of the
Board of Directors
of
VALEANT PHARMACEUTICALS INTERNATIONAL
(a
Delaware corporation)



Function

The primary function of the Finance and Audit Committee (the "Committee") is to assist the Board of Directors in monitoring (1) the integrity of the Company's financial statements, (2) the independent auditors' qualifications and independence, (3) the performance of the Company's internal audit function and independent auditors, and (4) the Company's compliance with legal and regulatory requirements.

The Committee's mandate includes free and open communication between it and the Company's independent auditors, internal auditors and financial management. The Company's independent auditors are ultimately accountable to the Board of Directors and the Committee, and the Committee shall have the authority to approve, change, retain and otherwise control the relationship between the Company and the independent auditors.

Composition

The Board of Directors shall designate three or more directors to serve on the Committee, with one member appointed as Chair of the Committee. Members of the Committee shall meet the independence requirements and other qualifications prescribed by the New York Stock Exchange and the Securities and Exchange Commission (the "SEC"). Members of the Committee shall not serve on the audit committee of more than a total of three public companies.  

Authority

In carrying out its responsibilities, the Committee may conduct investigations relating to the Company's financial affairs, records, accounts, reports, controls or activities as the Committee, in its discretion, deems desirable or as the Board of Directors may, from time to time, request.

The Committee will have free (and, if requested by the Committee, private) access to the Company's independent auditors and its internal auditing, financial management and legal counsel staffs, and any other personnel requested by the Committee, in order for the Committee to perform its duties and satisfy its responsibilities. The Committee may also employ any outside experts, legal counsel or other personnel deemed by the Committee in its collective judgment to be reasonably necessary, and in the best interest of the Company, to enable the Committee to ably perform its duties and satisfy its responsibilities. Fees and expenses of any such personnel shall be paid by the Company in accordance with such arrangements as the Committee may make.

Responsibilities

The Committee has the following responsibilities:

 

1.

Independent Auditors

 

(A)

 

Appoint and replace the Company's independent auditors who shall report directly to the Committee. Review and evaluate the lead partner, and ensure rotation of the lead and concurring audit partners every five years.

 

(B)

 

Review and discuss with the independent auditors the scope and timing of their audit, including the coordination of procedures and locations to be visited by the independent auditors and internal auditors. In conducting this review, the Committee will review with the independent auditors, internal auditors and Company financial management the risk assessments used in determining the audit scope.

 

(C)

 

Except as otherwise permitted by applicable regulations, pre-approve all audit and permitted non-audit services (including the fees and terms thereof) by the independent auditors. Establish policies and procedures to govern management's engagement of the independent auditors for any permitted non-audit services.

 

(D)

 

Review with management and the independent auditors the actual annual fees and expenses for the audit and for any other permitted services performed by the independent auditors. The Committee shall be directly responsible for approving the fees and expenses to be paid to the independent accountants.

 

(E)

 

Discuss with the independent auditors the matters included in the annual written communication that the independent auditors are required to submit to the Company by the Independence Standards Board. Such discussions should include any relationships between the independent auditors and the Company that may impact the objectivity and independence of the independent auditors. Recommend that the Board of Directors take action, if appropriate, in response to the independent auditors' communication.

 

(F)

 

At least annually, obtain and review a report by the independent auditors and consider, among other matters, the following:

 

the competency and qualifications of the individuals involved in the audit,

 

the quality of the audit process,

 

responsiveness and service levels,

 

appropriate audit firm executive involvement in the audit,

 

the firm's and the engagement team's independence with respect to all relationships between the independent auditor and the Company and its management,

 

the independent auditors' quality control procedures, and

 

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 government or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the independent auditors, and any steps taken to address any such issues.

 

 

2.

Annual Financial Statements and Audit Results

After the completion of each annual audit:

 

(A)

 

Review the Company's accounting policies and practices and the annual financial statements to be included in the Company's Annual Report on Form 10-K and the related Management's Discussion and Analysis of Results of Operations and Financial Condition with the Company's financial management and the independent auditors. Recommend to the Board of Directors whether the audited financial statements should be included in the Company's Form 10-K.

 

(B)

 

Meet with the independent auditors to review the results of their examination, including their opinion and any related comments. Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 and 90 relating to the conduct of the audit.

 

(C)

 

Secure the independent auditors' views about the appropriateness, not just the acceptability, of the Company's accounting policies and practices and the clarity of the financial disclosures used by management.

 

(D)

 

Secure the independent auditors' views about whether management's choices of accounting policies are conservative, moderate or aggressive and as to whether alternative choices of policies would present a materially different financial position and results of operations. Resolve any disagreements between the independent accountants and management.

 

(E)

 

Review with the independent auditors any audit problems or difficulties and management's response. Determine that no restrictions were placed by management on the scope of their examination or its implementation and that there was a free exchange of information.

 

 

3.

Quarterly Financial Statements and Press Releases

Review with the Company's financial management and independent auditors the quarterly financial statements to be included in the Company's quarterly reports on Form 10-Q and the related Management's Discussion and Analysis of Results of Operations and Financial Condition. Review and discuss with management the earnings press releases, and financial information and earnings guidance provided to securities analysts and ratings agencies. Review quarterly reports from the independent auditors required by applicable laws, regulations, or accounting standards.

 

 

4.

Internal Controls

 

 

(A)

 

Review with the independent auditors, the internal auditors and the Company's financial management the adequacy and effectiveness of the Company's internal controls and elicit any recommendations they may have for improvement.

 

 

 

 

 

 

 

(B)

 

Review the adequacy of the internal audit function, including a review of the scope and results of its program, and the organizational structure, budget, staffing and qualifications of the internal audit department.

 

 

(C)

 

Review any internal control deficiencies, disclosure policy deficiencies and management or employee fraud identified in connection with the Chief Executive Officer and Chief Financial Officer certifications provided to the SEC and with respect to Management's Report on Internal Control over Financial Reporting, which is included in the Annual Report on Form 10-K.

 

 

(D)

 

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

 

 

5.

Compliance Matters

Review the processes and procedures established by the Company periodically to ensure that the Company complies with applicable legal and regulatory requirements, and monitor, as the Committee determines to be appropriate under the circumstances, the Company's adherence to such requirements. Discuss with management the status and performance of the Company's compliance programs.

 

 

6.

External Communications

 

 

 

Oversee the Company's external communications policy.

 

 

7.

Conflicts of Interest    

Conduct a review of transactions or proposed transactions in which a member of the Board of Directors, an executive officer of the Company or a senior financial officer of the Company has an interest that conflicts with the Company's interests and make recommendations to the Board of Directors regarding any such transaction.

 

 

8.

Risk Management

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.

 

 

9.

Hiring Policies

Set clear hiring policies for employees or former employees of the independent auditors.

 

 

10.

Separate Meeting Sessions

Periodically, meet separately with management, with the internal auditors and with the independent auditors privately.

 

 

11.

Reporting

Report regularly to the Board of Directors with respect to the Committee's activities. Prepare the Committee report that is required by the SEC to be included in the Company's proxy statement.

 

 

12.

Charter

Annually review the adequacy of the Committee charter, and request and obtain the approval of the Board of Directors for any proposed changes.

 

 

13.

Annual Evaluation

Annually review the performance of the Committee.