The Board of Directors (the "Board") of NDCHealth Corporation (the "Company") has established the Audit Committee (the "Committee) of the Board to carry out the duties and responsibilities assigned to the Committee by the Board, including those required under the applicable securities laws, rules and regulations of the Securities and Exchange Commission (the "SEC") and the rules and regulations of the New York Stock Exchange, Inc. or any other national securities exchange on which the Company's Common Stock is listed (the "Applicable Exchange"). This Charter replaces and supercedes in its entirety the previous charter adopted by the Board of the Company.
2003 Audit Charter: NDC
I. Members of the Committee
The Committee shall be comprised of no fewer than three independent members of the Board. Each member of the Committee must be financially literate (as interpreted by the Board in its business judgment) and, unless the Board determines otherwise, at least one member of the Committee must be a "financial expert" within the meaning of Section 407 of the Sarbanes-Oxley Act of 2002 (the "Act") and rules promulgated by the SEC thereunder and the rules and regulations of the Applicable Exchange, as in effect from time to time.
Each member of the Committee shall be independent of the management of the Company and free of any relationship that, in the judgment of the Board, would interfere with such member's exercise of independent judgment as a Committee member and shall meet all applicable independence requirements of the Applicable Exchange and the Section 10A(m)(3) of the Securities Exchange Act of 1934 and the regulations thereunder. Unless the Board determines otherwise, Committee members may not serve simultaneously on the audit committees of more than three public companies.
The Board will assess and determine such qualifications of the Committee members.
The members of the Committee shall be appointed annually by the Board on the recommendation of the Nominating/Governance Committee of the Board. The chairperson of the Committee shall be appointed by the Board. If a chairperson is not designated or present, the members of the Committee may designate a chairperson by majority vote of the Committee membership. Committee members are subject to removal by the Board pursuant to the terms of the Company's bylaws.
The responsibilities of a member of the Committee are in addition to his or her responsibilities as a member of the Board and each member of the Committee will be compensated separately for his or her service on the Committee.
II. Responsibilities and Duties of the Audit Committee
A. Scope of Responsibility
1. The Committee shall be solely and directly responsible for the appointment, dismissal, compensation, and oversight of the Company's independent auditors, and may not delegate any of such responsibilities to the Board, to any other committee of the Board or to any other person or party. The independent auditors shall report directly to the Committee and the Committee shall oversee the performance of all services by the independent auditors.
2. The Committee shall assist the Board in its oversight of:
(a) the audit and integrity of the Company's financial statements;
(b) the qualifications, independence and performance of the Company's independent auditors;
(c) the internal audit function by, and the performance of, the Company's internal auditors;
(d) the accounting and financial reporting processes and system of internal controls of the Company; and
(e) the Company's compliance with applicable legal and regulatory requirements.
3. The Committee shall also prepare the Report of the Committee for inclusion in the Company's annual proxy statement as required by applicable SEC rules and regulations.
4. The Committee shall assist the Board in fulfilling its oversight responsibilities by:
(a) reviewing the Company's financial information that will be filed with the SEC or otherwise provided to its stockholders or to analysts;
(b) working with management to establish, subject to the approval of the Board, the Company's system of internal controls;
(c) reviewing the systems of internal controls and reports of variance from those controls;
(d) reviewing all audit processes and results of internal audits;
(e) reviewing the Company's accounting, reporting and financial practices; and
(f) performing such other tasks as it deems appropriate and consistent with its duties hereunder.
B. Responsibilities and Duties
The Committee shall:
1. meet at the request of the Chairman of the Board, the Chief Financial Officer or the independent auditors and shall meet at least once every quarter in regular session, or more frequently as circumstances dictate or as the Committee deems appropriate;
2. meet in executive sessions, separately, with each of (a) management, including the Chief Financial Officer, (b) the independent auditors and (c) the internal auditors, at least once every quarter;
3. review and discuss with management the policies and guidelines for risk assessment and management;
4. report its actions, budget and expenditures to the Board.
In addition, the Committee shall perform such other functions as are required by law, the Company's Certificate of Incorporation or its Bylaws, or as requested by the Board and may take any other action permitted by applicable laws, rules, and regulations necessary to accomplish any action authorized by this Charter or to further the goals of the Committee as set forth in this Charter.
Meetings of the Committee may be held in person or telephonically and may be held at such times and places as the Committee determines. The chairperson of the Committee should prepare, or have prepared and approve, an agenda in advance of each meeting. The Committee may form and delegate authority to subcommittees as appropriate.
C. Relationships with Independent Auditor
1. The Committee shall:
(a) solely and directly determine and approve the scope of the annual audit (including, as appropriate, reviewing with management, the internal auditors and the independent auditors the proposed audit plan, including areas of business to be examined, the personnel to be assigned to the audit, the procedures to be followed, special areas to be investigated, and the program for integration of the independent and internal audit efforts) and the interim reviews of the Company's financial statements, and the associated fees to be paid to the independent auditors for audit and for permissible non-audit work; and
(b) confirm, oversee, monitor and evaluate the qualifications, performance and independence of the independent auditors considering whether the independent auditors' quality controls are adequate and the provision of non-audit services is compatible with maintaining the independent auditors' independence;
(c) review the qualifications, experience and performance of the audit partner, the reviewing partner and other senior members of the audit team;
(d) ensure that the independent auditors provide the Committee for its review timely reports of all critical accounting policies and practices; all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the effects of using such alternatives and the treatment preferred by the independent auditing firm; and other material written communications between the independent auditors and management;
(e) obtain and review at least annually a report from the independent auditors regarding (i) the auditors' internal quality control procedures, (ii) any material issues raised by the most recent 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, (iii) any steps taken to deal with any such issues, and (iv) all relationships between the independent auditors and the Company;
(f) review the independent auditors' reports on the adequacy of the Company's internal controls;
(g) set hiring policies for the Company's hiring of employees or former employees of the independent auditors consistent with applicable regulations and rules of the Applicable Exchange; and
(h) discuss with the national office of the independent auditors issues on which such office has been consulted by the Company's audit team and matters of audit quality and consistency.
2. Prior to the release or filing thereof, the Committee shall review documents containing the Company's financial statements or summaries thereof, including earnings press releases, the interim financial reports and filings with the SEC or other regulatory agencies or bodies and presentations to rating agencies. The Committee shall review specifically:
(a) the independent auditors and management's processes for assessment of material misstatements, identification of notable risk areas, and their response to those risks;
(b) with management and independent auditors, the Company's annual and quarterly financial statements and related footnotes as well as all of the Company's filings with the SEC which contain financial statements prior to their filing, including the Company's disclosure under "Management's Discussion and Analysis of Financial Condition and Results of Operations";
(c) with the independent auditors, any additions or changes in auditing or accounting principles suggested by the independent auditors, management, or the internal auditors;
(d) the independent auditors' qualitative judgment about the appropriateness, and not just the acceptability, of accounting principles, use of estimates, basis for determining the amounts of estimates, and financial disclosures;
(e) with the independent auditors, any audit problems or difficulties and management's response;
(f) with the independent auditors, any significant difficulties or disputes with management encountered during the course of the audit;
(g) any material financial or non-financial arrangements of the Company that do not appear on the financial statements of the Company and risks related thereto;
(h) with management and the independent auditors, the effect of regulatory and accounting proposals, initiatives, or changes as well as accounting principles and their alternatives that have or could have a significant effect on the Company's financial statements;
(i) any transaction or course of dealing with parties related to the Company that are significant in size or involve terms or other aspects that differ from those that would likely be negotiated with independent parties, or that are relevant to an understanding of the Company's financial statements; and
D. Approval of Services Provided by Independent Auditors
The Committee shall approve any audit services and any permissible non-audit services prior to the commencement of the services as set forth in the Act, subject to any applicable de minimis exceptions to such pre-approval requirement. In making its pre-approval determination, the Committee shall consider whether providing the non-audit services compatible with maintaining the auditors' independence. If this pre-approval is delegated to an individual Committee member or members, such member or members shall present a report of his or her decisions at the next scheduled Committee meeting.
E. Relationships with the Internal Audit Function
The Committee shall:
1. be solely and directly responsible for the appointment, replacement, reassignment, or dismissal of the Company's internal auditors;
2. establish procedures to assess the effectiveness and performance of the internal auditors;
3. discuss any significant deficiencies in the design or operation of internal controls identified by management which could adversely affect the issuers ability to record, process, summarize, and report financial data; and
4. take steps that are, in the sole judgment of the Committee, reasonable or necessary to ensure that the internal auditors are independent and the compensation and benefits allocated to the internal auditors are not subject to modification or termination without the consent of the Committee.
F. Compliance Oversight
The Committee shall:
1. establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns or issues regarding the Company's accounting or auditing matters;
2. review any transactions with related parties and the procedures used to identify related parties;
3. annually review, and confer with the Nominating and Governance Committee concerning, the Company's Code of Business Conduct and Ethics, and recommend to the Board any changes or additions, as needed; and
4. review the Disclosure Committee Charter and recommend to management any changes or additions.
5. establish and review whistleblower procedures with respect to the protection of employees who act lawfully to provide information, cause information to be provided, or otherwise assist in an investigation of, or file, cause to be filed, testify, participate in or otherwise assist in a proceeding filed as a result of, a violation of securities laws relating to fraud against shareholders.
G. Audit Committee Formalities and Charter
The Committee shall:
1. review and reassess annually the adequacy of this Audit Committee Charter and recommend any changes to the Board;
2. report periodically to the Board on the Committee's activities and findings, including any issues regarding the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors, or the performance of the Company's internal auditors;
3. keep appropriate minutes of its meetings hand actions taken by it, with the advice of counsel; and
4. take actions to assess its performance on an annual basis, such as retaining counsel, accountants or other consultants for the purpose of reviewing its performance.
III. Further Authority of the Committee
The Committee shall have the power to conduct or authorize investigations into any matters within its scope of responsibilities and duties as it deems reasonable or necessary in the discharge thereof. The Committee shall be empowered to retain (and determine the funding for) independent counsel, accountants, and others to assist it in the conduct of any investigation and the Company shall provide such funding.
IV. Continuing Education
The Company is responsible for providing the Committee with educational resources related to the accounting principles and procedures, current accounting topics pertinent to the Company and other material as may be requested by the Committee. The Company shall assist the members of the Committee in maintaining appropriate financial literacy.
V. Limitation of Committee's Role
While the Committee is charged with the duties and responsibilities set forth in and the powers granted by this Charter, it is not the duty of the Committee 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 of the Company and the Company's independent auditor.