The Audit Committee is a committee of the Board of Directors of IDEXX
Laboratories, Inc. Its primary function is to assist the Board in
fulfilling its oversight responsibilities by overseeing the accounting,
internal control and financial reporting processes and the audit process of
The Company's management is responsible for preparation, presentation
and integrity of the Company's financial statements; the appropriateness of
the accounting principles and reporting policies that are used by the
Company; establishing and maintaining disclosure controls and procedures
(as defined in Rule 13a–15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")); establishing and maintaining the
effectiveness of disclosure controls and procedures (as defined in Rule
13a–15(f) of the Exchange Act); evaluating the effectiveness of internal
control over financial reporting; and evaluating any change in internal
control over financial reporting that has materially affected, or is
reasonably likely to materially affect, internal control over financial
reporting. The independent auditors are responsible for auditing the
Company's financial statements and for reviewing the Company's unaudited
interim financial statements as well as expressing an opinion on (i)
management's assessment of the effectiveness of internal control over
financial reporting and (ii) the effectiveness of internal control over
financial reporting. The authority and responsibilities set forth in this
Charter do not reflect or create any duty or obligation of the Audit
Committee to plan or conduct any audit, to determine or certify that the
Company's financial statements are complete, accurate, fairly presented, or
in accordance with generally accepted accounting principles
("GAAP") or applicable law, or to guarantee the independent
The Audit Committee will consist of at least three members of the Board
of Directors. Each member of the Audit Committee shall be independent as
defined by NASDAQ rules, meet the criteria for independence set forth in
Rule 10A–3(b)(1) under the Exchange Act (subject
to the exemptions provided in Rule 10A–3(c)), and not have participated in
the preparation of the financial statements of the Company or any current
subsidiary of the Company at any time during the past three years. At least
one member of the Audit Committee shall be an "audit committee
financial expert" as defined under the rules and regulations of the
U.S. Securities and Exchange Commission ("SEC"). Each member of
the Audit Committee must be able to read and understand fundamental
financial statements, including the Company's balance sheet, income
statement, and cash flow statement, at the time of his or her appointment
to the Audit Committee. The Nominating and Governance Committee of the
Board of Directors shall determine annually whether each member of the
Audit Committee meets the requirements of this paragraph.
Audit Committee members and the Committee chairman shall be designated
by the full Board of Directors upon recommendation of the Nominating and
Governance Committee. The Board shall elect the Chairman of the Committee.
The Chairman of the Committee shall periodically report to the Board
regarding the activities of the Committee.
In meeting its responsibilities, the Audit Committee shall perform the
A. Oversight of the
Independent Auditors and Audit Process:
The Audit Committee is solely responsible
for appointing, evaluating, retaining, compensating and, when necessary,
terminating the engagement of the independent auditors. The Audit Committee
is empowered without further action of the Board, to cause the Company to
pay the compensation of the independent auditors established by the Audit
The Audit Committee shall pre-approve all
services associated with the annual audit to be provided to the Company by
the independent auditor or other firms performing services on behalf of the
independent auditor. The Audit Committee shall approve all other services
(review, attest and non-audit) to be provided to the Company by the
independent auditor; provided, however, that de minimis non-audit services may
instead be approved in accordance with applicable SEC rules.
The Audit Committee shall oversee the work
of the independent auditors, who shall report directly to the Audit
Committee. Such oversight shall include resolution of disagreements between
management and the independent auditors regarding financial reporting.
The Audit Committee shall provide an open
avenue of communication between the independent auditors and the Board of
The Audit Committee shall gain assurance, in
writing, on the independence of the independent auditors, consistent with
Independence Standards Board Standard No. 1. It is the responsibility of
the Audit Committee to insure the objectivity and independence of the
independent auditors and ensure that there are no conflicts of interest
involving the independent auditors.
The Audit Committee shall conduct an annual
review of the performance of the independent auditors, including a review
of (1) the background and performance of partners and managers assigned to
the Company's account, (2) quality control procedures established by the
independent auditors, and (3) 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, and
any steps taken to deal with any such issues.
The Audit Committee shall set clear hiring
policies for employees or former employees of the independent auditors.
B. Oversight of
The Audit Committee shall coordinate the
Board of Directors' oversight of the Company's internal control over
financial reporting, disclosure controls and procedures and code of ethics.
The Audit Committee shall receive and review the reports of the Chief
Executive Officer and Chief Financial Officer required by Rule 13a-14 of
the Exchange Act.
The Audit Committee shall review the
charter, plans, activities, staffing and organizational structure of the
internal audit function and shall review and concur in the appointment,
replacement, reassignment, or dismissal of the Director of Internal
Auditing or person having similar responsibilities. The Audit Committee
will provide an open channel of communication between the internal auditors
and the Board.
The Audit Committee shall consider and
review with the internal auditors and management:
the objectivity, independence and
effectiveness of the internal auditors;
the internal audit risk assessment process,
audit scope and plans of the internal auditors;
the coordination of effort with the
independent auditors to assure completeness of coverage, reduction of
redundant efforts and the effective use of audit resources;
the quality and adequacy of the Company's
internal accounting controls; and
findings and recommendations of the independent auditors and internal
auditors together with management's responses thereto.
C. Oversight of the
Financial Reporting Process:
The Audit Committee shall consider and
review with management and the independent auditors prior to the filing of
each periodic report:
the Company's financial statements and
judgments of the independent auditors about
the quality of the Company's accounting principles as applied in its
financial reporting for its financial statements;
any significant events or transactions
occurring during the period being reported;
any changes in accounting estimates,
policies and practices, unusual or significant commitments or liabilities,
and legal and regulatory matters that may have a material impact on the
the reports to be filed with the SEC and
other published documents containing the Company's financial statements and
consider whether the information contained in these documents is consistent
with the information contained in the financial statements;
internal control matters required to be
communicated to the Committee by management, including all 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, and any allegation of fraud that involves management
or other employees who have a significant role in the Company's internal
the process used by management to evaluate
the effectiveness of disclosure controls and procedures and the results of
management's evaluation of such effectiveness; and
earnings press release.
The Audit Committee shall consider and
review with management and the independent auditors at the completion of
the annual audit examination:
Report provided by the independent auditors
on the following matters:
all critical accounting policies and
practices in use;
all alternative treatments of financial
information within GAAP that have been discussed with management,
ramifications of the use of such alternative treatments, and the treatment
preferred by the independent auditors; and
written communications between the independent auditors and management,
such as any management letter or schedule of unadjusted differences.
The independent auditors' audit of the
financial statements and report thereon, including any attestation report
on management's assessment of the internal control system.
The Audit Committee shall consider whether
it will recommend to the Board that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K.
The Audit Committee shall review and discuss
with the Company's management and independent auditor the Company's audited
financial statements, including the matters about which Statement on
Auditing Standards No. 61 (Codification of Statements on Auditing
Standards, AU �380)
D. Other Oversight
The Audit Committee shall maintain procedures
the receipt, retention, and treatment of
complaints regarding accounting, internal control and auditing matters; and
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
The Audit Committee shall periodically meet
independently and in separate executive sessions with the internal
auditors, the independent auditors, and management.
The Audit Committee shall prepare the report
required by the rules of the SEC to be included in the Company's annual
The Audit Committee shall report Audit
Committee actions to the Board of Directors with such recommendations, as
it may deem appropriate.
The Audit Committee is authorized to conduct
or instruct management to conduct investigations into any matters within
its scope of responsibilities. The Audit Committee shall be empowered to
retain independent counsel, accountants, or others to assist it in the
conduct of any investigation and the Company will provide appropriate
funding for payment for such services, as determined by the Committee.
The Audit Committee shall review all related
party transactions (defined as transactions required to be disclosed
pursuant to Item 404 of Regulation S-K) on an ongoing basis, and all such
transactions must be approved by the Audit Committee.
The Audit Committee shall discuss with
management the Company's major policies with respect to risk assessment and
risk management, including insurance coverage.
The Audit Committee shall meet as frequently
as required to fulfill the requirements of its charter or as circumstances
require. The Audit Committee will ask members of management or others to
attend the meeting and provide pertinent information as necessary.
The Audit Committee will perform such other
functions as assigned by law, NASDAQ regulation, the Company's charter or
by-laws, or the Board of Directors.
The Audit Committee shall review and update,
if necessary its charter at least annually.
The Audit Committee shall review the
structure and function of the Company's Finance organization at least
The Audit Committee shall periodically
review critical accounting topics or processes of the Company as determined
by the Chief Financial Officer, independent auditors or the Committee.