2003 Committee Charter : DGX
Quest Diagnostics Incorporated
Audit and Finance Committee Charter
The primary purpose of the Committee is (1) to assist in the Board's oversight of (a) the quality and integrity of the Company's financial statements and related disclosure, (b) the Company's compliance with legal and regulatory requirements, (c) the independent auditor's qualifications and independence, and (d) the performance of the Company's internal audit function and independent auditors, and (2) to provide advice to the Board on financing activities and other financial matters. In connection with the Committee's responsibility for oversight of the Company's compliance with legal and regulatory requirements, the Committee acknowledges that the Company's Quality, Safety & Compliance Committee will continue to be primarily responsible for oversight of the Company's compliance with legal and regulatory requirements other than securities and accounting laws and regulations. In furtherance of its purpose, the Committee will maintain unrestricted and open communication between the Board of Directors, the independent auditor, the internal auditors and the financial management of the Company.
Members. The Committee shall consist of as many members as the Board shall determine, but in any event not fewer than three members. The members of the Committee shall be appointed annually by the Board upon the recommendation of the Governance Committee.
Qualifications. Each member of the Committee shall meet all applicable independence, financial literacy and other requirements of law and the New York Stock Exchange. It is the expectation of the Company that at least one member of the Committee shall be an audit committee financial expert as such term is defined by the Securities and Exchange Commission.
Chair. The Chair of the Committee shall be appointed by the Board upon recommendation of the Governance Committee.
Removal and Replacement. The members of the Committee may be removed or replaced, and any vacancies on the Committee shall be filled, by the Board upon the recommendation of the Governance Committee. In addition, membership on the Committee shall automatically end at such time as the Board determines that a member ceases to meet the independence, financial literacy and other requirements of law and the New York Stock Exchange,
Meetings. The Chair of the Committee, in consultation with the Committee members, shall determine the schedule and frequency of the Committee meetings. At all meetings of the Committee, the presence of a majority of the members of the Committee shall be necessary and sufficient to constitute a quorum for the transaction of business. Except when otherwise required by statute, the vote of a majority of the members of the Committee present and acting at a meeting at which a quorum is present shall be the act of the Committee. In the absence of a quorum, a majority of the members of the Committee present may adjourn the meeting from time to time, until a quorum shall be present. The Committee may also act by unanimous written consent of all the members.
Agenda. The Chair of the Committee shall develop and set the Committee's agenda, in consultation with management. The agenda and information concerning the business to be conducted at each Committee meeting shall, to the extent practical, be communicated to the members of the Committee in advance of each meeting.
Report to Board. At each regular meeting of the Board, the Committee shall report to the Board on any meetings held or actions taken by the Committee since the last regular meeting of the Board with such recommendations as the Committee shall deem appropriate.
Self-Evaluation; Assessment of Charter. The Committee shall conduct an annual self-evaluation of its performance and shall report to the Board the results of the self-evaluation. The Committee shall assess the adequacy of this Charter periodically (not less than annually) and recommend any changes to the Board.
Authority and Duties
In furtherance of its purpose, the Committee shall:
Independent Auditor's Qualifications and Independence:
Be directly responsible for the appointment, retention, compensation, evaluation and oversight of the work of the independent auditor employed by the Company to audit its financial statements or perform related services. The independent auditor shall report directly to the Committee.
Have the sole authority to preapprove any non-audit services to be provided by the independent auditor.
Obtain and review with the lead audit partner, annually or more frequently as the Committee considers appropriate, a report by the independent auditor describing: the independent auditor's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, or by any inquiry, review or investigation by governmental, professional or other regulatory 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 these issues; and (to assess the independent auditor's independence) all relationships between the independent auditor and the Company.
Review the experience, qualifications and performance of the senior members of the independent auditor team.
Preapprove the hiring of any employee or former employee of the independent auditor who was a member of the Company's audit team during the preceding three fiscal years. In addition, the Committee shall preapprove the hiring of any employee or former employee of the independent auditor (within the preceding three fiscal years) for senior positions within the Company, regardless of whether that person was a member of the Company's audit team.
Performance of the Internal Audit Function and Independent Auditor
Meet with the internal auditor, independent auditor and financial management to review the scope, planning and staffing of the proposed audit for the current year and, at the conclusion thereof, review such audit, including any comments or recommendations of the independent auditor and inquire about whether any undue time pressures were placed on the independent auditor.
Review the organization, responsibilities, plans, results, budget and staffing of the internal audit function, including the independence and authority of its reporting obligations, the proposed audit plans for the coming year and the summary of findings from completed and in progress internal audits.
Review and concur in the appointment, replacement, reassignment or dismissal of the Director of Internal Audit.
Review with the independent auditor, internal auditors and financial management, the quality, adequacy and effectiveness of the Company's internal controls and any significant deficiencies or material weaknesses in such controls and elicit any recommendations for the improvement of such internal controls.
Review the Company's policies with respect to risk assessment and risk management.
Financial Statements and Related Disclosure
Review and discuss the annual audited financial statements and quarterly financial statements with management and the independent auditor, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" before the filing of the Company's Form 10-K and Form 10-Q.
Review and discuss with management earnings press releases before they are issued and the nature of the financial information and earnings guidance provided to analysts and rating agencies.
Review in a timely manner with the independent auditor: (1) all critical accounting policies and practices to be used by the Company in preparing its financial statements, (2) all alternative treatments of financial information within United States generally accepted accounting principles that have been discussed with management, ramifications of the use of these alternative disclosures and treatments, and the treatment preferred by the independent auditor, and (3) other material communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences. In addition, the Committee shall review with the independent auditor any audit problems or difficulties and management's response.
Review with management, and any outside professionals as the Committee considers appropriate, the adequacy and effectiveness of the Company's disclosure controls and procedures, and elicit any recommendations for the improvement of such controls and procedures.
Review with management, and any outside professionals as the Committee considers appropriate, important trends and developments in financial reporting practices and requirements and their effect on the Company's financial statements.
Prepare the Committee's report required by the Securities and Exchange Commission to be included in the Company's annual proxy statement.
Compliance with Legal and Regulatory Requirements
Obtain and review reports from management, the internal auditor, the independent auditor and the Quality, Safety & Compliance Committee regarding legal matters (including the status of pending litigation) and compliance with all applicable legal and regulatory requirements, including any material reports or inquiries from regulatory or governmental agencies.
Obtain and review reports from management and the Quality, Safety &Compliance Committee regarding the adequacy and effectiveness of the Company's procedures to ensure compliance with its legal and regulatory responsibilities.
Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing matters or potential violations of law and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
Give advice and make recommendations with regard to investments, debt financings, stock issuances, stock repurchases, dividend payments and other significant financial policies and actions.
Periodically meet separately with the internal auditor and independent auditor without members of management present. The Committee shall meet separately with the independent auditor at or in connection with every in-person meeting of the Committee at which the independent auditor is present.
Periodically meet separately with members of management without the internal auditor or independent auditor present.
Discharge such other responsibilities as may be delegated by the Board of Directors.
Clarification of the Committee's Role
The foregoing list of duties is not exhaustive, and the Committee may, in addition, perform such other functions as may be necessary or appropriate for the performance of its duties. The Committee shall have the power to delegate its authority and duties to subcommittees or individual members of the Committee, as it deems appropriate in accordance with applicable laws and regulations and the requirements of the New York Stock Exchange.
The Committee's responsibility is one of oversight. It is the responsibility of the Company's management to prepare consolidated financial statements in accordance with applicable laws and regulations and of the Company's independent auditor to audit those financial statements. Therefore, each member of the Committee shall be entitled to rely, to the fullest extent permitted by law, on the integrity of those persons and organizations within and outside the Company from whom he or she receives information, and the accuracy of the financial and other information provided to the Committee by such persons or organizations. In discharging its oversight role, the Committee shall have full access to all Company books, records, facilities and personnel.
The Committee shall have the power to retain counsel, accountants or other advisors as and on such terms as the Committee considers appropriate in carrying out its duties. The Committee shall receive appropriate funding, as determined by the Committee, from the Company to pay any such counsel, auditors or other advisors.
James F. Flaherty III
William R. Grant
Dan C. Stanzione