The Audit and Finance Committee (the "Audit Committee") shall
assist the Board of Directors with the oversight of: (a) the integrity of the
financial statements and internal controls of Covance Inc. (the
"Company"), (b) the Company's compliance with legal and regulatory
requirements, (c) the independent auditor's qualifications and independence,
(d) the performance of the Company's internal audit function and the
independent auditors, (e) the Company's capital and financing requirements
and structure, (f) tax matters, and (g) risk management. The purpose of the
Audit Committee is to provide oversight of management and the independent
auditors and not to prepare financial statements, to provide internal
controls or to conduct the other above-referenced matters.
The Audit Committee shall consist of three or more directors all of whom in
the judgment of the Board of Directors shall be independent in accordance
with New York Stock Exchange listing standards and applicable law. Each
member shall in the judgment of the Board of Directors be financially
literate in accordance with New York Stock Exchange listing standards. The
intent of the Board is that, where reasonably feasible, at least one member
of the Audit Committee, in the judgment of the Board of Directors, will be an
audit committee financial expert in accordance with applicable law and the
rules and regulations of the Securities and Exchange Commission. Service on
the Audit Committee of any member of the Board who simultaneously serves on
the audit committee of more than three public companies shall be subject to
approval of the Board in accordance with the New York Stock Exchange listing
standards. Members of the Audit Committee and the Audit Committee Chair shall
be appointed by the Board of Directors and may be removed by the Board of
Directors in its discretion. The Audit Committee shall have the authority to
delegate to subcommittees as it deems appropriate.
The Audit Committee shall have the following authority and responsibilities:
1. Directly to appoint, retain, evaluate, oversee, and
terminate the independent auditor, including resolution of any disagreements
between management and the auditor regarding financial reporting, and to
approve all audit engagement fees and terms. The independent auditor shall
report directly to the Audit Committee.
2. Approve all audit services and any non-audit services in advance of the
performance of such audit and non-audit services, except as permitted by
applicable law and the rules and regulations of the SEC.
3. Establish procedures for the receipt, retention and treatment of
complaints from Company employees on accounting, internal accounting controls
or auditing matters, as well as for confidential, anonymous submissions by
Company employees of concerns regarding questionable accounting or auditing
4. Obtain advice and assistance from outside legal, accounting or other
advisors as the Audit Committee deems necessary to carry out its duties.
5. Receive appropriate funding, as determined by the Audit Committee, from
the Company for payment of compensation to the outside legal, accounting or
other advisors employed by the Audit Committee.
6. Obtain and review:
a. At least annually, a report by the independent auditor
describing the independent auditor's internal quality-control procedures and
any material issues raised by the most recent internal quality-control
review, or peer review, of the independent auditor, 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 independent auditor, and any steps taken to deal with any such issues;
b. At least annually, a report by the independent auditor describing all
relationships between the independent auditor and the Company for the purpose
of assessing the independence of the independent auditor; and
c. Other reports from the independent auditor that the Audit Committee deems
necessary or appropriate.
7. Review with the independent auditor:
a. The scope and results of the audit;
b. Any audit problems or difficulties and management's response; and
c. Current accounting and auditing trends and developments.
8. Review, at least annually, the scope and results of the
internal audit program and any significant matters contained in reports from
the internal auditor.
9. Review and discuss the Company's policies and processes with respect to
risk assessment and risk management.
10. Review and discuss: (a) with the independent auditor, the Company's
internal auditor, and management the system of internal control; and (b) any
special audit steps adopted in light of any significant control deficiencies.
11. Review and discuss with management and the independent auditor:
a. The annual audited financial statements and quarterly
financial statements of the Company, including the Company's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations;"
b. Critical accounting policies and practices and major issues regarding
accounting principles and financial statement presentations, including any
significant changes in the Company's selection or application of accounting
principles or practices;
c. 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; and
d. The effect of regulatory and accounting initiatives (as well as
off-balance sheet structures, if any) on the financial statements of the
12. Recommend to the Board of Directors, based on the
Committee's activities under this Charter, whether the members of the Board
of Directors should execute the annual report on Form 10-K.
13. Review and discuss the general content of earnings press releases,
including the type and presentation of information to be included in earnings
press releases, (paying particular attention to any use of "pro
forma," or "adjusted" non-GAAP, information), as well as
financial information and earnings guidance provided to the public, analysts
and rating agencies.
14. Review and discuss: (a) the status of compliance with applicable laws and
regulations; and (b) the status of systems designed to promote Company
compliance with laws and regulations.
15. Establish clear policies for the hiring of employees and former employees
of the independent auditor.
16. Carry out such other duties and have such authority as may be assigned or
granted by the Board or as required to be carried out or authorized by (i)
applicable law, or (ii) the listing standards of the New York Stock Exchange.
17. Conduct an annual performance evaluation of the Audit Committee and
annually evaluate the adequacy of its charter.
The Audit Committee shall meet at least four times each year and at such
other times as it deems necessary to fulfill its responsibilities. The Audit
Committee periodically shall meet separately, in executive session, with
management, the internal auditor (or personnel responsible for the internal
audit function) and the independent auditor.
The Audit Committee shall:
1. Report regularly to the Board of Directors with respect
to its activities and make recommendations to the Board of Directors as
2. Prepare the report required by the Securities and Exchange Commission
proxy rules to be included in the Company's proxy statement relating to the
Company's annual meeting.