Audit Committee Charter
Effective: April 21, 2004
Updated: February 25, 2009
The Audit Committee (the "Committee") is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities. The Committee's primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance.
- Monitor the independent auditors' qualifications, independence, and performance.
- Provide an avenue of communication among the independent auditors, management, and the Board of Directors.
- Encourage adherence to, and continuous improvement of, the Company's policies, procedures and practices at all levels.
- Review areas of potential significant financial risk to the Company.
- Monitor compliance with legal and regulatory requirements.
The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The Audit Committee Chair shall approve an agenda in advance of each meeting. The Committee should meet privately in executive session at least annually with management, the independent auditors, and as a committee to discuss any matters that the Committee or each of these groups believes should be discussed. In addition, the Committee, or at least its Chair, should communicate with management and the independent auditors quarterly to review the Company's financial statements and significant findings based upon the auditors' review procedures.
Responsibilities and Duties
- Review and reassess this charter periodically, at least annually, or as conditions dictate, and recommend to the Board of Directors any necessary or appropriate amendments.
- Appoint, discharge, compensate, retain and oversee the work of the Company's independent audit firm, which shall be a registered public accounting firm as defined by the Sarbanes Oxley Act of 2002 (the "Independent Auditor"), based upon the Committee's judgment of the independence of the auditors (taking into account the standards and rules established by the Public Company Accounting Oversight Board, and fees charged both for preapproved audit and preapproved non-prohibited non-audit services) and the quality of its audit work. The Committee shall be responsible for the resolution of disagreements between management and the Independent Auditor regarding financial reporting. If the Independent Auditor is dismissed by the Committee, the Committee shall appoint a new Independent Auditor. The Committee in its capacity as a committee of the Board of Directors shall determine the appropriate funding for payment of compensation to the Independent Auditor employed for the purpose of issuing an audit report and to any advisers employed by the Committee. The Independent Auditor must report directly to the Committee.
- Review and pre-approve each service, considered to be auditing services and non-prohibited non-audit services to be provided by the Independent Auditor. The Committee may delegate to one or more of its members the authority to grant preapprovals required and as contemplated by Section 10A(i) of the Securities Exchange Act of 1934 (the "Exchange Act"), with any such preapproval reported to the Committee at its next regularly scheduled meeting, unless the specific service has been previously preapproved with respect to that year, the Committee must approve the permitted service before the Independent Auditor is engaged to perform it.
- Review the Company's annual audited financial statements prior to filing or distribution. Review should include discussion with management and independent auditors of significant issues regarding accounting principles, practices, and judgments.
- In consultation with management and the independent auditors, consider the integrity of the Company's financial reporting processes and controls. Discuss significant financial risk exposures and the steps management has taken to monitor, control and report such exposures. Review significant findings prepared by the independent auditors together with management's responses.
- Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters, as well as the confidential, anonymous submission by employees of the Company of concerns regarding questionable auditing or accounting matters.
- Review, and discuss with management and the Independent Auditor, the Company's audited annual financial statements to be filed with the Securities and Exchange Commission (the "SEC") on SEC Form 10-K and quarterly financial statements on Form 10-Q, including the Management's Discussion and Analysis of Financial Condition and Results of Operations. The Committee shall receive the disclosures by the Company's principal executive officer and principal financial officer regarding the certifications required in each annual or quarterly report filed with the SEC in accordance with the rules regarding such certifications as adopted by the SEC. The Committee shall discuss earnings press releases and the included financial information.
- The Independent Auditor is ultimately accountable to the Audit Committee and the Board of Directors. The Audit Committee shall review the independence and performance of the Independent Auditor and annually recommend to the Board of Directors the appointment of the Independent Auditor or approve any discharge of the Independent Auditor when circumstances warrant.
- Approve the fees and other significant compensation to be paid to the Independent Auditor.
- On an annual basis, the Committee should review and discuss with the Independent Auditor a formal written statement from the Independent Auditor which delineates all relationships between the Independent Auditor and the Company that could impair the Independent Auditor's objectivity or independence, consistent with applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence.
- Review the Independent Auditor's audit plan - discuss scope, staffing, locations, reliance upon management and general audit approach.
- Prior to releasing the year-end earnings, discuss the results of the audit with the Independent Auditor. Discuss certain matters required to be communicated to audit committees in accordance with AICPA SAS.
- Consider the Independent Auditor's judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting.
- On at least an annual basis, review with the Company's counsel, any legal matters that could have a significant impact on the organization's financial statements, the Company's compliance with applicable laws and regulations, inquiries received from regulators or government agencies.
Other Audit Committee Responsibilities
- Annually prepare an Audit Committee report to shareholders as required by the SEC. The report should be included in the Company's annual proxy statement.
- 16. Perform any other activities consistent with this Charter, the Company's By-laws and governing law, as the Committee or the Board of Directors deems necessary or appropriate.
- 17. Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities.
- 18. Periodically perform self-assessment of Committee performance.
- 19. Review financial and accounting personnel succession planning within the Company.
- 20. Annually review policies and procedures as well as audit results associated with directors' and officers expense accounts and perquisites. Annually review a summary of director and officers' related party transactions and potential conflicts of interest and approve such related party transactions and potential conflicts of interest, if appropriate, as required under Rule 4350(h) of The NASDAQ Stock Market, Inc.
- 21. Determine the amount of funding appropriate for the Committee to carry out its responsibilities and obligations as a committee of the Board of Directors, which funding the Company shall provide to the Committee, for the payment of
- Compensation to any registered public 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 independent counsel or other advisers engaged by the Committee; and
- Ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out the Committee's duties.
In addition to the powers necessary to carry out the foregoing responsibilities, the Committee may in its discretion request and receive reports from the Chairs of other committees of the Board of Directors regarding matters under the cognizance of such committees that the Committee determines are appropriate to the fulfillment of its functions under this Charter. The Committee shall have such other duties as may be lawfully delegated to it from time to time by the Board of Directors. The Committee shall report regularly to the Board of Directors and review with the Board of Directors any issues that may arise with respect to the quality or integrity of the Company's financial statements, compliance with legal or regulatory requirements related to financial statements and reporting, and the performance and independence of the Independent Auditor. The Committee shall have the authority to engage independent counsel and other advisors to the Committee, as the Committee deems necessary to carry out its duties.
Size of Committee
The membership of the Committee shall consist of a minimum of three directors. [This sentence is covered more completely under "Appointment" below.]
All members of the Committee shall meet the definitions of: "independent director" under Rules 4200(a)(15) and 4350(d)(2) of The NASDAQ Stock Market, Inc., "outside director" under Treasury Regulation 1.162-27 (e)(3), for purposes of Internal Revenue Code Section 162(m); and "non-employee director" under Rule 16b-3(b)(3) under the Exchange Act; and the criteria for independence under Rule 10A-3(b)(1) of the Exchange Act, as such requirements may change from time to time. An independent director should be free of any relationship that could influence his/her judgment as a Committee member. All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, at the time of appointment to the Committee, and at least one member of the Committee shall qualify as an "audit committee financial expert," as defined in Regulation S-K, Item 407(d)(5) of the Exchange Act.
The members of the Committee shall be appointed by the Board of Directors. The Board of Directors shall designate one member of the Committee to serve as Chairperson. If the Chairperson is absent from a meeting, another member of the Committee may act as Chairperson.
The members of the Committee will be appointed for three-year terms and shall serve until their resignation, retirement, or removal by the Board of Directors or until their successors shall be appointed. The Board of Directors may fill vacancies on the Committee at any time with or without cause. No member of the Committee shall be removed except by majority vote of the independent directors of the Board of Directors then in office.