I. Purpose; Statement of Policy
2004 Committee Charter : MAR
A. The purpose of the Audit Committee (the "Committee") is to assist the Board of Directors in overseeing: (i) the accounting, reporting, and financial practices of the Company and its subsidiaries, including the integrity of the Company's financial statements; (ii) the Company's internal control environment and compliance with legal and regulatory requirements; (iii) the independent auditors' qualifications and independence; and (iv) the performance of the Company's internal audit function. The Committee shall also prepare the report for the Company's annual proxy statement required by rules of the Securities and Exchange Commission (the "SEC").
B. The Committee has revised and amended this Charter as part of its continuing commitment to the integrity and importance of the financial reporting process and to reflect recent changes in law. The Committee recognizes that these changes are ongoing, and, accordingly, the Committee will from time to time consider such further modifications to this charter as may be necessary or appropriate in light of further changes in law, rule, regulation or best practice.
II. Members and Terms of Office
A. The Board of Directors appoints the members of the Committee, which shall be composed of at least three Directors, and designates one member to serve as Committee Chair. Each member of the Committee shall be financially literate, as determined by the Board of Directors, and must at all times be "independent," as defined by the New York Stock Exchange ("NYSE") and the SEC. At least two members of the Committee must also be a "financial expert" as defined by SEC and NYSE requirements.
B. Members of the Committee serve until the next Annual Meeting of the Board of Directors or until their successors are appointed.
A. The Committee will hold at least four (4) regular meetings each year, and telephonic meetings prior to each quarterly earnings release, as well as such additional meetings as the Committee Chair may deem necessary or appropriate. Minutes of each Committee Meeting will be submitted to the Board of Directors and the Committee Chair will report verbally to the full Board of Directors on matters discussed at the most recent Committee Meeting. Meetings may take place in person or telephonically at such times and places as the Committee Chair may determine. One-half of the members of the Committee will constitute a quorum.
B. To provide access to the Committee for the internal auditors, independent auditors, and key financial management, the Committee will request the attendance at its regular meetings or otherwise, of the Chief Audit Executive ("Chief Audit Executive") and such other members of the Company's management as circumstances may require.
IV. Duties and Responsibilities
Consistent with and subject to applicable law and rules or listing standards promulgated by the SEC, NYSE, or other applicable regulatory authority, the Committee shall have the following duties and responsibilities.
A. Relationship with Independent Auditors
1. The Committee will appoint, oversee and determine the compensation of any registered public accounting firm (the "Independent Auditors") employed by the Company for the purposes of preparing or issuing an audit report or related work, and the Independent Auditor shall report directly to the Committee.2 The Committee has sole authority to approve all terms and fees associated with any audit engagement.3 The Committee will review, at least annually, a report describing the Independent Auditor's internal quality control procedures and any material issues raised by the most recent internal quality-control review, or by any inquiry or investigation by governmental or professional authorities within the preceding five (5) years4, and any steps taken to address such issues.
2. The Committee will approve in advance all audit engagement fees and terms of all audit services to be provided by the Independent Auditor. (By approving the audit engagements, the audit service shall be deemed to have been pre-approved.)
3. The Committee will establish policies and procedures for the engagement of the Independent Auditor and pre-approval of any permissible non-audit services to be performed by the Independent Auditor. The Committee will, at least annually, (i) consider the independence of the Independent Auditor and whether the performance of permissible non-audit services is compatible with the auditor's independence, and (ii) review a report by the Independent Auditor describing any relationships between the Independent Auditor and the Company or any other relationships that may adversely affect the independence of the Independent Auditor.
B. Risk Assessment and Control Environment
The Committee will periodically review and discuss the Company's business and financial risk management and risk assessment policies and procedures with senior management, the Independent Auditor, and the Chief Audit Executive. The Committee will review and discuss with the Chief Audit Executive the scope, progress, and results of the internal audit program.
The Committee will annually:
1. Obtain a report from the Independent Auditors discussing, among other items, critical accounting policies and alternative treatments of financial information discussed with management;5
2. Review major issues concerning accounting policies and financial statement presentations, including any significant changes in the Company's selection or application of such principles; and
3. Review any analyses prepared by management and/or the Independent Auditors setting forth significant financial reporting issues and related judgments.
C. Internal Controls and Disclosure Controls and Procedures
The Committee will periodically review the adequacy and effectiveness of the Company's internal control environment, including any significant changes or deficiencies in internal controls. The Committee will also review the annual attestation and report of the Independent Auditor on management's evaluation of the Company's internal controls and procedures for financial reporting. In connection with this review, the Committee will obtain and discuss:
1. Reports from the Chief Executive Officer, the Chief Financial Officer and the Independent Auditors on any significant deficiencies in the design or operation of internal controls with the identification of any material weakness;
2. Any fraud or other irregularity (whether or not material) that involves management or other employees who have a significant role in the Company's internal control environment; and
3. Management's evaluation of the Company's disclosure controls and procedures.
D. Financial Reporting
1. The Committee will review the Company's quarterly and annual results with senior management and the Independent Auditors prior to the public release of those results.
2. The Committee will review with senior management and the Independent Auditor the Company's annual audited and quarterly financial statements and earnings press releases, as well as financial information and earnings guidance provided to analysts and, from time to time, management will provide the Committee with an overview of the information presented, or to be presented, to rating agencies.
3. The Committee will at least annually review the following with the Independent Auditors (and management, as appropriate):
· The Independent Auditor's views of the quality of the Company's accounting principles setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements.
· Major issues regarding the accounting principles applied, especially significant estimates made by management or significant changes in accounting principles and financial statement presentation.
· Significant related party transactions or other significant conflicts of interest.
· Significant audit adjustments.
· The Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," including critical accounting policies.
· Any difficulties encountered during the audit, including any restrictions on the scope of work or access to information.
· Any other matters related to the conduct of the audit that must be communicated to the Committee under Generally Accepted Auditing Standards.
· Recommend to the Board, based on the foregoing, whether the financial statements should be included in the Annual Report on Form 10-K.
4. The Committee will meet regularly with in-house counsel to discuss legal matters that may have a material impact on the financial statements. The Committee may meet with outside counsel as the Committee deems appropriate.
5. The Committee will prepare an Audit Committee Report for inclusion in the Company's annual proxy statement and submit the draft report to the Board of Directors for approval.
E. Review of Codes of Conduct for Directors, Officers, and Employees
The Committee will at least annually review with management, the General Counsel and the Chief Audit Executive the Company's programs to ensure compliance with its' Ethical Conduct Policy (MIP-1) and the Business Conduct Guide. These policies will be posted on the Company's public website.
F. Oversight of System for Complaints
The Committee will establish a procedure for the oversight and reporting to the Committee of the receipt, retention, treatment, and closure of complaints to the Company concerning (i) accounting, internal accounting controls, or auditing matters; or (ii) the confidential, anonymous submission by Company employees regarding questionable accounting or auditing matters.
G. Hiring Employees of Independent Auditors
The Committee will establish policies for the hiring of employees and former employees of the Independent Auditors.
H. Periodic Review of Charter; Function of Audit Committee
The Committee will at least annually review and assess the adequacy of this Charter and will submit proposed revisions to the Charter to the Board of Directors for approval. In addition, the Committee will at least annually evaluate its own performance.
The Committee will develop and implement any Audit Committee Policies and Procedures consistent with this Charter that it deems necessary or appropriate to carry out the Committee's obligations as required by this Charter, by the Board of Directors, and by applicable law and by SEC and NYSE rule. Such procedures may include policies and procedures for the efficient and consistent management of the Committee's oversight over the Independent Auditors, and will cover such matters as pre-approval of audit fees, pre-approval of permissible non-audit services to be provided by the Independent Auditor, and approval of plans relating to rotation of Independent Auditors or their personnel. The Audit Committee Policies will be construed in connection with the authority conferred by this Charter.
The Committee may investigate suspected improprieties on any material matter, using special counsel or outside experts when necessary or appropriate.
V. Retention of Outside Advisors
The Committee may, without further action of the Board of Directors, retain for its own account and service any external advisors, attorneys, consultants, and accountants (collectively, "Advisors") it deems necessary to carry out the Committee's purposes. The Company will adequately fund the costs and expenses of these Advisors under arrangements that assure the independence of those Advisors and their loyalty to the Committee.