2003 Audit Charter: MAYCHARTER FOR THE AUDIT COMMITTEE
The audit committee shall assist the board in its oversight of
(i) the integrity of the Company's financial statements;
(ii) the Company's compliance with legal and regulatory requirements;
(iii) the independent auditor's qualifications and independence; and
(iv) the performance of the Company's internal audit function and independent auditors.
In addition, the committee shall aid management's efforts to enhance the quality of the Company's controls and shall work to provide appropriate avenues of communication between the board of directors and the Company's independent auditor and internal auditors. The committee shall prepare a report required by the rules of the SEC to be included in the Company's proxy statement.
COMPOSITION AND TERM
The committee shall be a committee of the board and shall consist of no fewer than three members, who shall meet the independence and experience requirements of the New York Stock Exchange, of Section 10A(m)(3) of the Securities Exchange Act of 1934 and of the rules and regulations of the Securities and Exchange Commission. At least one member of the audit committee shall be a financial expert, as defined by the SEC. Audit committee members shall not, without express approval of the board, simultaneously serve on the audit committees of more than two other public companies.
Committee members shall be appointed by the board, upon the recommendation of the nominating and governance committee, and shall serve at the pleasure of the board. The chairman shall be designated by the board.
The committee shall meet as often as it determines is necessary, but not less frequently than quarterly. The committee shall report to the board of directors at the first board meeting following each such committee meeting.
The committee shall provide management, the internal auditors and the independent auditor with periodic opportunities to meet privately with the committee. The 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 committee or to meet with any members of, or consultants to, the committee.
The committee may form and delegate authority to subcommittees consisting of one or more members, when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that such subcommittee presents any decisions to grant preapprovals to the full committee at its next scheduled meeting.
The committee may retain its own independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the committee, to pay compensation to the independent auditor for the purpose of rendering or issuing an audit report and to any advisors employed by the committee.
DUTIES AND RESPONSIBILITIES
The committee shall:
With respect to the independent auditor:
1. appoint or replace the independent auditor, subject to shareowner ratification, and shall be directly responsible for the compensation and oversight of the work of the independent auditor, including resolution of disagreements between management and the independent auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services. The independent auditor shall report directly to the committee.
2. preapprove all auditing services and all non-audit services permitted by applicable law to be performed for the Company by the independent auditor (subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(b) of the 1934 Act which are approved by the committee prior to the completion of the audit) including (i) the proposed fees and terms thereof, (ii) the proposed risk assessment process in establishing the scope of the examination and (iii) the
proposed reports to be rendered.
Any such non-audit services can not have contingent fee type terms.
With respect to financial statements and disclosure matters:
3. review the results of the quarterly reviews and the year-end audit of the Company, including
- the audit report, the published financial statements, the management representation letter, the "Memorandum Regarding Accounting Procedures and Internal Control" prepared by the independent auditor, any other pertinent reports and management's responses concerning that memorandum and any other reports;
- any material accounting issues among management, the Company's internal audit staff and the independent auditor, and
- other matters required to be communicated to the committee under generally accepted auditing standards by the independent auditor;
4. review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management's discussion and analysis and recommend to the board whether the audited financial statements should be included in the Company's annual report on Form 10-K (and incorporate this recommendation into the annual proxy statement as required by SEC rules);
5. review and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of the Company's quarterly report on Form 10-Q, including the results of the independent auditor's reviews of the quarterly financial statements;
6. discuss with management and the independent auditor 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 steps adopted in light of material control deficiencies;
7. review and discuss reports from the independent auditor on:
- all critical accounting policies and practices to be used;
- 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 auditor; and
- other material written communications to management, such as any management letter or schedule of unadjusted differences;
8. discuss with management the Company's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies; such discussions may be done generally, consisting of discussing the types of information to be disclosed and the types of presentations to be made;
9. discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company's financial statements;
10. 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;
11. discuss with the independent auditor the matters required to be discussed by Statement of Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information and any significant disagreements with management; and
12. review disclosures made to the 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 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.
With respect to oversight of the Company's relationship with the independent auditor:
13. review and evaluate the lead partner of the independent auditor engagement team;
14. (a) obtain and review a report from the independent auditor at least annually regarding
- the independent auditor'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,
- any steps taken to deal with any such issues, and
- all relationships between the independent auditor and the Company;
(b) evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor's quality controls are adequate and the provision of permitted non-audit services is com patible with m aintaining the auditor's independence and taking into account the opinions of management and internal auditors; and
(c) present its conclusions with respect to the independent auditor to the board;
15. ensure the rotation of audit partners as required by law, and consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent audit firm on a regular basis;
16. review and recommend to the board the Company's policies for hiring employees or former employees of the independent auditor who participated in any capacity in the audit of the Company;
17. discuss with the independent auditor the financial reporting issues and matters of audit quality and
consistency on which they consulted their national office; and
18. meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
With respect to oversight of the Company's internal audit function:
19. review the appointment and replacement of the senior internal audit executive;
20. review the coordination between the independent auditor and internal auditors and review the risk
assessment process, scopes and procedures of the Company's internal audit work and whether
such risk assessment process, scopes and procedures are adequate to attain the internal audit
objectives, as determined by management and approved by the committee;
21 review the significant reports to management prepared by the internal audit department and
22. discuss with the senior independent audit executive and management the internal audit department
responsibilities and budget, the quality and composition of the internal audit staff and any
recommended changes in the planned scope of the internal audit; and
23. review and approve the internal audit charter at least annually.
With respect to compliance oversight responsibilities:
24. obtain from the independent auditor assurance that Section 10A(b) of the 1934 Act has not been violated;
25. review procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing m atters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
26. discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company's financial statements or accounting policies;
27. meet annually with general counsel, and outside counsel when appropriate, to review legal and regulatory matters, if any, that may have a material impact on the financial statements or the Company's compliance procedures;
28. (a) review annually the distribution and acknowledgment process related to the Policy on Business Conduct and review the results of the Company's internal audit work of this process, including the types of exceptions reported by associates;
(b) obtain reports from management, the senior internal audit executive and the independent auditor that the Company and its subsidiaries are in conformity with applicable legal requirements and the Company's Policy on Business Conduct;
(c) review reports and disclosures of insider and affiliated party transactions; and
(d) advise the board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's Policy on Business Conduct;
29. review annually the Company's policies and procedures with respect to officers' travel and entertainment expenses and corporate jet usage and consider the results and recommendations of any audit work in these areas performed by the independent auditor and internal uditors;
30. review and assess the adequacy of its charter at least annually and recommend any changes to the board; and
31. perform an annual performance evaluation of the committee
Limit of Committee's Role
While the committee has the responsibilities and powers set forth in this charter, it is not the committee's duty to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor.
This charter will be made available on the Company's Web site.