Audit Committee Charter
The purposes of the Audit Committee of the Board of Directors of the Company (the “Board”) are to:
- assist the Board in its oversight of:
- the integrity of the financial statements of the Company;
- the qualifications, independence and performance of the Company’s independent auditor;
- the performance of the Company’s internal audit function; and
- compliance by the Company with legal and regulatory requirements; and
- prepare the Audit Committee report that the Securities and Exchange Commission (“SEC”) rules require to be included in the Company’s annual proxy statement.
The Audit Committee shall consist of at least three members, each of whom the Board has determined has no material relationship with the Company and each of whom is otherwise “independent” under the rules of the New York Stock Exchange, Inc. and Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board shall also determine that each member is “financially literate,” and that one member of the Audit Committee has “accounting or related financial management expertise,” as such qualifications are interpreted by the Board in its business judgment, and whether any member of the Audit Committee is an “audit committee financial expert,” as defined by the rules of the SEC. If the Board has determined that a member of the Audit Committee is an audit committee financial expert, it may presume that such member has accounting or related financial management expertise.
The Nominating and Corporate Governance Committee shall recommend nominees for appointment to the Audit Committee annually and as vacancies or newly created positions occur. Audit Committee members shall be appointed by the Board and may be removed by the Board at any time. The Nominating and Corporate Governance Committee shall recommend to the Board, and the Board shall designate, the Chair of the Audit Committee.
A member of the Audit Committee may not simultaneously serve on the Audit Committee of more than three public companies unless such service is approved by the Board upon its determination, based on the recommendation of the Nominating and Corporate Governance Committee, that the simultaneous service would not impair the ability of the member to effectively serve on the Company’s Audit Committee, and the Company discloses such determination in its annual proxy statement or annual report.
The function of the Audit Committee is oversight. In fulfilling their responsibilities hereunder, it is recognized that members of the Audit Committee are not full-time employees of the Company and are not, and do not represent themselves to be, performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards.
In addition to any other responsibilities which may be assigned from time to time by the Board, the Audit Committee is responsible for the following matters:
- The Audit Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company (subject, if applicable, to shareholder ratification). Each such accounting firm shall report directly to the Audit Committee.
- The Audit Committee shall pre-approve the audit services and non-audit services to be provided by the Company’s independent auditor before the auditor is engaged to render such services. The Audit Committee may delegate its authority to pre-approve services to one or more Audit Committee members, provided that such designees present any such approvals to the full Audit Committee at the next Audit Committee meeting.
- The Audit Committee shall review and approve the scope, budget and staffing of the independent auditor’s annual audit plan(s).
- The Audit Committee shall evaluate the independent auditor’s qualifications, performance and independence, and shall present its conclusions with respect to the independent auditor to the full Board on at least an annual basis. As part of such evaluation, at least annually, the Audit Committee shall:
- obtain and review a report or reports from the Company’s independent auditor:
- describing the independent auditor’s internal quality-control procedures;
- describing any material issues raised by (i) the most recent internal quality-control review, or peer review, of the auditing firm, or (ii) any inquiry or investigation by governmental or professional authorities, within the preceding five years, regarding one or more independent audits carried out by the auditing firm, and any steps taken to deal with any such issues;
- describing all relationships between the independent auditor and the Company consistent with applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding the independent auditor’s communications with the Audit Committee concerning independence; and
- assuring that Section 10A of the Exchange Act has not been implicated;
- review and evaluate, at least annually, the qualifications, performance and independence of the independent auditor, which shall include:
- evaluating senior members of the independent auditor team(s), particularly the partners on the audit engagement teams;
- confirming and evaluating the rotation of the audit partners on the audit engagement team as required by law;
- considering the quality of the audits and whether the independent auditor should be rotated, so as to assure continuing auditor independence; and
- obtaining the opinion of management and the internal auditors of the independent auditor’s performance.
- The Audit Committee shall obtain from the independent auditor in connection with any audit a timely report relating to the Company’s annual audited financial statements describing all critical accounting policies and practices used, all alternative treatments within generally accepted accounting principles (“GAAP”) for policies and practices related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and any material written communications between the independent auditors and management, such as any “management” letter or schedule of unadjusted differences.
- The Audit Committee shall establish policies for the Company’s hiring of current or former employees of the independent auditor.
- At least annually, the Audit Committee shall evaluate the performance, responsibilities, budget and staffing of the Company’s internal audit function and review the internal audit plan. Such evaluation shall include a review of the responsibilities, budget and staffing of the Company’s internal audit function with the independent auditor.
- At least annually, the Audit Committee shall evaluate the performance of the senior officer or officers responsible for the internal audit function of the Company, and make recommendations to the Board and management regarding the responsibilities, retention or termination of such officer or officers.
Financial Statements; Disclosure and Risk Management
- Management, the internal auditors and the independent auditor are expected to provide to the Audit Committee a timely analysis of significant issues and practices relating to accounting principles and policies, financial reporting and internal control over financial reporting.
- The Audit Committee shall consider any reports or communications (and management’s and/or the internal audit department’s responses thereto) submitted to the Audit Committee by the independent auditors required by or referred to in applicable PCAOB or other professional standards.
- As appropriate, the Audit Committee shall review with management, the internal auditors and the independent auditor, in separate meetings if the Audit Committee deems it necessary:
- the scope and results of the annual review;
- the annual audited financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” prior to the filing of the Company’s Form 10-K;
- the quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” prior to the filing of the Company’s Form 10-Q;
- the individual certificates required to be filed with the Company’s periodic reports to the SEC;
- any analyses or other written communications 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;
- the critical accounting policies and practices of the Company;
- off-balance sheet transactions and structures;
- any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles;
- the effect of regulatory and accounting initiatives or actions applicable to the Company (including any SEC investigations or proceedings); and
- the form of opinion the independent auditors propose to render to the Board and shareholders.
- As appropriate, the Audit Committee shall request from the internal auditors summaries or reports on any significant matters arising from any audit, including any audit problems or difficulties, whether raised by management, the internal auditing department or the independent auditors, relating to the Company’s financial statements.
- The Audit Committee shall review, in conjunction with management, the Company’s policies generally with respect to the Company’s earnings press releases and with respect to financial information and earnings guidance provided to analysts and rating agencies, including in each case the type of nformation to be disclosed and type of presentation to be made and paying particular attention to the use of non-GAAP financial information.
- The Audit Committee shall discuss the Company’s financial information and earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, and any of the Company’s other financial disclosures as the Chair deems appropriate.
- The Audit Committee shall, in conjunction with the Chief Executive Officer (“CEO”) and Chief Financial Officer of the Company, review the Company’s disclosure controls and procedures and internal control over financial reporting.
- The review of internal control over financial reporting shall include whether there are any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the Company’s ability to record, process, summarize and report financial information and any fraud involving management or other employees with a significant role in internal control over financial reporting. The Audit Committee shall also review any special audit steps adopted in light of material control deficiencies.
- The Audit Committee shall review and discuss with the independent auditor any audit problems or difficulties and management’s response thereto, including but not limited to:
- any restrictions on the scope of the independent auditor’s activities or on access to requested information;
- any accounting adjustments that were noted or proposed by the auditor but were “passed” (as immaterial or otherwise);
- any uncorrected misstatements related to accounts or disclosures that the auditor presented to management;
- any corrected misstatements related to accounts or disclosures, other than those that are clearly trivial;
- any communications between the audit team and the audit firm’s national office regarding auditing or accounting issues presented by the engagement;
- ny management or internal control letter issued, or proposed to be issued, by the auditor;
- any unreasonably brief time within which to complete the audit; and
- any significant disagreements between management and the independent auditor.
- In connection with its oversight responsibilities, the Audit Committee shall be directly responsible for the resolution of disagreements between management and any auditor regarding the Company’s financial reporting.
- The Audit Committee shall review the Company’s policies and practices with respect to risk assessment and risk management, including discussing with management the Company’s major financial risk exposures and the steps that have been taken to monitor and control such exposures.
- The Audit Committee shall prepare the Audit Committee report that the SEC rules require to be included in the Company’s annual proxy statement.
Other Oversight and Compliance Responsibilities
- The Audit 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 Audit Committee shall review any complaints regarding accounting, internal accounting controls or auditing matters received pursuant to such procedures.
- The Audit Committee shall be advised on the Company’s compliance with laws and regulations, including major legal and regulatory initiatives. The Audit Committee shall also review any significant legal, compliance or regulatory matters that may have a material impact on the Company’s financial statements or compliance policies, including material notices to or inquiries received from governmental agencies. The Audit Committee shall meet and discuss these matters with management and others as appropriate, including the general counsel of the Company.
- The Audit Committee shall meet periodically with the Chief Information Officer to review risks related to information security and data protection.
Reporting to the Board
- The Audit Committee shall report to the Board regularly. This report shall include a review of any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the independence and performance of the Company’s independent auditor, the performance of the internal audit function and any other matters that the Audit Committee deems appropriate or is requested to be included by the Board.
- At least annually, the Audit Committee shall evaluate its own performance and report to the Board on such evaluation, which shall compare the performance of the Audit Committee with the requirements of this charter. The report to the Board may take the form of an oral report by the Chair of the Audit Committee or any other member of the Audit Committee designated by the Committee to make this report.
- The Audit Committee shall annually review and assess the adequacy of this charter and recommend any proposed changes to the Board.
Resources and Authority
The Audit Committee shall have the resources and authority (without seeking Board approval) appropriate to select, retain, terminate and approve the fees and other retention terms of special or independent legal, accounting or other experts or advisors, as it deems necessary or appropriate, and may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to meet with any members of, or advisors to, the Audit Committee.
The Audit Committee shall have available appropriate funding from the Company as determined by the Audit Committee for payment of:
- compensation to any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
- compensation to any advisors employed by the Audit Committee; and
- ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
The Audit Committee may delegate its authority to subcommittees or the Chair of the Audit Committee when it deems appropriate and in the best interests of the Company.
Meetings and Procedures
The Audit Committee shall meet as often as it determines is appropriate to carry out its responsibilities under this charter, but not less frequently than quarterly. The Chair of the Audit Committee, in consultation with the other Audit Committee members, shall determine the frequency and length of the Audit Committee meetings and shall set meeting agendas consistent with this charter. Members of the Audit Committee may participate in a meeting of the Audit Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.
The Audit Committee shall maintain minutes of Audit Committee meetings.
The Audit Committee shall meet separately, periodically, with management, with internal auditors or other personnel responsible for the internal audit function and with the independent auditor.
Limitations Inherent in the Audit Committee's Role
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 GAAP and applicable rules and regulations. This is the responsibility of management and the independent auditor. Furthermore, while the Audit Committee is responsible for reviewing the Company’s policies and practices with respect to risk assessment and management, it is the responsibility of the CEO and senior management to determine the appropriate level of the Company’s exposure to risk.
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