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CHARTER OF AUDIT COMMITTEE
The Audit Committee (the "Committee") is appointed by the Board of Directors (the "Board") to assist the Board in monitoring (1) the integrity of the financial statements of the Company; (2) the Company's compliance with legal and regulatory requirements; (3) the independence, qualifications and performance of the Company's independent public accountants; and (4) the performance of the Company's internal audit function. The Committee will prepare the annual report included in the Company's proxy statement as required by the SEC pursuant to the Securities and Exchange Act (the "Act").
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles ("GAAP") and applicable rules and regulations. These are the responsibilities of management and the independent public accountants.
The Committee shall be composed of three or more members of the Company's Board. The members of the Committee shall serve at the discretion of the Board or until they resign or their successors are appointed. The Board shall appoint the chairperson of the Committee (the "Chairperson"). The members of the Committee shall meet the standards of independence and experience requirements of the New York Stock Exchange.
The Committee shall have the authority to conduct investigations and to retain such special legal, accounting or other consultants to advise the Committee, as it determines necessary to carry out its duties, whose compensation shall be funded by the Company. The Committee may request any officer or employee of the Company or the Company's outside counsel or independent public accountants to attend a meeting of the Committee or to meet with any member of, or consultant to, the Committee.
The Committee shall meet at least quarterly or more frequently as may be deemed necessary by the Committee. Minutes of each meeting shall be taken by the corporate Secretary or another person selected by the Committee. The Chairperson or a Committee member shall report to the full Board the substantive actions taken at each meeting.
The Committee shall meet at least quarterly with the independent public accountants, internal auditors and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discuss privately.
The Committee shall:
1. Be solely responsible for the appointment, compensation, retention and oversight of the work of the independent public accountants (including resolution of disagreements between management and the independent public accountants regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and, where appropriate, terminate and replace the independent public accountants. Such independent public accountants shall report directly to and be ultimately accountable to the Committee.
2. Review, evaluate and approve the annual engagement proposal of the independent public accountants (including the proposed scope and approach of the annual audit) and the experience and qualifications of the senior members of the team to be assigned to the Company. Ensure that the lead audit partner having primary responsibility for the audit and the reviewing audit partner are rotated at least every five years.
3. Pre-approve all auditing services and all non-auditing services to be performed by the independent public accountants, provided that such firm shall not be retained to perform those non-audit functions prohibited by either the New York Stock Exchange or the Securities and Exchange Commission. The approved non-auditing services must be disclosed in the Company's periodic public reports required by section 13(a) of the Act. The approval of non-auditing services can be delegated to one or more members of the Committee, but the decision must be presented to the full Committee at the next scheduled meeting.
4. Receive periodic reports from the independent public accountants delineating all relationships between the independent public accountants and the Company, actively engage in a dialogue with the independent public accountants with respect to any relationships or services that may impact the objectivity, or adversely affect the independence, of the independent public accountants, and if so determined by the Committee, recommend that the Board take appropriate action in response to the independent public accountants' report to satisfy itself of such firm's independence.
5. Obtain and review reports from the independent public accountants, at least annually, regarding: (a) the independent public accountants' internal quality-control procedures; and (b) any material issues raised by the most recent internal quality-control review, or peer review, of the independent public accountants, 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 such firm, and any steps taken to deal with any such issues.
6. Review an analysis prepared by management and the independent public accountants of significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements and their impact on the financial statements.
7. Review and discuss with management and the independent public accountants the Company's annual audited financial statements and the results of the audit. Discuss with the independent public accountants any unusual or non-recurring items and the establishment or change of any significant reserves that arose in connection with the audit and the adequacy of the Company's internal controls. Review the financial information contained in the Annual Report on Form 10-K, including, but not limited to, Management's Discussion and Analysis contained in such report prior to the filing thereof with the Securities and Exchange Commission. Obtain from the independent public accountants assurance that the audit was conducted in a manner consistent with Section 10A of the Act, as amended.
8. Review and discuss with management and the independent public accountants the Company's quarterly financial statements and Quarterly Report on Form 10-Q, including, but not limited to, Management's Discussion and Analysis contained in each such report, prior to the filing thereof with the SEC.
9. Review with management and the independent public accountants earnings press releases prior to their release and financial information and earnings guidance provided to analysts and rating agencies.
10. Discuss with the independent public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as it may be modified or supplemented, relating to communications with the independent public accountants.
11. Review major changes to the Company's auditing and accounting principles and practices as suggested by the independent public accountants or management.
12. Obtain and review timely reports from the independent public accountants regarding:
a. all critical accounting policies and practices to be used by the Company;
b. all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent public accountants; and
c. all other material written communications between the independent public accountants and management, including any management letter or schedule of unadjusted differences.
13. Review with the independent public accountants any problems or difficulties such firm may have encountered, including: (a) any restrictions on the scope of activities or access to required information; (b) any changes required in the planned scope of the internal audit; and (c) any recommendations made by such firm as a result of the audit.
14. Review with management, independent public accountants and internal auditors the adequacy of the Company's internal accounting controls and procedures including the activities, structure resources, qualifications and effectiveness of the internal audit function, and the performance of the director of internal audit.
15. Inquire about internal control recommendations made by internal auditors and independent public accountants and whether they have been implemented by management.
16. Review periodically with management and the independent public accountants the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.
17. Periodically obtain reports from management, internal auditors, independent public accountants, general counsel, tax advisors or any regulatory agency regarding regulatory compliance, transactions with affiliates, and other legal matters that may have a material impact on financial statements and the consideration of those matters in preparing the financial statements.
18. Review the effectiveness of the policies and procedures for monitoring compliance with laws and regulations and the results of management's investigation and follow-up (including disciplinary action) on any reporting deficiencies, fraudulent acts or accounting irregularities.
19. Establish procedures for (1) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (2) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
20. Review the appointment and replacement of the director of internal auditing.
21. Set clear hiring policies for employees or former employees of the independent public accountants.
22. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board.
23. Regularly report to the Board on the Committee's activities and make appropriate recommendations.
24. Annually evaluate the performance of the Committee.
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