Board of Directors
Audit Committee Charter
Effective 14 May 2008
The Committee is responsible for assisting the Board of Directors (the "Board") in the Board's oversight responsibilities relating to the integrity of the Company's financial statements, financial reporting process, and systems of internal accounting and financial controls; the qualifications, independence, and performance of the independent auditor and the performance of the Company's internal audit department; and the Company's legal and regulatory compliance.
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 and disclosures are complete and accurate or are in accordance with generally accepted accounting principles and applicable rules and regulations. This is the responsibility of the Company's management and the independent auditor.
Committee Structure; Member Qualifications, Appointment, and Removal
The Committee shall consist of at least three directors who, along with the chairperson of the Committee, are appointed by the Board upon recommendation of the Corporate Governance and Nominating Committee (the "Governance Committee"), and may be removed by the Board in its discretion.
All members of the Committee shall be independent directors under the standard adopted by the New York Stock Exchange and shall also satisfy the New York Stock Exchange's more rigorous independence and financial literacy requirements for members of audit committees. All Committee members shall have sufficient financial experience and ability to enable them to discharge their responsibilities and at least one member shall have accounting and related financial management expertise within the meaning of the New York Stock Exchange listing standards and qualify as an "audit committee financial expert" under applicable law.
Authority and Responsibilities
In furtherance of the Committee's purpose, the Committee shall have the following authority and responsibilities:
Financial Statements, Financial Reporting Process, and Systems of Internal Accounting and Financial Controls
- To review and discuss with management and the independent auditor the annual audited financial statements and other financial information to be included in the Company's Annual Report on Form 10-K, including management's and/or the independent auditor's 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.
- To discuss the results of the annual audit and any other matters required to be communicated to the Committee by the independent auditor under generally accepted auditing standards, applicable law, or listing standards, including matters required to be discussed by Statement on Auditing Standards ("SAS") No. 114.
- To recommend to the Board, based on the reviews and discussions with management and the independent auditor described above, whether the annual audited financial statements should be included in the Company's Form 10-K Annual Report.
- To review with management and the independent auditor the Company's quarterly financial information to be included in the Company's Quarterly Reports on Form 10-Q.
- To review and discuss with management the types of information to be discussed and the type of presentation to be made in the Company's earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, including the use of "pro forma" or "adjusted" information not consistent with generally accepted accounting principles in the United States ("GAAP").
- To review and discuss with management and the independent auditor
-- material changes in the Company's accounting policies and practices and significant judgments that may affect the financial results;
-- the nature of any unusual or significant commitments or contingent liabilities together with the underlying assumptions and estimates of management;
-- the effect of changes in accounting standards that may materially affect the Company's financial reporting practices; and
-- the Company's procedures with respect to appropriateness of significant accounting policies and adequacy of financial controls.
- To review and discuss with the independent auditor any accounting or auditing issues on which the national office of the independent auditor was consulted.
- To review analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues or judgments made in connection with the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.
- To discuss with management, the senior internal audit executive and the independent auditor the adequacy and effectiveness of internal controls.
- To review with the Chief Executive Officer and the Chief Financial Officer the Company's disclosure controls and procedures and to review periodically, but in no event less frequently than quarterly, management's conclusions and the Chief Executive Officer's and the Chief Financial Officer's certifications about the efficacy of such disclosure controls and procedures.
Oversight of Independent Auditor and Internal Audit Department
- To recommend for shareowner approval the independent auditor to examine the Company's accounts, controls, and financial statements, nevertheless having sole authority to appoint or replace the independent auditor, who shall report directly to the Committee.
- To be directly responsible for the compensation and oversight of the work of the independent auditor.
- To preapprove all auditing services and permitted nonaudit services (including the fees and terms thereof) to be performed for the Company by the independent auditor, and consider whether the provision of permitted nonaudit services by the independent auditor is compatible with maintaining the auditor's independence.
- To review and evaluate the qualifications, performance, and independence of the Company's independent auditor at least annually, receive periodic reports from the independent auditor regarding the auditor's independence, discuss such reports with the independent auditor, and if so determined by the Committee, take appropriate action to satisfy itself of the independence of the auditor.
- To consult with management and the senior internal audit executive and obtain and review a written report by the independent auditor describing such auditor's internal quality-control procedures, material issues raised by its most recent internal quality control review, or peer review (if applicable), or by any inquiry or investigation by governmental or professional authorities for the preceding five years and the response of the independent auditor; to review all relationships between the independent auditor and the Company; and to assure the regular rotation of the lead audit partner and the reviewing partner of the independent auditor as required by law.
- To approve guidelines for the Company's hiring of former employees of the independent auditor who participated in any capacity in the audit of the Company.
To review and concur in the appointment and replacement of the Company's senior internal audit executive and review the responsibilities, budget, and staffing of the internal audit department.
- To review the reports to management prepared by the internal audit department, or summaries thereof, and management's responses, and periodically review the experience and qualifications of the members of the internal audit department and the quality control procedures of the internal audit department.
- To discuss with the senior internal audit executive and the independent auditor the overall scope and plans for their respective audits, including the adequacy of staffing and other factors that may affect the effectiveness and timeliness of such audits.
- To receive reports on the Company's compliance program, including a review of the distribution of and compliance with the Company's Code of Conduct.
- To approve the Audit Committee report required to be included in the Company's annual proxy statement.
- To discuss with management, the senior internal audit executive and the independent auditor the Company's major risk exposures and guidelines and policies to govern the processes by which risk assessment and risk management is undertaken by the Company, including discussing the Company's major financial risk exposures and steps taken by management to monitor and mitigate such exposures and from time to time conferring with another committee of the Board about risk exposures and policies within the scope of such other committee's oversight. \
- To review with management and the independent auditor (if appropriate) significant legal and regulatory exposures, including any regulatory inquiries or concerns regarding the Company's financial statements and accounting policies.
- To establish 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.
- To review and approve transactions between the Company and related persons.
Committee Operations: Meetings, Agendas, Reporting, Delegation, and Performance Evaluation
The Committee may adopt procedural rules for its meetings and the conduct of its business, not inconsistent with this Charter, the Company's bylaws, or applicable law. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. Adequate provision will be made for notice to members of all meetings. One-third of the members, but not less than two, shall constitute a quorum and all matters will be determined by a majority vote of the members present. The Committee may delegate all or a portion of the authority granted to it by the Board to one or more of the Committee members, senior executives, or subcommittees, subject to applicable law, regulation, and listing standards.
The Board approves the regular meeting schedule for the Committee each year. Additional meetings may occur, as the Committee or the Chairman deem advisable. The Chairman of the Board, the Corporate Secretary, and the Committee Chairperson agree on the length of regular meetings and the need to schedule additional special meetings. The Committee shall meet at least four times per year, or more frequently as circumstances require.
The annual Committee agenda and individual meeting agendas are developed by the Chairman of the Board and Corporate Secretary in consultation with the Committee Chairperson, with input from appropriate members of management and staff. The Committee meets periodically with management, with the senior internal audit executive and with the independent auditor in separate executive sessions.
When present, the Chairman will preside at Committee meetings. In his or her absence, Committee members present may appoint a chairman pro temp. The Committee Chairperson reports to the Board on Committee meetings and actions, and the Secretary or an Assistant Corporate Secretary keeps minutes of all Committee meetings, which are distributed to Committee members for review and approval.
The Committee evaluates its performance annually and discusses the outcome of the evaluation with the full Board.
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel or other experts or consultants, as it deems appropriate, including sole authority to approve the firms' fees and other retention terms. The Company will provide the Committee with appropriate funding, as the Committee determines, for the payment of compensation to the Company's independent auditor, outside counsel, and other advisors as it deems appropriate, and administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention. The Committee will have access to the Company's books, records, facilities, and personnel. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company, and the Committee will take all necessary steps to preserve the privileged nature of those communications.