2004 Committee Charter : N

CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
As amended as of February 3, 2004
I. Committee Composition and Meetings
The members of the Audit Committee (the ‘‘Committee'') shall, subject to appointments made as a result of
resignations, removals or retirements, be appointed annually by the Board of Directors (‘‘Board'') of Inco
Limited (the ‘‘Company''), taking into account the recommendations made by the Corporate Governance and
Nominating Committee with respect to who should serve on the Committee. The Board shall annually designate a
Chair of the Committee from among the members of the Committee. The Committee shall consist of at least four
Directors, each of whom shall satisfy all applicable stock exchange and other regulatory requirements and the
Guidelines of the Board of Directors on Corporate Governance with respect to (a) having no material
relationships with the Company and who are otherwise ‘‘independent'' and (b) their financial knowledge, literacy
and expertise and other requisite qualifications. The requirements for qualification of members of the Committee
shall be determined and interpreted by the Board from time to time based upon recommendations by the
Corporate Governance and Nominating Committee.
No Director may serve as a member of the Committee if such Director serves on the audit committee of
more than two other public companies unless the Board determines that such simultaneous service would not
impair the ability of such Director to effectively serve on the Committee, and discloses this determination in the
Company's annual proxy circular and statement. No member of the Committee may receive directly or indirectly
any consulting, advisory or other compensatory fees or other payments from the Company other than (i) annual
retainer and meeting fees, which may be received in cash, common shares or deferred share units, and stock
options or any other in-kind consideration ordinarily payable to non-employee Directors for serving as a Director
and a chair and/or member of any committee of the Board and (ii) other regular benefits that other non-employee
Directors receive.
The Committee shall hold at least four regularly scheduled meetings in each calendar year in person or by
conference call or by means of similar communications equipment hook-up and shall meet more frequently if
circumstances warrant, including convening a meeting to cover any matters at the request of the independent
auditors or the head of internal audit.
Attendance by at least three members of the Committee either in person or by conference call or by means
of similar communications equipment hook-up shall constitute a quorum for the transaction of any business that
may properly come before any meeting of such Committee. The head of internal audit shall serve as secretary of
the Committee and shall be responsible for preparing and circulating the agenda and all supporting and
supplementary material for each meeting and preparing the minutes of each meeting.
II. Function, Duties and Responsibilities
The purpose of the Committee is to assist the Board in its oversight of (a) the accounting and financial
reporting principles, policies, practices and procedures of the Company and its subsidiaries and affiliates, (b) the
adequacy of the systems of internal accounting control throughout the Company and its subsidiaries and affiliates,
(c) the quality, integrity and transparency of the Company's financial statements, (d) the independent auditors'
qualifications and independence, (e) the performance of the independent auditors and the Company's internal
audit function and (f) the Company's compliance with all legal and regulatory requirements with respect to
(i) financial reporting principles, policies, practices and procedures of the Company and its subsidiaries and
affiliates, (ii) the Company's financial statements, and (iii) the duties and responsibilities of the Committee. The
independent auditors and any other registered public accounting firm engaged pursuant to paragraph (A)(1)(b)
below shall report directly to the Committee. The head of the Company's internal audit function and the
Management of the Company is responsible for the preparation, presentation and integrity of the Company's
financial statements and for the effectiveness of internal control over financial reporting. Management of the
Company is also responsible for maintaining appropriate accounting and financial reporting principles and
policies and internal accounting controls and procedures designed to assure compliance with accounting
standards and all applicable laws and regulations. The Company's independent auditors are responsible for
planning and carrying out proper audits and reviews, including reviews of the Company's quarterly financial
statements prior to the filing of each quarterly report on Form 10-Q and any similar reporting or filing
requirements and procedures, and, in connection with the Company's annual financial statements, annually
auditing management's assessment of the effectiveness of internal control over financial reporting in accordance
with all legal and regulatory requirements, and other procedures. In fulfilling their responsibilities, it is
recognized that members of the Committee are not full-time employees of the Company and are not, and do not
represent themselves to be, performing the functions of accountants or auditors. As such, it is not the duty or
responsibility of the Committee or any of its members to conduct ‘‘field work'' or other types of auditing or
accounting reviews or procedures, and each member of the Committee shall be entitled reasonably to rely on (i)
the integrity of those persons and organizations within and outside the Company from whom the Committee
receives information and (ii) the accuracy of the financial and other information provided to the Committee by
such persons or organizations absent actual knowledge to the contrary (in which event any such occurrence shall
be promptly reported to the Board).
In assisting the Board in fulfilling its function of oversight, the Committee shall have the following duties
and responsibilities:
(A) With respect to the independent auditors:
(1) appoint, retain, terminate and oversee the work of (a) the independent auditors (subject to
nominating, or recommending to the Board for nomination of, the independent auditors to be
proposed for shareholder approval or ratification in any proxy circular or statement and the
approval of such nomination by shareholders) including, in each case, the resolution of
disagreements between management and the independent auditors regarding financial reporting,
and (b) any other registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing audit, review, attestation or similar services;
(2) pre-approve, or adopt appropriate procedures to pre-approve, all audit and permitted non-audit
services to be provided by the independent auditors, including all auditing and non-auditing
services deemed necessary or desirable to facilitate the Company's offering and issuance of
securities (which may involve having such auditors participate in due diligence sessions, prepare
comfort letters and agreed-upon procedures letters, and provide consents in connection with any
such offerings and issuances), and to consider whether the independent auditors' provision of
particular non-audit services to the Company is compatible with maintaining the independence
of the independent auditors;
(3) ensure that the independent auditors prepare and deliver annually the Annual Independent
Auditors' Statement, as defined below (it being understood that the independent auditors are
responsible for the accuracy and completeness of this Statement) and discuss with the
independent auditors any relationships or services disclosed in such Statement that may impact
the quality of audit services or the objectivity and independence of the independent auditors;
(4) obtain from the independent auditors in connection with any audit relating to the Company's
annual audited financial statements a timely report relating to the Company's annual financial
statements which describes all critical accounting policies and practices used, all alternative
treatments within generally accepted accounting principles for policies and procedures related
to material items that have been discussed with management, the ramifications of the use of
such alternative treatments, and the treatment preferred by the independent auditors, and any
material written communications between the independent auditors and management, such as
any ‘‘management'' letters or schedule of unadjusted differences;
(5) review and evaluate the qualifications, performance and independence of the lead audit partner
and other key members of the audit team of the independent auditors, taking into account the
opinions of management and the Company's internal audit personnel in assessing the qualifications,
performance and independence of such personnel of the independent auditors;
(6) discuss with management the timing and process for implementing the rotation of the lead audit
partner, the concurring partner and any other active audit engagement team partner of the
independent auditors, and to consider whether there should be a regular rotation of the
independent auditors themselves;
(7) obtain, and review and evaluate, the independent auditors' annual formal written statement (the
‘‘Annual Independent Auditors' Statement'') addressing or describing at least the following;
(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 independent auditors, or
by any inquiry or investigation by governmental 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 deal with any such issues; and (c) all relationships
between the independent auditors and the Company, including each permitted non-audit service
provided to the Company and at least all of the matters set forth in Independence Standards
Board Standard No. 1 and any other similar standards or other requirements applicable to such
auditors;
(8) obtain, and review and evaluate, at least annually the independent auditors' formal and
appropriately detailed written statement of its fees billed for each of the last two fiscal years
covering each of the following categories of services rendered by the independent auditors:
(a) the audit of the Company's annual financial statements for those fiscal years and the reviews
of the financial statements included in the Company's Quarterly Reports on Form 10-Q for
those fiscal years and any other services that are normally provided by the independent auditors
in connection with statutory and regulatory filings or engagements; (b) assurance and related
services not included in clause (a) that are reasonably related to the performance of the audit or
review of the Company's annual and quarterly financial statements; (c) tax compliance, tax
consulting and tax planning services, in the aggregate and by each service; and (d) all other
products and services provided or rendered by the independent auditors for those fiscal years, in
the aggregate and by each product or service; and
(9) obtain from the independent auditors assurance that their audit was conducted in a manner
consistent with Section 10A – Audit Requirements of the U.S. Securities Exchange Act of 1934,
as amended, and all applicable rules and regulations thereunder, and any corresponding
legislation or rules and regulations applicable to the Company, which sets forth certain
procedures to be followed in any audit of financial statements required under such legislation
and rules and regulations.
(B) With respect to accounting principles, financial reporting principles, policies, practices and procedures,
and internal control over financial reporting:
(1) advise management, the head of internal audit and the independent auditors that they are
expected to provide to the Committee a timely analysis of significant issues and practices
relating to accounting principles and policies, financial reporting and internal control over
financial reporting;
(2) consider any reports or communications (and management's and/or the internal audit department's
responses thereto) submitted to the Committee by the independent auditors required by
or referred to in Statement on Auditing Standards No. 61, ‘‘Communication with Audit
Committees'' (as codified by AU Section 380), as such Statement may be modified or
supplemented, and any other similar standards or requirements, as such other standards or
requirements may be modified or supplemented from time to time;
(3) meet with management of the Company, the independent auditors and, if appropriate, the head
of internal audit, to:
) discuss the planned scope of the annual audit by the independent auditors and (a) the annual
financial statements (including the notes thereto) and related financial material and the
independent auditors' report and opinion to be included in the Company's Annual Report to
Shareholders, Annual Report on Form 10-K, Annual Information Form and any other
similar filings with regulatory agencies, stock exchanges and other bodies as may be
required, (b) the quarterly financial statements of the Company prior to their inclusion in any
Quarterly Report on Form 10-Q and any similar filings to be made with any regulatory
agencies, stock exchanges or other bodies, (c) the Company's disclosures under ‘‘Management's
Discussion and Analysis of Financial Condition and Results of Operations'' set forth
in any report including the Company's quarterly or annual financial statements, and (d) the
results of the Company's periodic surveys relative to compliance with the Company's
‘‘Conflicts of Interest'' policy statement and ‘‘Guidelines on Business Conduct'', and the
results of compliance with any other codes, surveys, policy statements, guidelines and
policies covering appropriate standards of conduct reported on to the Committee, and any
amendments to such policy statements, guidelines or policies, and any other matters
covering such policy statements, guidelines and policies brought to the attention of the
Committee by management of the Company;
) discuss any significant matters arising from any audit, including any audit problems or
difficulties, whether raised by management, the head of internal audit or the independent
auditors, relating to the Company's financial statements;
) discuss any difficulties the independent auditors encountered in the course of the audit,
including any restrictions on their activities or access to requested information and any
significant disagreements with management;
) discuss any ‘‘management'' or ‘‘internal control'' letters issued, or proposed to be issued, by
the independent auditors to the Company;
) review the form of report and opinion the independent auditors propose to render to the
Board and shareholders; and
) discuss, as appropriate, the following: (a) any major issues regarding accounting principles
and financial statement presentations, including any significant changes in the Company's
selection or application of accounting principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps adopted in light of material control
deficiencies; (b) analyses prepared by management of the Company and/or the independent
auditors 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 generally accepted accounting principles on the financial statements; and (c) the
effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the
financial statements of the Company.
(4) inquire of the Company's Chief Executive Officer and Chief Financial Officer as to the
existence of any significant deficiencies or material weaknesses in the design or operation of
internal control over financial reporting that are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial information and as to the
existence of any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company's internal control over financial reporting;
(5) (a) discuss guidelines and policies governing the process by which senior management of the
Company and the relevant departments of the Company assess and manage the Company's
exposure to risk, and discuss the Company's major financial risk exposures and the steps
management has taken to monitor and control such exposures and (b) review and evaluate the
quarterly reports on the Company's risk management policies and procedures;
(6) discuss with the Chief Financial Officer generally (representing a discussion of the general
types of information to be disclosed) the substance of all financial results press releases,
including the transparency of such results and the financial measures included in such releases
that are not in accordance with generally accepted accounting principles and earnings and
related guidance provided in such releases, and the types of presentations made to the
investment community and credit rating agencies;
(7) 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 Company employees of concerns regarding questionable
accounting or auditing matters relating to the Company;
(8) establish hiring policies for employees or former employees of the independent auditors;
(9) meet with management of the Company, the head of internal audit, and/or the independent
auditors to review and discuss (a) any significant matters arising from any audit or report or
communication, whether raised by management, the internal audit staff or the independent
auditors, relating to the Company's financial statements, (b) significant changes to the
Company's auditing and accounting principles, policies, controls, procedures and practices
proposed or contemplated by the independent auditors, the internal audit staff or management of
the Company, (c) significant risks and exposures, if any, relating to the integrity of the
Company's financial information and systems of internal accounting control, and the steps taken
to monitor and minimize such risks and exposures and (d) critical security and other measures
implemented or to be considered relating to the integrity of the Company's financial
information;
(10) discuss with the Company's General Counsel any significant legal, compliance or regulatory
matters that may have a material effect on the Company's financial statements, business or
compliance policies, including material notices to or inquiries received from governmental or
other similar agencies or bodies;
(11) with respect to the systems of internal accounting control throughout the Company, review and
evaluate (i) the adequacy of the quality of such systems after consultation with appropriate
members of management of the Company, the head of internal audit and the independent
auditors, (ii) management's performance in maintaining and improving these systems and
whether management is setting the appropriate control culture by communicating the importance
of internal control and management of risks and (iii) recommendations made by the
independent auditors and the head of internal audit relative to improvements to these systems;
(12) review and evaluate the results of any special investigation undertaken by the Committee at the
request of the Board; and
(13) review and evaluate the integrity of the Company's policies, procedures, practices and systems
covering the security of Company information stored, maintained and transmitted electronically
or by or through any electronic device and any significant breaches in such policies, procedures,
practices and systems.
(C) With respect to the internal audit function:
(1) review the appointment and replacement of the head of internal audit and any other key
personnel of this function and the coordination of responsibilities between the Company's
independent auditors and the internal audit function;
(2) review and discuss with the independent auditors and management the internal audit function's
responsibilities, budget and staffing, performance and effectiveness and any recommended
changes in the planned scope of the internal audit function; and
(3) advise the head of internal audit that he or she is expected to provide to the Committee
summaries of and, as appropriate, copies of, all significant reports to management prepared by
the internal audit function and management's responses thereto.
(D) With respect to its responsibilities involving its meetings and its reporting and related matters:
(1) prepare any report or other disclosures from the Committee, including any recommendations of
the Committee, required by the rules of the U.S. Securities and Exchange Commission or any
other applicable regulatory agency or body or stock exchange, to be included in the Company's
annual proxy circular and statement or any other reports, disclosures or filings required by the
Committee with any other regulatory agencies or bodies or stock exchanges;
(2) review this Charter at least annually and recommend any changes thereto to the Board;
(3) report its activities to the Board on a regular basis and make such recommendations with respect
to matters relating to the Committee as the Committee may deem necessary or appropriate;
(4) prepare and review with the Board an annual performance evaluation of the Committee, which
evaluation shall compare the performance of the Committee with the requirements of this
Charter and recommend to the Board any improvements or changes to this charter deemed
necessary or desirable by the Committee. Such performance evaluation by the Committee shall
be conducted in such manner as the Committee deems appropriate and may take the form of an
oral report by the Chair of the Committee or any other member of the Committee designated by
the Committee to make such report;
(5) during its regularly scheduled meetings, and any special meetings as it deems necessary or
appropriate, meet privately (in executive session) with the independent auditors and the head of
the internal audit; the Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditors, or any advisors or experts the Committee
has retained, to attend all or any part of any meeting of the Committee or to meet with any
members of, or advisors or experts to, the Committee; the Committee shall also meet separately
to discuss any matters that the Committee or any of these persons or firms believe should be
discussed with the Committee and/or management privately; and
(6) the Chair of the Committee shall review and approve at least annually the business expenses
incurred by the Chief Executive Officer.
III. Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its functions, duties and responsibilities to
a subcommittee of the Committee. The Committee may, in its discretion, delegate to one or more of its members
the authority to pre-approve any audit or permitted non-audit services to be performed by the independent
auditors, provided that any such approvals are presented to the Committee for ratification at its next scheduled
meeting.
IV. Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to fully discharge its functions, duties and
responsibilities, including the authority to select, retain, terminate and approve the fees of and other terms of
retention of special or independent counsel, accountants, auditors or other experts and advisors as it deems
necessary or appropriate, in connection with its functions, duties and responsibilities without seeking approval of
the Board or management. The Committee shall have unrestricted access to management, employees and
information it believes will be relevant in carrying out its functions, duties and responsibilities.
The Company shall provide for appropriate funding as determined by the Committee, in its capacity as a
formal committee of the Board, for payment of:
(1) compensation to the independent auditors and any other public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit, review or attestation services
for the Company;
(2) compensation of any counsel, experts or advisors retained by the Committee; and
(3) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its
functions, duties and responsibilities.