There shall be a
committee of the board of directors to be known as the audit committee. The
audit committee shall be composed of directors who are independent of the
management of the corporation and are free of any relationship that, in the
opinion of the board of directors, would interfere with their exercise of
independent judgment as a committee member. No committee member may,
directly or indirectly, within the last fiscal year, or will while a
member, accept, any consulting, advisory or other compensatory fee (other
than directors' compensation) from the Company or its subsidiaries.
Statement of Policy
The audit committee
shall have oversight responsibility in fulfilling the Board's
responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices of the
corporation, and the quality and integrity of the financial reports of the
corporation. In doing so, it is the responsibility of the audit committee
to maintain free and open communication between the directors, the
independent auditors, the internal auditors, and the financial management
of the corporation.
Each member of the audit
committee must have a working knowledge of corporate financial, accounting
and reporting practices. In addition the chairman of the audit committee
should, through education or experience, have (1) an understanding of U.S.
generally accepted accounting principles and their application to financial
statements, (2) experience in preparing, evaluating, or auditing financial
statements of a U.S. public company and in the use of estimates, accruals
and reserves, (3) experience with internal accounting controls, and (4) an
understanding of audit committee functions. The board of directors may
determine that a person meets the foregoing attributes if, in the board's judgment,
such person has expertise and experience similar to the attributes noted.
In carrying out its
oversight responsibilities, the audit committee believes its policies and
procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the
corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these
responsibilities, the audit committee will:
- Have sole authority to
appoint, compensate and oversee the independent auditors who will
audit the financial statements of the corporation and its
subsidiaries. The selected independent auditors shall report directly
to the committee.
- Review, on a periodic basis,
all relationships between the independent auditors and the corporation
in order to determine whether any such relationship has a likelihood
of compromising the auditor's independence and take action to ensure
that independence is maintained.
- Approve, in advance, the
engagement of and the fees to be paid to the independent auditor for
any function other than the audit, if the aggregate of such other fees
will amount to more than five percent (5%) of the approved audit
- Meet with the independent
auditors and financial management of the corporation to review and
determine the scope of the proposed audit for the current year and the
audit procedures to be utilized, and at the conclusion thereof, review
such audit, including any comments or recommendations of the
- Review with the independent
auditors, the company's internal auditor, and financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the corporation, and elicit any recommendations
for the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are desirable.
Particular emphasis should be given to the adequacy of such internal
controls to expose any payments, transactions, or procedures that
might be deemed illegal or otherwise improper. Further, the committee
periodically should review company policy statements to determine
their adherence to the appropriate standards.
- Review the internal audit
function of the corporation including the independence and authority
of its reporting obligations, the proposed audit plans for the coming
year, and the coordination of such plans with the independent
auditors. Ensure that the internal auditor reports findings directly
to the committee.
- Receive a summary of
findings from completed internal audits and a progress report on the
proposed internal audit plan, with explanations for any deviations
from the original plan.
- Review the financial statements
and notes contained in the corporation's quarterly and annual reports
filed on forms 10-Q and 10-K with management and the independent
auditors (together and separately) to determine that the independent
auditors are satisfied with the disclosure and content of the
financial statements to be presented to the shareholders. Any changes
in accounting principles should be reviewed.
- Provide sufficient
opportunity for the internal and independent auditors to meet with the
members of the audit committee without members of management present.
Among the items to be discussed in these meetings are the independent
auditors' evaluation of the corporation's financial, accounting, and
auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
- Review sufficiency of
accounting and financial human resources and succession planning
within the company.
- Submit the minutes of all
meetings of the audit committee to, or discuss the matters discussed
at each committee meeting with, the board of directors.
- Investigate any matter
brought to its attention within the scope of its duties, with the
power to retain outside counsel for this purpose if, in its judgment,
that is appropriate.
- Investigate and be
responsible for the resolution of any disagreements between management
and the independent auditor.
- Have in place procedures for
addressing complaints concerning auditing issues and procedures for
employees to anonymously submit their concerns regarding accounting or
- Review with the
corporation's counsel any legal matters that could have a significant
adverse impact on the corporation's financial statements and the
corporation's compliance with legal and regulatory requirements as
- Prepare the audit committee
report to be included in the corporation's annual proxy statement.
- Review the corporation's
policy and strategy regarding financial risk management.
- Set clear hiring policies
for employees or former employees of the independent auditors.