MAF BANCORP, INC.
Audit Committee of the
Board of Directors
(approved by the
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the board in fulfilling its oversight responsibilities. The Audit Committee’s primary duties and responsibilities are to:
· · Annually appoint the Company’s independent auditors who shall report solely to the Audit Committee.
· · Monitor the integrity of the company’s financial reporting process and systems of internal controls regarding finance, accounting, and legal and regulatory compliance.
· · Provide oversight regarding presentation of the Company’s financial statements and review the transparency and quality of the Company’s financial reporting.
· · Encourage adherence to, and continuous improvement of, the company’s policies, procedures and practices.
· · Monitor the qualifications, independence and performance of the company’s independent auditors and internal auditing department. The Audit Committee shall have sole authority to hire and fire the independent auditors.
· · Provide an avenue of communication among the independent auditors, management, the internal auditing department, and the Board of Directors.
The Internal Audit Department will report to the Audit Committee. The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, utilizing the Internal Audit Department or Security Department. In addition, the Audit Committee has the ability to retain, at the company’s expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties. The Audit Committee may request any officer or employee of the company or the company’s outside counsel or independent auditor to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee. The Audit Committee will report its findings to the Board of Directors.
II. Audit Committee Composition, Meetings and Manner of Acting:
Audit committee members shall meet the independence and experience requirements of The Nasdaq National Market (“Nasdaq”) as well as the rules and regulations promulgated by the Securities and Exchange Commission (the “SEC”). The Audit Committee shall be comprised of three or more directors appointed by the Board of Directors upon the recommendation of the nominating committee, each of whom shall be independent non-executive directors, free from any relationship that would interfere with the exercise of his or her independent judgment. In accordance with the rules and regulations of Nasdaq and the SEC, and except as so provided therein, members of the Audit Committee (including their immediate family members) may not (1) accept any consulting, advisory or other compensatory fees from the company, except in his or her capacity as a member of the Board of Directors or (2) be an affiliate of the company.
All members of the Audit Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, and, to the extent required by Nasdaq, at least one member of the Audit Committee shall be an “ audit committee financial expert” as defined by the SEC.
A majority of the members of the Audit Committee present (in person or by telephone) at any meeting of the Audit Committee shall constitute a quorum, and approval by a majority of the quorum is necessary for Audit Committee action. If an Audit Committee chair is not present, or at any time that one is not appointed by the Board, the members of the Audit Committee may designate a chair by majority vote of the Audit Committee members. The Audit Committee shall meet at least four times annually, or more frequently as circumstances dictate. The Audit Committee chair shall prepare and/or approve an agenda in advance of each meeting. The Audit Committee should meet privately in separate executive session at least annually with each of management, the director of the internal auditing department, the independent auditors, and as a committee with all of these groups to discuss any matters that the Audit Committee or each of these groups believes should be discussed. In addition, the Audit Committee will communicate with management and the independent auditors quarterly to review the company’s interim financial statements and significant findings based upon the auditor’s limited review procedures regarding the interim financial statements to be included in the company’s Quarterly Report on Form 10-Q.
III. Audit Committee Responsibilities and Duties
1. 1. Review with management and the independent auditors the company’s annual audited financial statements prior to filing or distribution and the company’s quarterly financial results prior to the release of earnings and the company’s quarterly financial statements prior to filing or distribution. Review should include discussion with management and the independent auditors of any (1) significant issues regarding accounting principles, practices, and judgments made in connection with the preparation of the company’s annual audited financial statements, (2) significant changes in the selection or application of the company’s accounting principles (3) significant and unusual transactions, (4) special steps adopted in light of material control deficiencies, (5) any items required to be communicated in accordance with SAS 61 (see item 13) and (6) the effect of off-balance sheet structures on the company’s financial statements.
2. 2. Obtain and review a report from the independent auditors as required by the SEC at least quarterly regarding: (1) all critical accounting policies; (2) all alternative treatments of financial information under GAAP that have been discussed with management, ramifications of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; and (3) other material written communications between the independent auditors including any management letter or schedule of unadjusted differences.
3. 3. On a quarterly basis, review disclosures made to the Audit Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of the company’s disclosure controls and procedures and/or internal controls, or material weaknesses therein, and any fraud involving management or other employees who have a significant role in the company’s internal controls.
4. 4. On an ongoing basis, in consultation with management, the independent auditors and the internal auditors, consider the integrity of the company’s financial reporting processes and controls. Discuss significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures. Review significant findings prepared by the independent auditors and the internal auditing department together with management’s responses.
5. 5. On an ongoing basis, discuss with management and the independent auditors the impact or potential impact of regulatory and accounting initiatives and proposals on the company’s financial statements.
6. 6. Review and reassess the adequacy of this charter at least annually in light of any changes in regulatory requirements or authoritative guidance and recommend any proposed changes to the Board of Directors for approval and have the document published in accordance with SEC regulations.
7. 7. The independent auditors are ultimately accountable to the Audit Committee and the Board of Directors. The Audit Committee shall select, and shall have sole responsibility for the appointment, hiring and firing of the independent auditors. Prior to appointment, the Audit Committee shall review and evaluate the independence and performance of the independent auditors (including the lead partner of the independent audit team).
8. 8. The Audit Committee shall pre-approve all audit fees and terms and all audit, review or attest engagements and any permissible non-audit services provided by the independent auditors, subject to de minimus exceptions contained in the Securities Exchange Act of 1934 (the “Exchange Act”), and shall consider whether these services are compatible with the auditor’s independence. Any engagement of the independent auditors must either be approved in advance by the Audit Committee or be entered into pursuant to pre-approval policies and procedures established by the Audit Committee (which policies and procedures must be detailed as to the particular service, may not include a delegation of the Audit Committee’s responsibilities to management and shall require that the Audit Committee be informed of each service to be so provided).
9. 9. On at least an annual basis, the Audit Committee shall request and ensure receipt of a formal written statement from the independent auditors regarding their independence and internal quality control procedures and should review and discuss with the independent auditors all significant relationships they have had or have with the Company that could impair the auditors’ independence and the scope of any non-audit services being performed for the Company by the independent auditors.
10. 10. Ensure the rotation of the lead partner and the concurring partner every five years and the rotation of any other audit partners (as defined by the SEC) on the independent audit team every seven years, as required by law.
11. 11. Establish policies governing the Company’s hiring of employees or former employees of the independent auditors who participated in any capacity in the audit of the Company in compliance with all relevant rules and regulations.
12. 12. Prior to the annual audit, review the independent auditor’s audit plan and discuss with the independent auditors the planned scope, staffing, locations, reliance upon management and internal audit, and general audit approach.
13. 13. Prior to release of year-end earnings, discuss the results of the audit with the independent auditors. Discuss certain matters required to be communicated to Audit Committee by the independent auditors (1) in accordance with SAS 61, including significant accounting policies, adjustments, disagreements with management, management judgments and significant estimates, and difficulties in performing the audit and (2) in compliance with the provisions of Section 10A of the Exchange Act, pertaining to information detected during the course of the audit indicating that any illegal act has or may have occurred .
14. 14. Consider the independent auditors’ judgments about the quality and appropriateness of the company’s accounting principles as applied in its financial reporting and the adequacy of internal controls that could significantly affect the company’s financial statements.
Internal Audit Department and Legal Compliance
15. 15. Review with management and the independent auditors the budget, plan, changes in plan, activities, organizational structure, and qualifications of the internal audit department, and any recommended changes in the scope of the internal audit.
16. 16. Review the appointment, performance and replacement of the senior internal audit executive. Approve the compensation plan for the senior internal audit executive.
17. 17. Review reports to management prepared by the internal audit department together with management’s response and follow-up to these reports.
18. 18. Review at least quarterly the adequacy of the company’s internal controls.
19. 19. Discuss any difficulties encountered in the course of internal audits, including any restrictions on the scope of work or access to information.
20. 20. On at least an annual basis, review with management and the company’s counsel, any legal or regulatory matters that could have a significant impact on the organization’s financial statements, the company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.
Other Audit Committee Responsibilities
21. 21. Annually prepare a report to shareholders regarding the performance of the Audit Committee as required by the SEC to be included in the company’s annual proxy statement filed with the SEC.
22. 22. To the extent the Audit Committee deems reasonably necessary or appropriate, the Audit Committee has the authority to engage independent legal, accounting or other advisers.
23. 23. Establish procedures for (1) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (2) the confidential and anonymous submission by employees of concerns regarding accounting, internal accounting controls or auditing matters. All such procedures will at all times comply with all provisions of law, regulations or company policy that prohibit discipline of or discrimination against employees who report what they reasonably believe to be violations of any law, rule or regulation applicable to the company.
24. 24. Review procedures adopted by management to assure that any related party transactions and potential conflicts of interest of any director or executive officer of the Company will be brought to the attention of the Audit Committee in advance. Review and approve or disapprove, in advance, any such related party transactions or potential conflicts of interest.
25. 25. Perform any other activities consistent with this charter, the company’s by-laws, and governing law, as the Audit Committee or the Board of Directors deems necessary or appropriate.
26. 26. Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities.
27. 27. Periodically review codes of conduct adopted by the Company and ensure that management has established a system to enforce adherence to its codes of conduct. As part of its oversight responsibilities with respect to the company’s compliance with legal and regulatory requirements, obtain reports as deemed appropriate from management, the company’s internal audit department and the independent auditors regarding the company’s compliance procedures and conformity with applicable legal requirements and the company’s code of conduct.
28. 28. Annually perform self-assessment of Audit Committee (and Audit Committee member) performance.
LIMITATION OF AUDIT COMMITTEE’S ROLE:
While the Audit Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor.