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Organization
This
charter governs the operations of the Audit Committee.
The Committee shall review
and reassess the charter
at least annually and obtain the approval of the Board
of Directors in respect of any revisions. The Committee
shall be members of, and appointed by, the Board of
Directors and shall comprise at least three Directors,
each of whom are independent of management and the
Company. Members of the Committee shall be considered
independent as long as they do not accept any consulting,
advisory, or other compensatory fee from the Company
(other than in their capacity as a Board or Committee
member) and are not an affiliated person (i.e. not
directly or indirectly controlling, controlled by,
or under common control) of the Company or its subsidiaries,
and meet the independence requirements of the stock
exchange listing standards. All Committee members shall
be financially literate, and at least one member shall
be an “Audit Committee Financial Expert,” as
defined by SEC regulations (see Qualifications below).
Purpose
The
Audit Committee shall provide assistance to the Board
of Directors in fulfilling their oversight
responsibility
to the shareholders, potential shareholders, the investment
community, and others relating to: the integrity of
the Company’s financial statements; the financial
reporting process; the systems of internal accounting
and financial controls; the performance of the Company’s
internal audit function and independent auditors; the
independent auditor’s qualifications and independence;
and the Company’s compliance with ethics policies
and legal and regulatory requirements. In so doing,
it is the responsibility of the Committee to maintain
free and open communication between the Committee,
independent auditors, the internal auditors, and management
of the Company.
In discharging its oversight role, the Committee is
empowered to investigate any matter brought to its
attention with full access to all books, records, facilities,
and personnel of the Company and to engage independent
counsel and other advisers as it determines necessary
to carry out its duties.
Funding
The
Board of Directors shall cause the Company to provide
to the Audit Committee appropriate
funding,
as the Committee may require, for payment of (i) all
invoices, approved by the Committee, from the Company’s
auditors, (ii) invoices from advisors employed by the
Committee including independent counsel, and (iii)
the ordinary administrative expenses necessary or appropriate
for the Committee to carry out its duties.
Duties and Responsibilities
The
primary responsibility of the Audit Committee is
to oversee the Company’s financial reporting
process on behalf of the Board and report the results
of their activities to the Board. 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. Management
is responsible for the preparation, presentation, and
integrity of the Company’s financial statements
and for the appropriateness of the accounting principles
and reporting policies that are used by the Company.
The independent auditors are responsible for auditing
the Company’s financial statements and for reviewing
the Company’s unaudited interim financial statements.
The
Committee, in carrying out its responsibilities,
believes its policies and procedures
should remain
flexible, in order to best react to changing conditions
and circumstances. The Committee should take appropriate
actions to set the overall corporate “tone” for
quality financial reporting, sound business risk practices,
and ethical behavior. The following shall be the principal
duties and responsibilities of the Audit Committee.
These are set forth as a guide with the understanding
that the Committee may supplement them as appropriate.
The Committee shall be directly responsible for the
appointment, setting compensation, the retention, and
the termination of the independent auditors (subject,
if applicable, to shareholder ratification of the appointment).
The independent auditors shall report directly to the
Audit Committee. The Committee also shall be directly
responsible for oversight of the work of the independent
auditors, including resolution of disagreements between
management and the auditor regarding financial reporting.
The Committee shall pre-approve all audit and non-audit
services provided by the independent auditors and shall
not engage the independent auditors to perform specific
non-audit services proscribed by law or regulation
(see Prohibited Non-Audit Services, below). The Committee
may delegate pre-approval authority to a member of
the Audit Committee. The decisions of any Audit Committee
member to whom pre-approval authority is delegated
must be presented to the full Audit Committee at its
next scheduled meeting.
At least annually, the Committee shall obtain and
review a written report by the independent auditors
describing:
- The
firm’s internal quality
control procedures.
- 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.
- All
relationships between the independent auditor and
the Company (to assess the auditor’s
independence) consistent with Independence Standards
Board Standard
1.
The Committee shall actively engage in a dialogue
with the independent auditor with respect to any disclosed
relationships or services that may impact the objectivity
and independence of the auditor. The Committee shall
take, or recommend that the Board of Directors take,
appropriate action to oversee the independence of the
outside auditor.
In addition, the Committee shall set clear hiring
policies for employees or former employees of the independent
auditors that comply with the SEC regulations and stock
exchange listing standards.
The
Committee shall discuss with the internal auditors
and the independent auditors the
overall scope and
plans for their respective audits, including the adequacy
of staffing and compensation. Also, the Committee shall
discuss with management, the internal auditors, and
the independent auditors the adequacy and effectiveness
of the accounting and financial controls, including
the Company’s policies and procedures to assess,
monitor, and manage business risk, and legal and ethical
compliance programs.
The
Committee shall meet separately periodically with
management, the internal auditors,
and the independent
auditors to discuss issues and concerns warranting
Committee attention. The Committee shall review with
the independent auditor any audit problems or difficulties
and management’s response.
The Committee shall receive a report from the independent
auditor, prior to the filing of its audit report with
the SEC, on all critical accounting policies and practices
of the Company, all material alternative treatments
of financial information within generally accepted
accounting principles that have been discussed with
management, including the ramifications of the use
of such alternative treatments and disclosures and
the treatment preferred by the independent auditor,
and other material written communications between the
independent auditor and management.
The
Committee shall review management’s assertion
on its assessment of the effectiveness of internal
controls as of the end of the most recent fiscal year
and the independent auditors’ report on management’s
assertion.
The Committee shall monitor and advise management
as necessary concerning policies for earnings press
releases, and financial information and earnings guidance
provided to analysts and rating agencies.
The
Committee shall review the interim financial statements
and disclosures under Management’s Discussion
and Analysis of Financial Condition and Results of
Operations with management and the independent auditors
prior to the filing of the Company’s Quarterly
Report on Form 10-Q. Also, the Committee shall discuss
the results of the quarterly review and any other matters
required to be communicated to the Committee by the
independent auditors under generally accepted auditing
standards.
The
Committee shall review with management and the independent
auditors the financial statements
and disclosures
under Management’s Discussion and Analysis of
Financial Condition and Results of Operations to be
included in the Company’s Annual Report on Form
10-K (or the annual report to shareholders if distributed
prior to the filing of Form 10-K), including their
judgment about the quality, not just the acceptability,
of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the
financial statements. Also, the Committee shall discuss
the results of the annual audit and any other matters
required to be communicated to the Committee by the
independent auditors under generally accepted auditing
standards.
The Committee shall 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 the Company of
concerns regarding questionable accounting or auditing
matters.
The Committee shall receive and take appropriate action
concerning reports from: (a) Company lawyers regarding
evidence of a material violation of securities laws,
breaches of fiduciary duty or other material issues,
and (b) the independent auditors concerning any report
of their discovery of an illegal action or omission.
The Committee shall ensure that senior management will
take timely and appropriate remedial actions concerning
all such matters.
The
Committee shall prepare a report to be included in
the Company’s annual proxy
statement, as required by SEC regulations.
The Committee shall perform an evaluation of its performance
at least annually to determine whether it is functioning
effectively.
Qualifications to be an Audit Committee Financial
Expert
Such person shall possess the following attributes:
- An understanding of generally accepted accounting
principles and financial statements;
- The ability to assess the general application
of such principles in connection with the accounting
for estimates, accruals and reserves;
- Experience
preparing, auditing, analyzing or evaluating financial
statements that
present a breath and level
of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues
that can reasonably be expected to be raised by the
Company’s financial statements, or experience
actively supervising one or more persons engaged
in such activities;
- An understanding of internal controls and procedures
for financial reporting; and
- An understanding of audit committee functions.
The above attributes shall have been acquired through
one of the following:
- Education and expertise as a principal financial
officer, principal accounting officer, controller,
public accountant or auditor or experience in one
or more positions that involve the performance of
similar functions;
- Experience actively supervising a principal financial
officer, principal accounting officer, controller,
public accountant, auditor or person performing similar
functions;
- Experience overseeing or assessing the performance
of companies or public accountants with respect to
the preparation, auditing or evaluation of financial
statements; or
- Other relevant experience.
Prohibited Non-Audit Services
The Audit Committee shall not approve the engagement
of the independent auditors to provide any of the following
services:
- Bookkeeping or other services related to the accounting
records or financial statements of the Company;
- Financial information systems design and implementation;
- Appraisal or valuation services, fairness opinions,
or contribution-in-kind reports;
- Actuarial services;
- Internal audit outsourcing services;
- Management functions or human resources;
- Broker or dealer, investment adviser, or investment
banking services;
- Legal services and expert services unrelated to
the audit; and
- Any other services that the Public Company Accounting
Oversight Board may determine, by regulation, is
impermissible.
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