I. Statement of Purpose
The Audit Committee is a standing committee of the Board of Directors. The purpose of the Committee is to assist the Board of Directors in fulfilling its oversight responsibility relating to (i) the integrity of the Company’s financial statements, the financial reporting process and the Company’s system of internal control over financial reporting; (ii) the performance of the internal auditors; (iii) the annual independent audits of the Company’s financial statements and system of internal controls, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence and performance; (iv) the compliance by the Company with legal and regulatory requirements, including maintenance of effective disclosure controls and procedures; (v) the evaluation of management’s process to assess and manage the Company’s enterprise risk issues, including Cybersecurity; and (vi) the fulfillment of the other responsibilities set out herein.
In discharging its responsibilities, the Committee is not itself responsible for the planning or conduct of audits or for any determination that the Company’s financial statements are complete and accurate or presented in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditors.
- Charter. At least annually, this charter shall be reviewed and reassessed by the Committee and any proposed changes shall be submitted to the Board of Directors for approval.
- Members. The members of the Committee shall be appointed by the Board of Directors and shall meet the independence and experience requirements of applicable law, the listing standards of the New York Stock Exchange and applicable policies of the Board of Directors. The Committee shall be comprised of at least three members, at least one of whom shall meet the expertise requirements of the listing standards of the New York Stock Exchange. Committee members may be removed by the Board of Directors. The Board of Directors shall also designate a Committee Chairperson.
- Meetings. In order to discharge its responsibilities, the Committee shall each year establish a schedule of meetings; additional meetings may be scheduled as required. In planning the annual schedule of meetings, the Committee shall ensure that sufficient opportunities exist for its members to interact with the independent auditors, the head of the internal audit function and management.
- Agenda, Minutes and Reports. An agenda, together with materials relating to the subject matter of each meeting, shall be sent to members of the Committee prior to each meeting. Minutes for all meetings of the Committee shall be prepared to document the Committee’s discharge of its responsibilities. The minutes shall be circulated in draft form to all Committee members for review to ensure an accurate final record, and shall be approved at a subsequent meeting of the Committee. The Committee shall make regular reports to the Board of Directors.
- Performance Evaluation. The Committee shall evaluate its performance on an annual basis.
- Engagement of Independent Auditors. The Committee shall directly appoint, retain, compensate, evaluate and terminate the Company’s independent auditors. The Committee shall have the sole authority to approve all engagement fees to be paid to the independent auditors. The independent auditor shall report directly to the Committee.
- Determination as to Independence and Performance of Independent Auditors. The Committee shall receive periodic reports from the independent auditors as required under generally accepted auditing standards, applicable law or listing standards regarding the auditors’ independence, which shall be not less frequently than annually. The Committee shall discuss such reports with the auditors, and if so determined by the Committee, take appropriate action to satisfy itself of the independence of the auditors. The Committee shall review the performance of the Company’s independent auditors annually. In doing so, the Committee shall consult with management and the Company’s internal auditor service provider and shall obtain and review a report by the independent auditors describing their internal control procedures, and any material issues raised by their most recent internal quality control review. Any selection of the auditors by the Committee may be subject to shareholders’ approval, as determined by the Board of Directors.
- Audits by Independent Auditors. The Committee shall discuss with the independent auditors the overall scope, plans and budget for the audits, including the adequacy of staffing and other factors that may affect the effectiveness of the audits. In this connection, the Committee shall discuss with financial management, the internal auditor service provider and the independent auditors the Company’s major risk exposures (whether financial, operating or otherwise), the adequacy and effectiveness of the accounting and financial controls, and the steps management has taken to monitor and control such exposures and manage legal compliance programs, among other considerations that may be relevant to the audit. The Committee shall review the independent auditors’ annual report on internal controls with financial management.
- Review of the Internal Audit Plan and Performance and Communications with Internal Auditor Service Provider. The Committee shall annually review the structure, resources and performance of the Company’s internal audit function. In that regard, the Committee shall discuss with the internal auditor service provider the overall scope, plans and budget for the annual internal audit plan, including the adequacy of staffing and other factors that may affect the effectiveness and timeliness of the internal audits. In addition, the internal auditor service provider shall report periodically to the Committee regarding any significant deficiencies in the design or operation of the Company’s internal controls, material weaknesses in internal controls and any fraud (regardless of materiality) involving persons having a significant role in the internal controls, as well as any significant changes in internal controls implemented by management during the most recent reporting period of the Company.
- Pre-Approval of Audit and Non-Audit Services. The Committee shall establish and maintain guidelines for the retention of the independent auditors for any non-audit service and the fee for such service and shall determine procedures for the approval of audit and non-audit services in advance. The Committee shall, in accordance with such procedures, approve in advance any audit or non-audit service provided to the Company by the independent auditors, all as required by applicable law or listing standards.
- Review of Annual SEC Filings. The Committee shall review with management and the independent auditors the Company’s Annual Report on Form 10-K, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, the clarity of the disclosures in the financial statements and the adequacy of internal controls. The Committee shall also 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, applicable law or listing standards, including matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees.
- Review of Quarterly SEC Filings and Other Communications. The Committee shall meet to review and discuss with management and the independent auditors the quarterly financial information to be included in the Company’s Quarterly Reports on Form 10-Q, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and shall discuss any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards, applicable law or listing standards. Management shall review and discuss with the Committee any other material public disclosures relating to the results of operations and financial condition of the Company. The Committee shall also discuss with Management the results of the independent auditors’ review of the Company’s quarterly financial information.
- Review of Disclosure Controls and Procedures. The Committee shall review with the Chief Financial Officer the Company’s disclosure controls and procedures and shall review periodically, but in no event less frequently than quarterly, management’s conclusions about the effectiveness of such disclosure controls and procedures, including any significant deficiencies in, or material non-compliance with, such controls and procedures.
- Oversight of Financial Risk. The Committee shall oversee the Company’s financial risk assessment and management. The Committee shall periodically discuss with management the policies, procedures and tools it utilizes in order to identify risks and evaluate their severity.
- Related Party Transactions. The Committee shall review at least annually, material related party transactions entered into by the Company.
- Review of Certain Matters with Internal and Independent Auditors. The Committee shall review periodically with financial management, the internal auditors and independent auditors the effect of new or proposed regulatory and accounting initiatives on the Company’s financial statements and other public disclosures.
- Consultation with Independent Auditors. The Committee shall review with the independent auditors any problems or difficulties the auditors may have encountered in connection with the annual audit or otherwise, and shall evaluate any management letter comments provided to the Committee and the Company’s responses thereto. Such review shall address any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, any disagreements with management regarding generally accepted accounting principles and other matters, material adjustments to the financial statements recommended by the independent auditors and any adjustments and disclosures that were proposed but “passed”, regardless of materiality.
- “Whistleblowing” Procedures. The Committee shall establish and maintain procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
- Access to Records, Consultants and Others. The Committee shall have the full resources and authority (i) to investigate any appropriate matter brought to its attention with full access to all books, records, facilities and personnel of the Company; (ii) to engage outside legal, accounting or other consultants to advise the Committee and to approve the terms of any such engagement and the fees of any such legal, accounting or other consultant; and (iii) to request any officer or employee of the Company, the Company’s outside counsel, internal audit service providers or independent auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
- Delegation. The Committee may delegate any of its responsibilities to a subcommittee comprised of one or more members of the Committee. The Committee shall also carry out such other duties as may be delegated to it by the Board of Directors from time to time.
- Cybersecurity. The Committee shall oversee and periodically review the Company’s Cybersecurity and related policies and controls.
- Proxy Statement. The Committee shall furnish the Audit Committee report required to be included in the Company’s annual proxy statement.
- Performance Evaluation. The Committee shall produce and provide to the Board an annual performance evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this charter. The performance evaluation shall also recommend to the Board any improvements to the Committee’s charter deemed necessary or desirable by the Committee. The performance evaluation by the Committee shall be conducted in such a manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Committee or any other member of the Committee designated by the Committee to make this report.