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The Sherwin-Williams Company
Board of Directors
Audit Committee Charter


Purpose
Membership
Responsibilitie
s
Limitation of Responsibilities
Meetings

 

Purpose
The purpose of the Audit Committee is to provide assistance to the Board of Directors in fulfilling the Board's oversight responsibilities on matters relating to: (1) the integrity of the Company's financial statements; (2) the independent auditor's qualifications and independence; (3) the performance of the Company's internal audit function and independent auditors; (4) the Company's compliance with legal and regulatory requirements; (5) preparing the report required by the rules of the Securities and Exchange Commission (the "Commission") to be included in the Company's annual proxy statement; and (6) engaging in such other matters as may from time to time be specifically delegated to the Committee by the Board.

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Membership
The Committee shall consist of at least three members. Each member of the Committee shall meet the independence requirements of (1) the New York Stock Exchange; and (2) Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), each as determined by the Board in its business judgment.

In addition, each member of the Committee shall be financially literate or must become financially literate within a reasonable period of time after appointment to the Committee. The Board will determine, in its business judgment, whether the members meet the financial literacy requirement.  Furthermore, at least one member of the Committee must have accounting or related financial management expertise, as determined by the Board in its business judgment.  The criteria for financial literacy and accounting or related financial management expertise shall meet the audit committee requirements of the New York Stock Exchange.

The members of the Committee will be appointed and replaced by the Board.  The Board will appoint a Chairman of the Committee.  The Chairman of the Committee will, in consultation with the other members of the Committee and the appropriate officers of the Company, be responsible for calling meetings of the Committee, establishing the agenda for the meetings and conducting the meetings of the Committee.

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Responsibilities
The Committee will have broad authority and powers in fulfilling its purpose and discharging its responsibilities.  In discharging its responsibilities, the Committee will:

    1)   Be directly responsible for the appointment, retention, compensation, evaluation, termination and oversight of the work of the Company's independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company (including the resolution of any disagreements between management and the independent auditor regarding financial reporting). 

    2)  Preapprove all auditing services and permitted non-audit services (including the fees and retention terms thereof) to be performed for the Company by the independent auditor as required by the Exchange Act. 

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

    4)  Obtain advice and assistance of independent legal counsel, and other independent consultants and advisors as the Committee deems necessary to advise and assist the Committee in discharging its responsibilities.

    5)  Receive appropriate funding, as determined by the Committee, from the Company for payment of compensation to the independent auditor, and for payment of compensation to any independent legal counsel or other independent consultant or advisor employed by the Committee.

    6)  Review annually a report by the independent auditor describing (a) the firm's 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, and any steps taken to deal with any such issues, and (c) all relationships between the independent auditor and the Company to assess the auditor's independence.

    In connection with the independence of the independent auditors, the Committee will (a) ensure that the independent auditors submit on a periodic basis to the Committee a formal written statement delineating all relationships between the independent auditors and the Company, (b) consider whether the providing of any non-audit services by the independent auditors is compatible with maintaining the independence of the independent auditors, (c) actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors, and (d) recommend that the Board take appropriate action in response to the independent auditors' report to satisfy itself of the independence of the independent auditors.

    7)  Review with management and the independent auditor the annual audited financial statements and quarterly financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of  Operations."  Such review shall include a review with the independent auditor of any audit problems or difficulties and management's response thereto.

    8)  Review generally with management the type of information to be disclosed and the type of presentation to be made (a) in the Company's earnings press releases and (b) in any financial information and earnings guidance provided to analysts and ratings agencies.

    9)  Review with internal audit management (a) the plans for and scope of ongoing internal audit activities and (b) the annual report of the internal audit activities, examinations and the results thereof.

    10)  Review with management, internal audit management and the independent auditor the quality and adequacy of the Company's internal accounting policies and financial controls. 

    11)  Review with management the Company's policies and guidelines used by management to assess and manage the Company's exposure to financial risk.

    12)  Establish hiring policies and guidelines for the Company with respect to current and former employees of the independent auditor.

    13)  Review such other matters in relation to the accounting, auditing and financial reporting practices and procedures of the Company as the Committee may, in its own discretion, deem desirable in connection with the review functions described above.

    14)  Review with appropriate officers of the Company the Company's policies and procedures with respect to (a) compliance with applicable laws and regulations and (b) proper business conduct and practices. 

    15)  Prepare annually any reports required by the rules of the Commission to be included in the Company's annual proxy statement.

    16)  Conduct an annual evaluation of the Committee's own performance.

    17)  Review and evaluate the adequacy of this Charter at least annually and recommend any proposed changes to the Board for approval.

The Committee shall have the sole authority to retain and terminate the independent auditor and shall have sole authority to approve the independent auditor's fees and other retention terms.  The Committee shall be directly responsible for the oversight of the work of the independent auditor (including the resolution of any disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. The independent auditor shall report directly to the Committee.

The Committee shall have the authority to retain, at such times and on such terms as the Committee determines in its sole discretion and at the Company's expense, independent legal counsel or other independent consultants and advisors, to advise and assist the  Committee in discharging its responsibilities.

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.  Any decisions of any such subcommittee to grant preapprovals shall be presented to the full Committee at its next scheduled meeting.

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Limitation of Responsibilities
While the Committee has the powers and responsibilities set forth in this Charter, it is not the responsibility of the Committee to plan or conduct audits, to determine that the Company's financial statements are complete and accurate or to determine that such financial statements are in accordance with generally accepted accounting principles.  It is also not the responsibility of the Committee to conduct investigations or to assure compliance with laws and regulations, and the Company's policies, procedures and corporate compliance programs.  These are the responsibility of management and the independent auditor.

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Meetings
The Committee shall meet as frequently as it determines necessary to discharge its responsibilities. The Committee will meet periodically with management, the internal audit management and the independent auditor in separate executive sessions.  In addition, the Committee may request any officer or employee of the Company, or the Company's outside legal counsel, independent auditors and other third parties to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. A majority of the members of the Committee shall constitute a quorum. Members of the Committee may participate in a meeting of the Committee by means of conference call or any other communications equipment by which all persons participating in the meeting can hear each other.  The Committee shall report its activities to the Board at the Board's first regular meeting thereafter or at such earlier times as it deems appropriate.

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Copyright 2005 The Sherwin-Williams Company