Pharmaceutical Product Development, Inc.

Finance and Audit Committee Charter


Mission Statement


The Finance and Audit Committee (the “Audit Committee”) will assist the Board of Directors of Pharmaceutical Product Development, Inc. (the “Company”) in fulfilling its oversight responsibilities. The Audit Committee will oversee and appraise the financial reporting process, the audit process, and the Company’s process for monitoring compliance with laws and regulations and with the Company’s codes of conduct and ethics. In performing its duties, the Audit Committee will maintain effective working relationships with the Board of Directors, management, and the internal and external auditors. To properly perform his or her role, each committee member will have an understanding of the responsibilities of committee membership as well as familiarity with the Company’s business, operations, and risks.


Although the Audit Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Audit 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. This is the responsibility of management and the external auditors. Nor is it the duty of the Audit Committee to assure compliance with laws and regulations and the Company’s codes of conduct and ethics.




The Audit Committee will be composed of not less than three nor more than five members of the Board of Directors.


The Board of Directors will appoint committee members annually for a term of one year.


The Board of Directors will appoint a chairperson.


Each committee member shall be able read and understand the Company’s fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement.


At least one member of the Audit Committee shall have past employment experience in finance or accounting, professional certification in accounting, or comparable experience or background which results in the individual’s financial sophistication.


Except as otherwise permitted by Nasdaq’s Marketplace Rules, each committee member (a) must be independent as defined in Nasdaq Marketplace Rule 4200, (b) must not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any subsidiary thereof (other than in his or her capacity as a member of the Board of Directors, the Audit Committee or any other board committee), (c) must not be an affiliated person of the Company or any of its subsidiaries and (d) must not have participated in the preparation of the Company’s financial statements at any time during the past three years.

A majority of the committee members will constitute a quorum.


The committee will meet at least four times each year, or more frequently as required, and at such times and places as it deems advisable.


The committee will report to the Board of Directors after each meeting of the committee.


The external and internal auditors will have the right to appear before and be heard by the Audit Committee.


The committee will have the right, for the purpose of the proper performance of its functions, to meet at any reasonable time with the external and internal auditors or any of the officers or employees of the Company.


The Audit Committee shall have the authority to engage and determine funding for independent counsel and other advisers as it deems necessary to carry out its duties.


The Audit Committee must determine, in its capacity as a committee of the Board of Directors, and the Company must provide for, appropriate funding for the payment of: (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company; (ii) compensation to any advisers employed by the Audit Committee as provided above; and (iii) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.


Roles and Responsibilities


Internal Controls


Evaluate whether management is appropriately communicating the importance of internal controls.


Appraise the extent to which internal and external auditors examine computer systems and applications, the security of such systems and contingency plans for processing financial information in the event of a systems breakdown.


Determine whether internal control recommendations made by internal and external auditors are responded to by management in a timely fashion.


Ensure that the external auditors have access to the Audit Committee with regard to issues of fraud, deficiencies in internal controls and related matters.


Financial Reporting




Oversee the accounting and financial reporting processes of the Company.


Review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on the financial statements.


Discuss with management and the internal and external auditors significant risks and exposures and the plans to minimize such risks.


Annual Financial Statements


Consider the annual financial statements and determine whether they are consistent with the information known to committee members.



Discuss judgmental areas such as those involving valuation of assets and liabilities, including, for example, the accounting for and disclosure of revenue recognition, reserves for receivables, IBNR reserves and litigation reserves.


Meet with management and the external auditors together and separately to discuss the financial statements and the results of the audit.


Review the annual report before its release and consider whether the information contained therein is consistent with members’ knowledge about the Company and its operations.


Obligate the external auditors to communicate certain required matters to the committee.


Interim Financial Statements


Be briefed on how management develops and summarizes quarterly financial information, and the extent to which the external auditors review quarterly financial information.


Meet with management and, if a pre-issuance review was completed, with the external auditors, either telephonically or in person, to discuss the interim financial statements and the results of the review (this may be done by the committee chairperson or the entire committee).


Compliance with Laws and Regulations


Appraise the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) on any fraudulent acts or accounting irregularities.


Periodically obtain updates from management, the Company’s general counsel, and the Company’s tax director regarding compliance.


Review the findings of any examinations by regulatory agencies such as the Securities and Exchange Commission.


Codes of Conduct and Ethics


Ensure that a code of conduct is formalized in writing and obligate management to communicate it to all employees.


Evaluate whether management is appropriately communicating the importance of the code of conduct and the guidelines for acceptable business practices.


Review the program for monitoring compliance with the code of conduct.


Periodically obtain updates from management and the general counsel regarding compliance.


Investigate possible violations of the Company’s code of ethics and report the results and recommendations to the Board of Directors.


Internal Audit


Review the activities and organizational structure of the internal audit function.


Review the qualifications of the director of internal audit and concur in the appointment, replacement, reassignment, or dismissal of that individual.



External Audit


The Audit Committee shall be solely responsible for the appointment, compensation, retention and oversight of the external auditors.


Instruct the external auditors that the Audit Committee, as the shareholders’ representative, is the external auditors’ client.


Review the external auditors’ proposed audit scope and approach.


Oversee the audit of the Company’s financial statements.


Review the performance of the external auditors to determine whether to retain or discharge the external auditors.


Obtain from the external auditors a formal written statement delineating all relationships between the external auditors and the Company, consistent with Independence Standard No. 1, and actively engage in a dialogue with the external auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditors.


Pre-approve the provision by the external auditors to the Company of all audit and permitted non-audit services.


Obtain from the external auditor reports required under Section 204 of the Sarbanes-Oxley Act of 2002.


Other Responsibilities


Meet with the external auditors, the director of internal audit, and management in separate executive sessions to discuss any matters that the committee or these groups believe should be discussed privately.


Ensure that significant findings and recommendations made by the internal and external auditors are dealt with in a timely fashion.


Review and approve related-party transactions before the Company engages in them.


Review with the general counsel any legal matters that could have a significant impact on the Company’s financial statements.


Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (ii) confidential, anonymous submissions by employees of the Company of concerns regarding questionable accounting or auditing matters.


Perform other oversight functions as requested by the Board of Directors.


Review and update the charter of the committee and receive approval of changes from the Board of Directors.


Reporting Responsibilities


Regularly update the Board of Directors about committee activities and recommendations.