2003 Audit Charter: JCI

JOHNSON CONTROLS, INC.
BOARD OF DIRECTORS

AUDIT COMMITTEE

CHARTER

Mission Statement

The Audit Committee will assist the Board of Directors (the "Board") in fulfilling its oversight responsibilities regarding (i) the integrity of the Company's financial statements, (ii) the Company's process for financial reporting and monitoring compliance with laws and regulations, (iii) the independent accountant's qualifications and independence; (iv) the performance of the Company's internal audit function and independent accountant; (v) the Company's internal control system; and (vi) the Company's ethics policy. References in this charter to the independent accountant shall be deemed to include the registered public accounting firm following approval of the firm's registration by the Public Company Accounting Oversight Board. In performing its duties, the Committee will maintain an effective independent working relationship with the Board of Directors, management, the internal auditors and the independent accountant.

The Audit Committee will prepare the report required by the rules of the Securities and Exchange Commission (the "Commission") to be included in the Company's annual proxy statement. The Audit Committee charter will be included in the Company's website and at least triennially in the Company's annual proxy statement.

The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company's financial statements

Organization

The Audit Committee will consist of at least four members. Audit Committee members may not have a material relationship with the Company, as determined by the Board. All Audit Committee members must meet the independence, experience and expertise requirements of the New York Stock Exchange, Section 10A of the Securities Exchange Act of 1934 (the "Exchange Act"), the rules and regulations of the Commission and the Corporate Governance Guidelines applicable to the Company. Each member must possess a detailed understanding of the responsibilities of Committee membership as well as the Company's business, operations and risks. At least one member must have accounting or related financial management expertise. The Company will disclose in its periodic reports filed pursuant to Sections 13(a) or 15(d) of the Exchange Act whether or not (and if not, why not) the Audit Committee includes of at least one member who is an "audit committee financial expert" as defined by the rules of the Commission.

No member of the Audit Committee will receive compensation from the Company other than Director's and Committee member's fees. The Audit Committee will meet at least four times per year.

The members shall be elected to the Audit Committee by the Board, on the recommendation of the Corporate Governance Committee, annually or as necessary to fill vacancies in the interim. The Board of Directors shall designate one of the Committee members as chairperson. Audit Committee members may be replaced by the Board. Simultaneous service on the audit committees of more than two (2) other public companies will be reviewed by the Board for a determination, to be reported in the Company's annual proxy statement, that such service does not impair the effective service of Audit Committees members.

Roles and Responsibilities

Funding, Audit Committee Meetings and Reports to the Board

The Company will provide the Audit Committee with the appropriate funding to the extent the Audit Committee deems necessary or appropriate to exercise its authority, and for other ordinary administrative expenses that the Audit Committee determines are necessary or appropriate to carry out its duties. No Board approval shall be required for such funding. The Audit Committee shall obtain advice and assistance from independent legal, accounting or other advisors as it deems necessary to carry out its duties. The Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent accountant to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

The Audit Committee will meet with management, the internal auditors and the independent accountant in separate executive sessions at least quarterly and will make regular reports to the Board. Management will be asked to report whether significant findings and recommendations made by the internal auditors and the independent accountant have been addressed in a timely manner. Annually, the performance of the Audit Committee and the Audit Committee Charter will be reviewed by the members.

Internal Control

The Audit Committee will encourage management to communicate the importance of internal control and to ensure that all employees are aware of the Company's internal control policies and procedures. Further, the Audit Committee will review and discuss with management the implementation of internal control recommendations made by the internal auditors and the independent accountant. Additionally, the Audit Committee will periodically review with management the status of major information technology plans and their potential effect on the internal control environment.

Financial Reporting

The Audit Committee will review and discuss with management and the independent accountant the Company's accounting policies, which may be viewed, as critical, and review and discuss any significant changes. Significant accounting and reporting developments, including recent professional and regulatory pronouncements, as well as off-balance sheet structures, and their impact on the Company's financial statements will be reviewed and understood.

The Audit Committee will meet with management and the independent accountant to review and discuss the audited financial statements and the results of the audit. It will be determined whether the audited financial statements are complete and consistent with respect to information known to Audit Committee members, and based upon appropriate accounting principles. Further, the Committee will review the MD&A section of the annual report before its release and consider whether the information is adequate and consistent with Committee members' knowledge about the Company and its operations. Based on the review and discussions with management and the independent accountant, the Audit Committee will recommend to the Board of Directors whether the audited financial statements are appropriate for inclusion in the Company's Annual Report on Form 10-K.

The Audit Committee Chair, and such other members as wish, will meet (in person or by phone) with management and the independent accountant to review the quarterly operating results, and financial statements (including the MD&A section of the quarterly report), discuss the results against the prior year, discuss any significant variances from the financial plan and discuss the results of the independent accountant's review of the quarterly financial statements prior to the filing of the Company's Form 10-Q, including the results of the independent accountant's review of the quarterly financial statements.

The Audit Committee will discuss with management and the independent accountant significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including any significant changes in the Company's selection or application of accounting principles, any major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of any material control deficiencies, the development, selection and disclosure of critical accounting estimates and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Company's financial statements.

The Audit Committee will discuss with management the Company's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, and hold general discussion on financial information and earnings guidance provided to analysts and rating agencies.

The Audit Committee will 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.

Compliance Oversight

The Audit Committee will review and advise the Board with respect to the effectiveness of the Company's system for monitoring compliance with laws and regulations and with the Company's Ethics Policy and will periodically obtain any required reports and assurances from the independent accountant, management and the internal auditor.

Compliance with Company Ethics Policy

The Audit Committee will ensure that an Ethics Policy is formalized in writing and that management takes the necessary actions to disseminate the information and educate all employees. The program for monitoring compliance and updates from management and the Company's General Counsel regarding the annual ethics certification and training processes will be reviewed periodically.

The Audit Committee will establish procedures, for (i) the receipt, retention and treatment of complaints received from employees of the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding internal accounting controls, questionable accounting or auditing matters.

Internal Audit

The internal auditors' proposed audit schedule and plans will be approved annually. Internal audit activities and organizational structure of the internal audit function will be reviewed regularly.

Independent Accountant

The independent accountant reports directly to the Audit Committee. The Audit Committee shall be directly responsible for the appointment, retention, compensation, termination, and oversight of the work of the independent accountant (including resolution of disagreements between management and the independent accountant) for the purpose of preparing or issuing an audit report, performing other audit, review or attest services or related work. The Audit Committee shall have the sole authority to approve all audit engagement fees and terms.

The Audit Committee shall preapprove all auditing services and permitted non-audit services to be performed for the Company by the independent accountant in accordance with Section 10A(i) of the Exchange Act. Approvals of all fees paid to the independent accountant shall be disclosed in the Company's annual proxy statements and annual reports as required by Section 13(a) of the Exchange Act. In carrying out its duty to approve the fees and terms of the independent accountant, if the Audit Committee approves an audit service within the scope of engagement of the independent accountant, such audit service shall be deemed to have been preapproved. The Audit Committee may delegate its duties to preapprove auditing services and permitted non-audit services to its chairman or one or more other Audit Committee members.

At least annually, the Audit Committee will obtain and review a report by the independent accountant describing (a) the independent accountant's internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the independent accountant's, 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 independent accountant, (c) any steps taken to deal with any such issues and (d) all relationships between the independent accountant and the Company.

The Audit Committee will evaluate the qualifications, performance, and independence of the independent accountant, including considering whether the independent accountant's quality controls are adequate and whether the provision of permitted non-audit services is compatible with maintaining the independent accountant's independence. In making its evaluation, the Audit Committee shall take into account the opinions of management and the internal auditor. The Audit Committee's evaluation will include a review of the experience, qualifications and performance of the senior members of the independent accountant team, including the lead partner of the independent accountant. The Audit Committee will oversee the rotation of the lead (or coordinating) audit partner as required by law and will consider whether, in order to assure continuing independent accountant's independence, there should be regular rotation of the audit firm itself. The Audit Committee will present its conclusions regarding the independent accountant to the Board of Directors, and if so determined by the Audit Committee, recommend that the Board take additional action to satisfy itself of the qualifications, performance and independence of the independent accountant.

The Audit Committee will set policies for the Company's hiring of employees or former employees of the independent accountant, particularly in light of the prohibition on employment outlined in Section 10A(l) of the Exchange Act.

The Audit Committee will require the independent accountant to communicate whether or not it is aware of any reportable illegal acts.

The Audit Committee will discuss with the independent accountant matters related to the conduct of the audit as required in Statement on Auditing Standards No. 61. In particular, the Audit Committee will discuss quarterly reports from the independent accountants on:

(a) all critical accounting policies and practices to be used;

(b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; and

(c) other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.

The Audit Committee will discuss the following with independent accountants:

(a) the adoption of, or changes to, the Company's significant auditing and accounting principles and practices as suggested by the independent accountant, internal auditors or management;

(b) the management letter provided by the independent accountant and the Company's response to that letter; and

(c) any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.

Other Responsibilities

In furtherance of the objectives reflected in this Audit Committee Charter, the Audit Committee will adopt, to the extent that it deems necessary or appropriate, Audit Committee Guidelines.

The Company officers who are required by law to certify the Company's annual or quarterly reports will disclose to the Audit Committee and to the independent accountants the information that is required to be disclosed to them by Section 302 of the Sarbanes-Oxley Act of 2002.

The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee shall annually review its own performance.

Effective July 2003

Procedures under development with anticipated publication before December 2003.