The primary purposes of the Audit and Finance Committee (the "Committee") of the Board of Directors (the "Board") of Orbital Sciences Corporation (the "Company") are to (i) assist the Board in the oversight of (A) the integrity of the financial statements of the Company, (B) the compliance by the Company with legal and regulatory requirements, (C) the qualification and independence of the Company's independent auditors, and (D) the performance of the Company's internal audit function and independent auditors, and (ii) prepare an audit committee report as required by the Securities and Exchange Commission ("SEC") to be included in the Company's annual proxy statement.
II. COMMITTEE MEMBERSHIP
The Committee shall be comprised of at least three directors. All members of the Committee shall meet the independence, experience, financial literacy and expertise requirements of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), the Securities Exchange Act of 1934, as amended, and applicable rules and regulations of the SEC, all as in effect from time to time. Because of the Committee's demanding role and responsibilities, and the time commitment of each attendant to Committee membership, no member of the Committee shall serve on more than three audit committees of public companies (including the Company) at any one time.
To ensure independence and to otherwise avoid any potential conflicts of interest, members of the Committee may not accept or receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries (other than fees and equity received as compensation for serving as a director), or be an affiliated person of the Company or any of its subsidiaries.
The Chairman and other members of the Committee shall be appointed by the Board. Committee members may be removed by the Board, with or without cause. Any member of the Committee may resign at any time by giving written notice of his or her resignation to the Board.
The Committee shall meet at least quarterly, or more frequently as deemed necessary to fulfill the responsibilities prescribed in this Charter or by the Board. The Chairman of the Committee may call special meetings of the Committee as required.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of any accounting firm employed by the Company (including the resolution of disputes between management and the accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, and such firm shall report directly to the Committee. In the performance of its duties, the Committee shall meet separately and periodically with management, the internal auditor(s) (or other personnel responsible for the internal audit function) and the independent auditors.
In addition, the Committee shall:
With Respect to Financial Statement and Disclosure Matters
and discuss the quarterly unaudited and annual audited financial statements
with management and the Company's independent auditors, including the results
of the independent auditor's review of the financial statements, prior to the
Company issuing its quarterly or year-end earnings release and filing its
Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as applicable.
Matters that will be reviewed and discussed include:
o The Company's disclosures in "Management's Discussion and Analysis of Financial Condition and Results of Operations";
o Major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles;
o Analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements;
o The effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Company's financial statements; and
o In general, the type and presentation of information to be included in earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as review of any financial information and earnings guidance provided to analysts and rating agencies.
2. Determine whether to recommend to the Board the inclusion of the annual audited financial statements in the Company's Annual Report on Form 10-K for the applicable fiscal year.
3. Discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures. The Committee shall also review and evaluate the Company's processes and policies for identifying and assessing key financial statement risk areas and for formulating and implementing steps to address such risk areas. As part of this process, the Committee should discuss guidelines and policies to govern the process by which this is handled.
Review with the
independent auditor any audit problems or difficulties the auditor may have
encountered in the course of the audit work, including any restrictions on the
scope of activities or access to requested information and any significant
disagreements with management, and management's response. Such review should
(a) any accounting adjustments that were noted or proposed by the independent auditor but were passed (as immaterial or otherwise);
(b) any communications between the independent auditor and its national office respecting auditing or accounting issues presented by the engagement; and
(c) any "management" or "internal control" letters issued, or proposed to be issued, by the independent auditor to the Company.
the following matters with the independent auditor (such matters shall be
timely reported to the Committee by the independent auditor):
(a) All critical accounting policies and practices to be used;
(b) 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 preferred treatment of the auditor; and
(c) Other material written communications between the auditor and management, including any management letter or schedule of unadjusted differences.
With Respect to Oversight of the Company's Relationship With the Independent Auditor
6. Be directly responsible and have the sole authority to appoint, retain, evaluate and terminate the independent auditors to be retained by the Company, to pre-approve all audit services, and to approve the compensation of the independent auditors and all audit engagement fees and terms. The Committee may consult with management but shall not delegate these responsibilities to management. The Committee should meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
7. Have the sole authority to, and shall, review and pre-approve, either pursuant to an established audit and non-audit services pre-approval policy or through a separate pre-approval by the Committee, any engagement of the Company's independent auditor to provide any permitted non-audit service to the Company that is not prohibited by law. The Committee shall have the ability to delegate the authority to pre-approve non-audit services to one or more designated members of the Committee. If such authority is delegated, the delegated member(s) of the Committee shall report to the full Committee, at the next Committee meeting, all items pre-approved by the designated member(s).
Receive and review
periodic reports, at least annually, prepared by the independent auditors
(a) the auditors' internal quality-control procedures;
(b) 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 (5) years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and
(c) the auditor's independence and all relationships between the independent auditor and the Company.
9. Discuss the reports described in paragraph 8 above with the auditor, and take appropriate action on any disclosed relationship to satisfy itself of the auditor's independence. As part of this process, the Committee should 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 compatible with maintaining the auditor's independence (and taking into account the opinions of management). The Committee also should receive, annually, a letter of independence from the independent auditor. The Committee shall present its conclusions to the Board.
10. Review and evaluate the experience and qualifications of the senior members (including the lead partner) of the independent auditor team and the performance of the independent auditor (which firm ultimately is accountable to the Committee and the Board).
11. Discuss with the independent auditor the matters required to be communicated by Statement on Auditing Standards No. 61, as amended, relating to the conduct of the audit.
12. Request a representation letter from the Company's independent auditor prior to the commencement of the audit engagement confirming that (i) the lead (or coordinating) audit partner and the reviewing audit partner have not performed audit services for the Company for more than five (5) consecutive years, and (ii) if either of such persons performed audit services for the Company for five (5) consecutive years, the last year of such period was more than five (5) years ago.
13. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the lead audit partner or even the independent auditing firm itself on a regular basis.
14. Request evidence from the independent auditors confirming that such firm is registered with the Public Company Accounting Oversight Board.
15. Obtain from the Company's independent auditor the inspection report of the Public Company Accounting Oversight Board.
With Respect to Oversight of the Company's Internal Controls Over Financial Reporting
16. Review and approve the audit plan and scope of work to be performed by the internal auditor.
17. Review the scope, responsibilities, budget and staffing of the internal audit function.
18. Review and assess the adequacy and effectiveness of the Company's internal control over financial reporting with management, the internal auditor and the independent auditor.
19. Review management's annual report on internal control over financial reporting prior to the Company's inclusion of such annual report in the Company's Annual Report on Form 10-K.
20. Review the independent auditor's attestation report regarding management's assessment of the Company's internal control over financial reporting prior to the inclusion of such attestation report in the Company's Annual Report on Form 10-K.
21. Review and assess any reports to management prepared by the internal auditor and management's response thereto, if any.
22. Review with management any changes in the Company's internal control over financial reporting that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
any significant deficiencies or material weaknesses identified in the Company's
internal control over financial reporting, and any special steps taken as a
With Respect to Compliance Oversight Responsibilities
With Respect to Compliance Oversight Responsibilities
24. Review with the Company's General Counsel (or, in the absence of such officer, other legal counsel of the Company) legal matters that have been brought to the Committee's attention, or matters that have been brought to the General Counsel's attention (including matters reported on the Company's Ethics Hotline) that may have a material impact on the Company's financial statements and compliance policies, as well as any material reports or inquiries received from regulatory bodies.
25. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company's financial statements or accounting policies.
26. Establish and periodically review procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters.
27. Establish and periodically review procedures for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters, and monitor compliance issues arising under and in accordance with the Company's Code of Business Conduct and Ethics.
28. Periodically review and assess the Company's hiring policies with regard to employees or former employees of the independent auditor.
The responsibilities and duties set forth herein are the sole responsibility of the Committee and may not be allocated to a different committee.
V. ADDITIONAL POWERS
The Committee shall have the power to conduct or authorize investigations into any matters within the Committee's scope of responsibilities.
The Committee shall have the authority to form, and delegate to, one or more subcommittees as it deems necessary or appropriate.
The Committee shall have the sole authority, to the extent it deems necessary or appropriate, to retain and engage advisers for advice and assistance, including any independent accounting or legal counsel, and shall have the sole authority to approve the advisers' fees and other retention terms.
The Committee shall have such other authority and responsibilities as may be assigned to it from time to time by the Board.
VI. REPORTS TO STOCKHOLDERS AND BOARD
The Committee shall prepare the report for inclusion in the Company's annual proxy statement in accordance with applicable rules and regulations of the SEC.
The Committee shall regularly report to the Board regarding the status and disposition of the above matters.
VII. ANNUAL COMMITTEE REVIEW
The Committee shall conduct an annual review and self-evaluation to determine whether it is functioning effectively and report on such review and evaluation to the Board. The Committee shall annually review and reassess the adequacy of this Charter and recommend any proposed changes to this Charter to the Board for approval.
This Charter shall be posted on the Company's website.
IX. LIMITATION OF COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this Charter, its function is one of oversight, and it is not the duty of the 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. The planning and conduct of the audit is the responsibility of the independent auditor and the financial statements are the responsibility of management. While it is not the duty of the Committee to conduct investigations or to assure compliance with applicable laws, rules and regulations, the Committee may take such actions with respect to such matters as it deems necessary or advisable in fulfilling its duties identified above