Audit Committee Charter
The Audit Committee (the “Committee”) of the Board of Directors (the “Board”)
of NorthWestern Corporation (the “Corporation”)
assists the Board in fulfilling its responsibilities for oversight of (a)(i) the Corporation’s accounting and financial reporting
processes, (ii) the audits and integrity of the Corporation’s financial
statements, (iii) the Corporation’s compliance with legal and regulatory
requirements, (iv) the independent auditor’s qualifications and independence,
and (v) the performance of the Corporation’s internal audit function and
independent auditors; (b) preparation of the reports that the rules of the
Securities and Exchange Commission (the “SEC”) require be included in the
Corporation’s annual proxy statement; and (c) such other duties as directed by
Organization and Meetings
The membership of the Committee shall consist of not less than three
non-employee members of the Board who are “independent” and are able to read
and understand financial statements and are financially literate. To be
“independent,” a Committee member may not: (a) accept any consulting, advisory
or other compensatory fee, directly or indirectly, from the Corporation (except
for Board or Committee fees); or (b) be an affiliate of the Corporation or any
of its subsidiaries (except in the capacity as a member of the Board or the
Committee), as determined in accordance with the rules of the SEC. In
addition, each member shall be free of any relationship that, in the opinion of
the Board, would interfere with his or her individual exercise of independent
judgment, as determined in accordance with the NASDAQ Marketplace Rules.
The Committee shall have at least one member who has past employment experience
in finance or accounting, requisite professional certification in accounting,
or any other comparable experience or background that results in financial
sophistication. The Committee shall also seek to have at least one member
who is an “audit committee financial expert” as determined in accordance with
the SEC rules, provided that the Committee will not be in violation of its
charter if it fails to have a member who is an audit committee financial
expert. In discharging this oversight role, the Committee is expected to
maintain free and open communication (including private executive sessions at
least annually) with the Corporation’s independent auditor (the “Accountant”),
and the management of the Corporation and shall be empowered to investigate any
matter brought to its attention, with full power to retain independent counsel,
accountants or others to assist in the conduct of any investigation, at the
The Committee’s primary responsibilities are:
- Appointment, compensation,
retention and oversight of the Accountant engaged for the purpose of
preparing or issuing an audit report or performing other audit, review or
attest services for the Corporation. In the process, the Committee
will discuss and consider the Accountant’s written affirmation that the
Accountant is in fact independent pursuant to SEC rules, discuss the
nature and rigor of the audit process, receive and review all reports, and
provide to the Accountant full access to the Committee (and the Board) to
report on any and all appropriate matters. The Committee shall make
it clear to the Accountant that the Accountant shall report and be
accountable to the Committee.
- At least annually, obtain and
review a formal written statement by the Accountant describing: (a) the
Accountant’s internal quality-control procedures; (b) any material issues
raised by the most recent internal quality-control review, or peer review,
of the Accountant, 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 Accountant, and any steps taken to
deal with any such issues; and (c) all relationships between the
Accountant and the Corporation consistent with Independence Standards
Board Standard 1. The Committee shall actively engage in dialogue
with the Accountant regarding any disclosed relationships or services that
may impact the independence of the Accountant.
- Provide oversight and review
the adequacy of management’s assessment of the effectiveness of the
Company’s internal control over financial reporting.
- Review and discuss annual and
quarterly financial statements with management and the Accountant.
Such discussions may include, as deemed appropriate, quality of earnings,
review of reserves and accruals, consideration of the suitability of
accounting principles, review of highly judgmental areas, audit
adjustments whether or not recorded, and such other inquiries as the
- Review and evaluate from time
to time and provide guidance to management as to the form and substance of
earnings press releases and financial information and earnings guidance
provided to analysts and rating agencies, and report any issues with
respect thereto to the Board.
- Review and discuss
Accountant’s required communications relating to the audit.
- Consider appropriateness of
non-audit services provided by the Accountant to the Corporation.
- Pre-approve all permissible
non-audit services and all audit, review or attest engagements. The
Committee may adopt a pre-approval policy setting forth the procedures by
which such pre-approvals shall be made.
- Consider the appropriateness
of, and approve, all “related party transactions,” as defined in the NASDAQ
- Take, or recommend that the
Board take, such other actions as the Committee determines are appropriate
to oversee the independence of the Accountant.
- Risk assessment and
management – monitoring company processes for management’s identification
and control of key business, financial, and regulatory risks.
- Discussion with management of
the status of pending litigation, taxation matters, and other areas of
legal and compliance oversight as may be appropriate.
- Review with management and
the Accountant any significant risks and exposures of the Corporation and
management’s steps to minimize them.
- As appropriate, obtain advice
and assistance from outside legal, accounting or other advisors.
- Determine the funding
necessary to compensate the Accountant and other outside advisors engaged
by the Committee, and advise the Corporation that it must make such
funding available to the Committee.
- Meet separately,
periodically, with management, with internal auditors (or other personnel
responsible for the internal audit function) and with the Accountant.
- Review with the Accountant
any audit problems or difficulties and management’s response.
- Review of any significant
findings and recommendations made by the Accountant, and management’s
responses to them.
- Establish complaint
procedures for the receipt, retention and treatment of complaints received
by the Corporation regarding accounting, internal accounting controls or
- Establish complaint
procedures for the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or auditing
- Set clear hiring policies for
employees or former employees of the Accountant.
- Annually review this Charter
and the Corporation’s Code of Conduct.
- Report regularly on Committee
activities to the full Board.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation’s financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This
is the responsibility of management and the Accountant. Nor is it the
duty of the Committee to conduct investigations or to assure compliance with
laws and regulations.