The Audit Committee (the "Committee'') shall report to and assist
the Board of Directors (the "Board'') of Johnson & Johnson (the
"Company'') by providing oversight of the financial management,
independent auditors and financial reporting procedures of the
Company, as well as such other matters as directed by the Board or
Membership of the Committee
1. The Committee shall be comprised of not less than three
members of the Board.
2. The composition of the Committee shall meet all the
requirements of the Audit Committee Policy of the New York Stock
Exchange, which, among other things, prohibits any officer or
employee of the Company from serving on the Committee.
3. Each Committee member shall have no other relationship to the
Company that may interfere with the exercise of his or her
independence from management and the Company, including the receipt
from the Company of any compensation other than directors' fees and
other compensation related to their service as a director.
4. Each Committee member shall be financially literate or shall
become financially literate within a reasonable period of time after
appointment to the Committee.
Meetings of the Committee
1. The Committee will meet formally at least four times each
2. The Committee will hold separate private meetings at least
twice each fiscal year with each of the Vice President of Internal
Audit, a representative of the independent auditors, the General
Counsel and the Chief Financial officer.
The Company's management is responsible for preparing the
Company's financial statements and the independent auditors are
responsible for auditing these financial statements. The Committee
is responsible for assisting the Board in overseeing the conduct of
these activities by the Company's management and the independent
auditors, and the integrity of the Company's financial statements.
The financial management and the independent auditors of the Company
have more time, knowledge and more detailed information on the
Company than do Committee members. Consequently, in carrying out its
oversight responsibilities, the Committee is not providing any
expert or special assurance as to the Company's financial statements
or any professional certification as to the independent auditors'
work. The Committee is also responsible for preparing the Report of
the Audit Committee that SEC rules require be included in the
Company's annual proxy statement.
In carrying out its oversight responsibilities, the Committee
shall perform the following functions:
Oversight of Independent Auditors.
In the course of its oversight of the independent auditors as
provided under this Charter, the Committee will be guided by the
premise that the independent auditors are ultimately accountable to
the Board and the Committee.
1. The Committee, subject to any action that may be taken by the
full Board, shall have the ultimate authority and responsibility to
appoint, retain, compensate, evaluate and, when appropriate,
terminate the independent auditors. This responsibility includes
resolving disagreements between management and the independent
auditors regarding financial reporting. The Committee shall assist
the Board in its oversight of the qualifications, independence and
performance of the independent auditors.
2. The Committee shall:
(i) receive from the independent auditors annually, a formal
written statement delineating the relationships between the
auditors and the Company consistent with Independence Standards
Board Standard Number 1;
(ii) discuss with the independent auditors the scope of any
such disclosed relationships and their impact or potential impact
on the independent auditors' independence and objectivity; and
(iii) recommend that the Board take appropriate action in
response to the independent auditors' report to satisfy itself of
the auditor's independence.
3. The Committee shall review and approve the original proposed
scope of the annual independent audit of the Company's financial
statements and the associated engagement fees, as well as any
significant variations in the actual scope of the independent audit
and the associated engagement fees.
4. The Committee shall set hiring policies for employees or
former employees of the independent auditors.
5. At least annually, the Committee shall obtain and review a
report by the independent auditors describing: the firm's internal
quality-control procedures; 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, respecting one or more
independent audits carried out by the firm, and any steps taken to
deal with any such issues; and (to assess the auditor's
independence) all relationships between the independent auditors and
6. The Committee shall review with the independent auditors any
difficulties the auditors encountered in the course of the audit
work, including restrictions on the scope of work or access to
requested information, and any significant disagreements with
Oversight of Internal Auditors.
The Committee shall review and discuss with management and the
1. The quality and adequacy of the Company's internal accounting
2. The organization of the internal audit department, the
adequacy of its resources and the competence and performance of the
internal audit staff.
3. The audit risk assessment process and the proposed scope of
the internal audit department for the upcoming year and the
coordination of that scope with independent auditors.
4. Results of the internal auditors' examination of internal
controls including summaries of inadequate reports issued and/or
management improprieties together with management's response
Oversight of Management's Conduct of the Company's Financial
1. Audited Financial Statements. The Committee shall
discuss with management and the independent auditors the audited
financial statements to be included in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed
prior to the filing of Form 10-K) and review and consider with the
independent auditors the matters required to be discussed by the
applicable Statement of Auditing Standards ("SAS''). Based on these
discussions, the Committee will advise the Board of Directors
whether it recommends that the audited financial statements be
included in the Annual Report on Form 10-K (or the Annual Report to
2. Interim Financial Statements. The Committee, through
its Chairman or the Committee as a whole, will review with
management and the independent auditors, prior to the filing
thereof, the Company's interim financial results to be included in
the Company's quarterly reports on Form 10-Q and the matters
required to be discussed by the applicable SAS. The Committee will
also discuss the Company's annual audited financial statements and
quarterly financial statements with management and the independent
auditors, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
3. Financial Reporting Practices. The Committee shall
(i) Changes in the Company's accounting policies and practices
and significant judgments that may affect the financial results.
(ii) The nature of any unusual or significant commitments or
contingent liabilities together with the underlying assumptions
and estimates of management.
(iii) The effect of changes on accounting standards that may
materially affect the Company's financial reporting practices.
4. Financial Information Disclosure. The Committee shall
in a general manner discuss earnings press releases, as well as the
types of financial information and earnings guidance that are given
to analysts and rating agencies.
5. Risk Assessment. The Committee shall discuss with
management the guidelines, policies and processes relied upon and
used by management to assess and manage the Company's exposure to
Assist the Board in Oversight of the Company's Compliance
with Policies and Procedures Addressing Legal and Ethical Concerns.
1. The Committee shall review and monitor, as appropriate:
(i) Results of compliance programs, including the Company's
Policy on Business Conduct.
(ii) Litigation or other legal matters that could have a
significant impact on the Company's financial results.
(iii) Significant findings of any examination by regulatory
authorities or agencies, in the areas of securities, accounting or
tax, such as the Securities and Exchange Commission or the
Internal Revenue Service.
(iv) The Company's disclosure controls and procedures.
2. By approving and adopting recommendations of management, the
Committee shall ensure that procedures have been established for the
receipt, retention and treatment of complaints from Company
employees on accounting, internal accounting controls or auditing
matters, as well as for the confidential, anonymous submissions by
Company employees of concerns regarding questionable accounting or
3. The Committee shall report regularly to the Board on its
meetings and discussions and review with the Board significant
issues or concerns that arise at Committee meetings, including its
evaluation of the independent auditors.
4. The Committee shall conduct an annual evaluation of its
performance in fulfilling its duties and responsibilities under this
5. The chairman or any one or more members of the Committee, as
designated by the Committee, may act on behalf of the Committee.
6. The Committee shall have authority and appropriate funds to
retain and consult with outside legal, accounting or other advisors
as the Committee may deem appropriate.
7. The adequacy of this Charter shall be reviewed by the
Committee on an annual basis. The Committee will recommend to the
Board any modifications to this Charter, which the Committee deems
appropriate, for approval by the Board.