The following functions shall be the recurring activities of the Committee in carrying out its responsibilities outlined in Section I of this Charter. These functions should serve as a guide with the understanding that the Committee may carry out additional or substitute functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time related to the purposes of the Committee outlined in Section I of this Charter.
The Committee shall have the following specific powers and duties:
With respect to the independent auditor:
1. To be directly responsible for the appointment, compensation, retention and oversight of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing its audit reports or performing other audit, review or attest services for the Company. The Committee is responsible for reviewing the performance of the independent auditor and removing the independent auditor if circumstances warrant. The independent auditor shall report directly to the Committee;
2. To review in advance, and grant any appropriate pre-approvals of (i) all auditing services to be performed by the independent auditor and (ii) all non-audit services to be provided by the independent auditor as permitted by Section 10A of the Securities Exchange Act of 1934 (the “Exchange Act”), and, in connection therewith, to approve all fees and other terms of such engagement, provided that pre-approval of de minimus services shall not be required to the extent provided by, and subject to the requirements of, the Exchange Act;
3. On an annual basis, to review and discuss with the independent auditor all relationships the independent auditor has with the Company and its subsidiaries in order to evaluate the independent auditor’s continued independence. The Committee shall:
(a) ensure that the independent auditor submits to the Committee on an annual basis a written statement
(consistent with Ethics and Independence Rule 3526, Communication with Audit Committees Concerning
Independence) delineating all relationships and services that may impair the objectivity and independence
of the independent auditor;
(b) discuss with the independent auditor any disclosed relationship or services that may impact the objectivity
and independence of the independent auditor;
(c) satisfy itself as to the independence of the independent auditor, including whether the provision of non-
audit services by the independent auditor is compatible with the auditor's independence; and
(d) ensure the rotation of the audit engagement partner as required by law, including consideration of whether
there should be rotation of the firm itself;
4. At least annually, to obtain and review a report from the independent auditor describing (i) such firm’s internal quality control procedures, (ii) 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 audits carried out by the firm, (iii) any steps taken to deal with any such issues and (iv) all relationships between the independent auditor and the Company;
5. In consultation with management, to evaluate the qualifications, performance and independence of the lead audit partner (or the lead audit partner responsible for reviewing the audit) for the Company’s independent audit firm, and to confirm that the lead audit partner has not performed audit services for the Company for each of the five previous fiscal years;
6. To review, based on the recommendation of the independent auditor and the Company’s management, the scope and plan of the work to be done by the independent auditors with respect to each fiscal year and review the same with internal audit and the Company's management;
With respect to financial statements and audit:
7. To meet with the independent auditor prior to the audit to review the planning and staffing of the audit, and to discuss with the independent auditor the scope of its examinations of the books and records of the Company and its subsidiaries and the matters required to be discussed relating to the conduct of the audit;
8. To review and discuss with management and the independent auditor the Company’s annual audited and quarterly unaudited financial statements and the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s filings with the SEC and review other relevant reports or financial information submitted by the Company to any governmental body or the public;
9. To recommend to the Company’s Board whether the Company’s annual audited financial statements should be included in the annual report on Form 10-K, and to review and approve the Company's unaudited financial statements for inclusion in the Company's quarterly reports form on Form 10-Q;
10. To review the integrity of the Company’s financing reporting processes, both internal and external, and discuss with management and the independent auditor (a) major issues regarding accounting principles and financial statement presentation, including any significant changes in the Company’s selection or application of accounting principles, (b) analyses 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, and the ramifications of the use of such alternative methods, (c) other material written communications between the independent auditor and management, including, but not limited to, the management letter and schedule of unadjusted differences, (d) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company, (e) the type and presentation of information to be included in earnings press releases (paying particular attention to any use of “pro forma,” or “adjusted” non-GAAP, information), as well as review any financial information and earnings guidance provided to analysts and rating agencies, and (f) policies with respect to risk assessment and risk management;
11. To periodically review separately with each of management, the independent auditor and the internal auditors:
(a) any significant disagreement between management and the independent auditor in connection with the
preparation of the financial statements;
(b) any problems or difficulties encountered in the course of the audit, including any restrictions on the scope
of activities or access to required information, and management’s response thereto;
(c) any changes required in the planned scope of the internal audit; and
(d) the responsibilities, budget and staffing of the Company’s internal audit function;
12. To review with management and the independent auditor any correspondence with regulators or governmental agencies and any employee or outside party (including stockholder) complaints or published reports which raise material issues regarding the Company’s financial statements or accounting policies;
13. To periodically discuss with the independent auditor, without management being present, the audit firm’s judgment about the quality, appropriateness and acceptability of the Company’s accounting principles and financial statements and the completeness and accuracy of the Company’s financial statements;
14. To discuss, with management and the internal and independent auditors, corporate policies with respect to earnings press releases, as well as review the Company’s earnings press releases, and the financial information and earnings outlook provided to analysts and rating agencies;
15. To review the process for CEO and CFO certifications of financial statements;
With respect to internal audit functions, internal controls and related matters:
16. To approve and adopt a Code of Business Ethics (the “Code”) for all directors, officers and employees of the Company, and make such changes to the Code as may be appropriate;
17. To review and discuss with management (i) the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures (including management’s risk assessment and risk management policies) and (ii) the procedures that management has established to monitor compliance with the Code;
18. To review transactions between the Company and “related persons” (as such term is defined in Item 404(a) of Regulation S-K promulgated by the SEC) submitted by the Company’s General Counsel for the Committee’s consideration pursuant to the terms of the Company’s Statement of Policy With Respect to Related Person Transactions (the “Related Persons Policy”). The Committee shall consider and have the authority to approve, amend, ratify, terminate or rescind such transactions at the next Committee meeting, provided that, in those instances specified in the Related Persons Policy, the Chairman shall consider and have the authority to approve such transactions between Committee meetings. The Committee delegates such authority to the Chairman, and the Chairman shall report to the Committee at the next Committee meeting any approval under the Related Persons Policy pursuant to the delegated authority.
19. To review and discuss with management all material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the financial condition, changes in financial condition, results of operations, liquidity, capital resources or significant components of revenues or expenses;
20. To review, in consultation with the independent auditor and management, (i) the independent auditor’s report on internal control (ii) the adequacy of the Company’s internal controls and any special audit steps adopted in light of significant control deficiencies, (iii) procedures and policies of the Company designed to ensure compliance with applicable laws and regulations and (iv) the responsibilities, budget and staffing needs for the internal audit function;
21. To review with management and the independent auditor the sufficiency and quality of the internal auditor staff and other financial and accounting personnel of the Company and its subsidiaries, including advising management and the Board regarding the selection and removal of the leader of the internal audit function;
22. To review with management and the leader of internal audit the internal audit charter, scope, responsibilities, plans, budget, staffing, organizational structure, and results. The leader of internal audit will regularly attend Committee meetings;
23. To meet, periodically with the leader of internal audit to discuss any matters that the Committee or internal audit believe should be discussed without management or the independent auditor present;
24. To establish procedures for (i) the receipt, retention and treatment of complaints received by the Company and its subsidiaries regarding accounting, internal accounting controls or auditing matters and (ii) confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;
Other:
25. To review, periodically, with the Company’s counsel, any legal matter that could have a significant impact on the Company’s financial statements;
26. To establish the policy for the Company’s hiring of employees or former employees of the independent auditor who were engaged on the Company’s account;
27. To report regularly to the Board with respect to 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 performance and independence of the Company’s independent auditors or the performance of the internal audit function;
28. To maintain minutes or other records of meetings and activities of the Committee and to report to the Board following meetings of or actions taken by the Committee;
29. To produce an annual audit committee report and any other Committee reports required to be included in the Company’s annual proxy statement, in accordance with applicable rules and regulations promulgated by the SEC, the NYSE and other regulatory bodies;
30. To conduct or authorize investigations into any matters within the Committee’s purpose and powers;
31. To review and reassess the powers of the Committee and the adequacy of this Charter periodically and recommend any proposed changes to the Board for approval;
32. To conduct an annual performance review and evaluation of the Committee; and
33. To consider such other matters in relation to the financial affairs of the Company, its books and records, and its internal and external audits as the Committee or the Board may, in its discretion, determine to be advisable.