Audit And Finance Committee Charter
1 Role
A. Oversight on Accounting, Auditing and Financial Reporting.
The Audit and Finance Committee (the “Committee”) of the Board of Directors (the “Board”) assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and financial reporting practices of the Corporation, and such other duties as directed by the Board. The Committee’s purpose is to oversee the accounting and financial reporting processes of the Corporation, the audits of the Corporation’s financial statements, the qualifications of the public accounting firm engaged as the Corporation’s independent auditor to prepare or issue an audit report on the financial statements of the Corporation and internal control over financial reporting, and the performance of the Corporation’s internal audit function and independent auditor. Management is responsible for (a) the preparation, presentation and integrity of the Corporation’s financial statements; (b) accounting and financial reporting principles; and (c) the Corporation’s internal controls and procedures designed to promote compliance with accounting standards, applicable laws and regulations and the company’s ethical standards. The Corporation’s independent auditing firm is responsible for performing an independent audit of the consolidated financial statements in accordance with generally accepted auditing standards.
The Committee members are not professional accountants or auditors and their functions are not intended to duplicate or to certify the activities of management and the independent auditor, nor can the Committee certify that the independent auditor is “independent” under applicable rules. The Committee serves a board level oversight role where it oversees the relationship with the independent auditor, as set forth in this charter, receives information and provides advice, counsel and general direction, as it deems appropriate, to management and the auditors, taking into account the information it receives, discussions with the auditor, and the experience of the Committee’s members in business, financial and accounting matters.
B. Oversight on Financial Affairs of Corporation.
The Committee shall also perform the following functions:
(a) The Committee will work with management to assist the Board in overseeing the financial affairs of the Corporation. The Committee reviews and makes recommendations to the Board about the financial affairs and policies of the Corporation.
(b) The Committee advises management in relation to mergers and / or acquisitions, unless the Board establishes a special committee to perform such service.
2. Members
The membership of the Committee consists of at least three directors, all of whom shall meet the independence requirements established by the Board and applicable laws, regulations, and listing requirements. Each member shall in the judgment of the Board have the ability to read and understand fundamental financial statements and otherwise meet the financial sophistication standard established by the requirements of the NASDAQ Stock Market, Inc. At least one member of the Committee shall in the judgment of the Board be an “audit committee financial expert” as defined by the rules and regulations of the Securities and Exchange Commission. The Board appoints the members of the Committee and the chairperson. The Board may remove any member from the Committee at any time with or without cause.
3. Responsibilities
The Committee:
(a) is directly responsible for the selection, appointment, replacement, compensation, and oversight of the work of the independent auditor. The independent auditor shall report directly to the Audit Committee.
(b) obtains and reviews annually a report by the independent auditor describing the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, peer review, PCAOB inspection, 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 resolve with any such issues.
(c) reviews and discusses with the independent auditor the written statement from the independent auditor concerning any relationship between the auditor and the company or any other relationships that may adversely affect the independence of the auditor, and, based on such review, assesses the independence of the auditor.
(d) establishes policies and procedures for the review and pre-approval by the Committee of all auditing services and permissible non-audit services (including the fees and terms thereof) to be performed by the independent auditor.
(e) reviews and discusses with the independent auditor: (i) its audit plans, and audit procedures, including the scope, fees and timing of the audit; (ii) the results of the annual audit examination and accompanying management letters; and (iii) the results of the independent auditor’s procedures with respect to interim periods.
(f) reviews and discusses reports from the independent auditors on (i) all critical accounting policies and practices used by the company, (ii) alternative accounting treatments with GAAP related to material items that have been discussed with management, including the ramifications of the use of the alternative treatments and the treatment preferred by the independent auditor, and (iii) other material written communications between the independent auditor and management.
(g) reviews and discusses with the independent auditor the independent auditor’s judgments as to the quality, not just the acceptability, of the Corporation’s accounting principles and such further matters are the independent auditors present the Committee under generally accepted auditing standards.
(h) discusses with management and the independent auditor quarterly earnings press releases, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, if deemed appropriate, recommends to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year.
(i) reviews and discusses with management and the independent auditor various topics and events that may have significant financial impact on the company ort hat are the subject of discussions between management and the independent auditors.
(j) reviews and discusses with management the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
(k) reviews and approves related-party transactions (as defined in the relevant NASDAQ requirements).
(l) reviews and discusses with management, the independent auditor, and the Corporation’s chief audit executive (CAE): (i) the adequacy and effectiveness of the Corporation’s internal controls (including any significant deficiencies or material weaknesses) and significant changes in internal controls reported to the Committee by the independent auditor or management; (ii) the Corporation’s internal audit procedures; and (iii) the adequacy and effectiveness of the Corporation’s disclosure controls and procedures, and management reports thereon.
(m) reviews and discusses with the CAE significant risk exposures and control issues.
(n) reviews annually with the CAE the scope of the internal audit program, and reviews annually the performance of both the internal audit group and the independent auditor in executing their plans and meeting their objectives.
(o) reviews and concurs in the appointment, replacement, reassignment, or dismissal of the CAE.
(p) reviews the use of auditors other than the independent auditor in cases such as management’s request for second opinions.
(q) reviews matters related to the corporate compliance activities of the company, including the review of reports from the company’s Ethics and Compliance Oversight Committee and other related groups.
(r) establishes 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 auditing matters.
(s) establishes policies for the hiring of employees and former employees of the independent auditor.
(t) publishes the report of the Committee required by the rules of the Securities and Exchange Commission to be included in the company’s annual proxy statement.
(u) when appropriate, designates one or more of its members to perform certain of its duties on its behalf, subject to such report to or ratification by the Committee as the Committee shall direct.
(v) has the responsibility of developing, together with the CAE, an annual audit schedule annotating the dates and time frames for audit committee activities
(w) Consults with management, provides oversight with respect to, and makes recommendations to the Board on matters relating to the financial affairs of the Company including areas of financial exposure and risk management.
(x) Reviews and provides guidance to the Board and management regarding:
(i) Cash management and dividend polkcy
(ii) Shareholder dividends and share repurchases
(iii) Working capital and cash flow management
(iv) Management of interest rate and foreign exchange risk
(v) Capital policy
(vi) Equity and debt issuances
(vii) The Corporation’s capital structure and potential adjustments
(viii) Investment philosophy and policies
(ix) Allocation of investment portfolio
(x) Management of investment risk
(xi) Tax planning and compliance
(xii) Financial aspects of insurance and risk management
(xiii) Indemnification arrangements for directors, officers, employees and agents of the Corporation and its subsidiaries
The Committee will engage in an annual self-assessment with the goal of continuing improvement, and will annually review and reassess the adequacy of its charter, and recommend any changes to the full Board.
The Committee shall meet at such times and places as the Committee shall determine. The Committee shall meet in executive session with the independent auditor, the CAE and management periodically. The Chairman of the Audit Committee shall report on Committee activities to the full Board.
The Chairman of the Committee is to be contacted directly by the CAE or the independent auditor (1) to review items of a sensitive nature that can impact the accuracy of financial reporting or (2) to discuss significant issues relative to the overall Board responsibility that have been communicated to management but, in their judgment, may warrant follow-up by the Committee.
4. Other Responsibilities
The Committee will regularly review and make recommendations to the Chairperson of the Nomination and Corporate Governance Committee regarding changes to the Charter of the Committee and will obtain or perform an annual evaluation of the Committee’s performance and make applicable recommendations, and reports results to the Chairperson of the Nomination and Corporate Governance Committee.
5. Authorization
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel or other experts or consultants, as it deems appropriate, including sole authority to approve the firms’ fees and other retention terms. The Corporation will provide the Committee with appropriate funding, as the Committee determines, for the payment of compensation to the Corporation’s independent auditor, outside counsel, and other advisors as it deems appropriate and administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention. The Committee will have access to the Corporation’s books, records, facilities, and personnel. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Corporation, and the Committee will take all necessary steps to preserve the privileged nature of those communications.
The Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee.
