2004 Committee Charter : SGP CHARTER
(APPROVED BY THE BOARD OF DIRECTORS ON FEBRUARY 24, 2004)
The Committee is appointed by the Board of Directors to assist the Board in
its oversight function by monitoring the following:
1. integrity of the Company's financial statements,
2. independent auditors' qualifications and independence,
3. performance of the Company's corporate audit function and
independent auditors, and
4. compliance by the Company with legal and regulatory requirements.
It is the responsibility of executive management of the Company to prepare
financial statements in accordance with generally accepted accounting principles
and of the independent auditors to audit those financial statements. It is not
the responsibility of the Committee to plan or conduct audits or to determine
that the Company's financial statements are complete and accurate or are in
compliance with generally accepted accounting principles.
The Audit Committee and the other Committees of the Board will coordinate
their compliance and risk oversight efforts to the extent necessary or
appropriate to ensure the complete and proper exchange of information.
The Committee shall be comprised of at least three Directors. Members shall
be appointed, and may be removed by the Board upon the recommendation of the
Nominating and Corporate Governance Committee.
The Committee shall meet the independence, financial literacy and expertise
requirements of the New York Stock Exchange, the requirements of Section
10A(m)(3) of the Securities Exchange Act of 1934 and the rules and regulations
of the Securities and Exchange Commission ("SEC").
Committee members shall not simultaneously serve on the audit committees of
more than two other public companies.
MEETINGS AND OPERATION
The Committee shall meet at least quarterly, and more frequently as it may
determine advisable in light of its responsibilities as set forth in this
Charter. The Committee Chair sets the agenda for each meeting and determines the
length and frequency of meetings.
The Committee shall meet periodically, and at a minimum four times per
year, in separate executive sessions with management, the internal auditors and
the independent auditor. The Committee may request any officer or employee of
the Company, outside counsel or the independent auditors to attend a meeting of
the Committee or to meet with any members of, or consultants to, the Committee.
The Committee shall determine how to best operate, including whether to
delegate any responsibilities to subcommittees.
The Committee shall operate in full compliance with the New York Stock
Exchange requirements for audit committees and other applicable laws and
The independent auditor shall report directly to the Committee. The
Committee has the sole authority and responsibility to select, appoint, evaluate
and, where appropriate, replace the independent auditor. The Committee 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.
In carrying out its purposes, the Committee's policies and procedures
should remain flexible, so that it may be in a position to best react or respond
to changing circumstances or conditions. While there is no "blueprint" to be
followed by the Committee in carrying out its purposes, the following should be
considered within the responsibilities and authority of the Committee:
1. Select Independent Auditors. Select the independent auditors
2. Matters Concerning the Independence of Independent
Auditors. Review and discuss with the independent auditors the written
disclosures required by Independence Standards Board Standard No. 1
regarding their independence and, where appropriate, recommend that the
Board take appropriate action in response to the disclosures to satisfy
itself of the independence of the independent auditors.
Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law.
Set policies for the Company's hiring of employees or former employees
of the independent auditor.
Preapprove all auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company by
its independent auditor. 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 decisions of such subcommittee to grant
preapprovals shall be presented to the full Committee at its next scheduled
3. Review Quality Control Process of Independent Auditor. Obtain and
review a report from the independent auditor at least annually regarding
(a) the independent 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 years
respecting one or more independent audits carried out by the firm, (c) any
steps taken to deal with any such issues, and (d) all relationships between
the independent auditor and the Company. Present the conclusions of its
review with respect to the independent auditors to the Board.
4. Review Audit Plan. Review with the independent auditors their
plans for, and the scope of, their annual audit.
5. Conduct of Audit. Discuss with the independent auditors the
matters required to be discussed by Statement on Auditing Standards Nos.
61, 89 and 90 relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work and management's
response, any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management.
6. Review Audit Results. Review with the independent auditors the
report of their annual audit, or proposed report of their annual audit, the
accompanying management letter, if any, and the reports of their reviews of
the Company's interim financial statements conducted in accordance with
Statement on Auditing Standards No. 100.
7. Review Annual Financial Statements. Review and discuss with
management and the independent auditors the audited financial statements
and the disclosures to be made in management's discussion and analysis.
Recommend to the Board whether the audited financial statements should be
included in the 10-K.
8. Review Quarterly Financial Results. Review and discuss with
management the Company's earnings press releases, including the use of "pro
forma" or "adjusted" non-GAAP information. Review with management generally
the types of financial information and presentation to be provided to
analysts and rating agencies, including whether earnings guidance will be
9. Review Quarterly Financial Statements. Review and discuss with
management and the independent auditor the quarterly financial statements
and the disclosures to be made in the MD&A prior to filing the 10-Q.
Discuss with the independent auditors their review of the quarterly
10. Financial Reporting Issues and Judgments; Related
Matters. 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
Review and discuss quarterly reports from the independent auditors on:
(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 treatment preferred by the independent auditor.
(c) Other material written communications between the independent
auditor and management, such as any management letter or schedule of
(d) Reports and disclosures of any insider or affiliated party
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.
Discuss with management and the independent auditor any correspondence
or published report which raises material issues regarding the Company's
financial statements or accounting policies that is issued by the U.S.
Securities and Exchange Commission or the New York Stock Exchange or other
11. Review Corporate Audit Program. Review annually with the senior
corporate auditing executive the budget, staffing and proposed scope of the
corporate auditing department activities. Review annually the results of
the corporate audit activities.
Review the appointment and replacement of the senior corporate
Approve a matrix for the timing and scope of reporting by Corporate
Audit to the Committee and the Business Practices Oversight Committee (in
consultation with the Chair of that Committee); receive and review reports
to the Committee pursuant to such matrix from the senior corporate auditing
12. Complaints regarding Accounting and Auditing Matters. 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 concerns regarding questionable accounting or
13. Review Systems of Internal Accounting Controls. Review with
management, the senior corporate auditing executive and the independent
auditors the adequacy of the Company's internal accounting controls that
could significantly affect the Company's financial statements.
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
14. Securities Exchange Act of 1934. Obtain assurance from the
independent auditor that Section 10A(b) of the Securities Exchange Act of
1934 has not been implicated.
15. Legal, Compliance and Risk Management Matters.
- At least annually, the Committee or its Chair will meet with the
Business Practices Oversight Committee or its Chair to review
compliance and risk matters, including material reports or inquiries
received from governmental agencies and material litigation. When
such meetings are held by the Committee Chair, he or she will report
on such meetings to the full Committee.
- Review with the Company's General Counsel legal matters that may
have a material impact on the financial statements and legal and
compliance matters that involve financial reporting or SEC
- 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
16. Prepare Proxy Statement Report. Prepare the report of the
Committee required by the rules of the SEC to be included in the Company's
annual proxy statement.
17. Review Other Matters. Review such other matters in relation to
the accounting, auditing, financial reporting and related compliance
practices and procedures of the Company as the Committee may, in its own
discretion, deem desirable in connection with the review functions
18. Board Reports. Regularly report its activities to the Board in
such manner and at such times as it deems appropriate. The Committee shall
review with the Board any issues that arise with respect to the quality or
integrity of Schering-Plough's financial statements, compliance with legal
or regulatory requirements, the performance and independence of the
independent auditors or the performance of the corporate auditors.
19. Review Committee Performance. Annually review its own
20. Review Charter. Review and reassess the adequacy of this Charter
annually and submit it to the Nominating and Corporate Governance Committee
and the Board for approval.
The Committee shall have the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisors.
FUNDING FOR INDEPENDENT AUDITORS AND ADVISORS
The Company shall provide for appropriate funding, as determined by the
Committee, for payment of:
- compensation to the independent auditor for the purpose of rendering or
issuing an audit report and for any other services approved by the
- compensation for any other advisors retained by the Committee, and
- ordinary administrative expenses that are necessary or appropriate in
carrying out the Committee's duties.
AUDIT COMMITTEE CHARTER REFERENCE SHEET:
1. INDEPENDENCE STANDARDS BOARD STANDARD NO. 1
Under ISB Standard No. 1, at least annually, an auditor must (1) disclose
to the audit committee, in writing, all relationships between the auditor and
its related entities that in the auditors' professional judgment may reasonably
be thought to bear on independence, (2) confirm in the letter that, in its
professional judgment, it is independent of the company, and (3) discuss the
auditors' independence with the audit committee.
2. STATEMENT ON ACCOUNTING STANDARDS NOS. 61, 89 AND 90
SAS Nos. 61, 89 and 90 requires an independent auditor to communicate to
the audit committee matters related to the conduct of the audit such as the
selection of and changes in significant accounting policies, the methods used to
account for significant unusual transactions, the effect of significant
accounting policies in controversial or emerging areas, the process used by
management in formulating particularly sensitive accounting estimates and the
basis for the auditors' conclusions regarding the reasonableness of those
estimates, significant adjustments arising from the audit, and disagreements
with management over the application of accounting principles, the basis for
management's accounting estimates and the disclosures in the financial
3. STATEMENT ON ACCOUNTING STANDARDS NO. 100
SAS No. 100 requires an independent auditor to be satisfied that any
significant matters identified as a result of interim review procedures have
been brought to the attention of the audit committee, either by management or
the auditor. If it is not possible for the auditor to make such communications
prior to the filing, they should be made as soon as practicable thereafter.
4. SECTION 10A(B) OF SECURITIES EXCHANGE ACT OF 1934
Section 10A(b) of the Securities Exchange Act of 1934, which is part of the
Private Securities Litigation Reform Act of 1995, requires an independent
auditor to inform management of, and assure that the audit committee is
adequately informed with respect to, illegal acts that have come to the
attention of the auditors in the course of their audits.