain Independent Auditor
Have the sole authority to (i) appoint and replace the Company's independent auditor, and (ii) to approve all audit engagement fees, terms and services, as well as non-audit engagements with the Company's independent auditor. The Audit Committee is to exercise this authority in a manner consistent with Sections 201, 202, and 301 of the Sarbanes-Oxley Act of 2002 and the rules and requirements promulgated thereunder by the Commission and the NYSE. The Audit Committee may delegate the authority to grant any pre-approvals required by such sections to one or more members of the Audit Committee as it designates, subject to the delegated member or members reporting any such pre-approvals to the Audit Committee at its next scheduled meeting. The Audit Committee will have direct oversight authority and responsibility for the independent auditor (including resolution of disagreements between management and the auditor regarding financial reporting), and the independent auditor shall report directly to the Audit Committee.
B. Quality Control of Independent Auditor
At least annually, obtain and review a report by the Company's independent auditor describing (i) the audit firm's internal quality control procedures, (ii) 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 five preceding years, respecting one or more independent audits carried out by the firm, and (iii) any steps taken to deal with any such issues. The Audit Committee shall require that the Company's independent auditor provide such report as a condition to the engagement of the independent auditor.
C. Review Independence of Auditor
In connection with the retention of the Company's independent auditor, at least annually review the information provided by management and the independent auditor relating to the independence of the audit firm, including, among other things, information related to the non-audit services provided and expected to be provided by the independent auditor. In addition, the Audit Committee shall (i) ensure that the independent auditor submit at least annually a formal written report delineating all relationships between the independent auditor and the Company consistent with applicable independence standards, (ii) discuss with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor, and (iii) take appropriate action in response to the independent auditor's report to satisfy itself of the independent auditor qualifications, performance and independence. The Audit Committee will also, at least annually, (x) review and evaluate the lead audit partner of the independent auditor, (xi) take such steps as may be required by law with respect to regular rotation of the lead audit and lead reviewing partners of the independent auditor (i.e., five years), and (xii) set hiring policies for employees or former employees of the independent auditor, which include the restrictions set forth in Section 206 of the Sarbanes-Oxley Act of 2002 and any rules promulgated thereunder by the Commission.
D. Review Audit Plan
Review with the independent auditor the overall plan, scope, and fees for the annual audit and other examinations including responsibilities, budget and staffing.
E. Conduct of Audit
Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 (as amended from time to time) relating to the conduct of the audit. Review with the independent auditor any audit problems or difficulties the auditor encountered in the course of the audit work and management's response, including any restrictions on the scope of the independent auditor activities or on access to requested information, any disagreements with management and significant issues discussed with the independent auditor's national office. This review shall be conducted outside the presence of the Company's officers, management or other personnel. The Audit Committee shall resolve any disagreements between the Company's management and the independent auditor.
F. Review of Audit Results
Review with the independent auditor the report of their annual audit, or proposed report of their annual audit, the accompanying management letter, if any, the reports of their review of the Company's interim financial statements conducted in accordance with Statement on Auditing Standards No. 61, and the reports of the results of such other examinations outside of the course of the independent auditor normal audit procedures that the independent auditor may from time to time undertake. The terms of any engagement of independent auditor shall provide that, in connection with reporting the results of any audit to the Audit Committee, the independent auditor will provide a report to the Audit Committee addressing those matters required by Section 204 and 404 of the Sarbanes-Oxley Act of 2002 and any rules promulgated thereunder by the Commission and as appropriate, (i) a review of major issues regarding (a) accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, and (b) the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies, (ii) a review of analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements, and (iii) a review of the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company. The Audit Committee will review the report and discuss the contents thereof with the independent auditor, senior management and the internal audit staff of the Company prior to release of any audited information.
G. Discuss Financial Statements and Disclosures
Discuss with appropriate officers of the Company and the independent auditor the annual audited and quarterly unaudited financial statements of the Company, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the disclosures regarding internal controls and other matters required to be reported to the Audit Committee by Section 302 of the Sarbanes-Oxley Act of 2002 and any rules promulgated thereunder by the Commission.
H. Annual Report on Form 10-K
Based on the reviews and discussions referred to in this charter, recommend to the Board whether the annual audited financial statements should be included in the Company's Annual Report on Form 10-K.
I. Review Earnings Press Releases
Review earnings and other financial press releases (paying particular attention to any use of "pro forma" or "adjusted" non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies (which review may occur after the issuance and may be done generally as a review of the types of information to be disclosed and the form of presentation to be made).
J. Review Internal Audit Plans
Review with the independent auditor, the senior internal auditing executive and appropriate members of the staff of the internal auditing department plans for and the scope of their ongoing internal audit activities, including the responsibilities, budget and staffing of the internal audit function.
K. Review Internal Audit Reports
Review with the senior internal auditing executive and appropriate members of the staff of the internal auditing department reports of audit activities, examinations and results thereof of the internal auditing department.
L. Review Systems of Internal Accounting Controls
Review with the independent auditor, the senior internal auditing executive, the General Counsel and, if and to the extent deemed appropriate by the chairperson of the Audit Committee, members of their respective staffs, the adequacy of the Company's internal accounting controls, the Company's financial, auditing and accounting organizations and personnel and the Company's policies and compliance procedures with respect to business practices, as required by Section 302 and 404 of the Sarbanes-Oxley Act of 2002 and any rules promulgated thereunder by the Commission. This shall include a review of: (a) the internal control report prepared by management (i) regarding management's responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting, and (ii) containing an assessment, as of the end of the Company's most recent fiscal year, of the effectiveness of the internal control structure and procedures of the Company for financial reporting, and (b) the independent auditor's opinion on the effectiveness of management's assessment of internal controls over financial reporting and the independent auditor's analysis of matters requiring modification to management's certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
M. Review Recommendations of Independent Auditor
Review with the senior internal auditing executive and the appropriate members of the staff of the internal auditing department recommendations made by the independent auditor and the senior internal auditing executive, as well as such other matters, if any, as such persons or other officers of the Company may desire to bring to the attention of the Audit Committee.
N. Securities Exchange Act
Obtain from the independent auditor any information that the independent auditor is required to provide to the Committee pursuant to Section 10A(b) of the Securities Exchange Act, as amended.
O. Subsidiary/Affiliate Compliance
Periodically obtain reports from management, the Company's senior internal auditing executive and the independent auditor that the Company and its subsidiaries are in conformity with applicable legal requirements and the Company's Code of Conduct. 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.
P. Discuss Risk Management Policies
Discuss policies with respect to risk assessment and risk management, including a discussion of the Company's major financial risk exposures and the steps management has taken to monitor and control these exposures.
Q. Establish Complaint Procedures; Discuss Proceedings/Complaints
Establish and periodically review procedures for: (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters as required by Section 301 of the Sarbanes-Oxley Act of 2002 and any rules promulgated thereunder by the Commission and the NYSE. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports that raise material issues regarding the Company's financial statements or accounting policies.
R. Discuss Legal Matters
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. Regularly review with the Company's counsel matters of legal or regulatory compliance, including compliance with the Company's Code of Conduct and its corporate securities trading policies.
S. Review Other Matters
Review such other matters in relation to the accounting, auditing and financial reporting practices and procedures of the Company as the Audit Committee may, in its own discretion, deem desirable in connection with the review functions described above.
T. Board Reports
Make regular reports of its activities to the Board in such manner and at such times as the Audit Committee deems appropriate, but in no event less than once a year. Such report shall include the a review of any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's the independent auditors or the performance of the internal audit function.
U. Audit Committee Report
Prepare, with the assistance of management, the independent auditor and outside legal counsel, and approve (i) the Audit Committee Report, and (ii) the annual Audit Committee affirmation letter required by the NYSE, and recommend its approval by the Board of Directors.
V. Review Audit Committee Performance
Prepare and review with the Board of Directors an annual performance evaluation of the Audit Committee, which evaluation shall compare the performance of the Audit Committee with the requirements of this Charter, and set forth the goals and objectives of the Audit Committee for the upcoming year. The performance evaluation by the Audit Committee shall be conducted in such a manner, as the Audit Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Audit Committee or any other member of the Audit Committee designated by the Audit Committee to make this report.
W. Review Audit Committee Charter
Review the Audit Committee's Charter annually, and recommend changes, if any, to the Public Policy and Corporate Governance Committee of the Board of Directors.
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 or are in accordance with generally accepted accounting principles. This is the responsibility of management and the Company's independent auditor. Nor is it the duty of the Audit Committee to conduct investigations or to assure compliance with laws and regulations or the Company's Code of Conduct. This is the responsibility of management.
Adopted by the Board of Directors on February 11, 2004.