SAMPLE
I.
Purpose The primary purpose of the Audit Committee
(the "Committee") is to (a) assist the Board of Directors in fulfilling
its oversight of (i) the integrity of the Company's financial statements, (ii)
the Company's compliance with legal and regulatory requirements, (iii) the Company's
independent auditors' qualifications and independence, and (iv) the performance
of the Company's internal audit function and independent auditors; and (b) prepare
any reports required by law to be prepared by the Committee, including any reports
required to be included in the Company's annual proxy statement and as otherwise
required. In fulfilling its purpose, the Committee
shall review: (a) the financial reports and other financial information of the
Company; (b) the Company's systems of internal controls and procedures and disclosure
controls and procedures; and (c) the Company's auditing, accounting and financial
reporting processes generally. Consistent with this purpose, the Committee should
encourage continuous improvement of, and should foster adherence to, the Company's
policies, procedures and practices at all levels. In
fulfilling their responsibilities hereunder, it is recognized that members of
the Committee are not employees of the Company and do not bear any of the responsibilities
of management and the Company's independent auditors. As such, it is not the duty
or responsibility of the Committee or its members (a) to plan or conduct audits,
(b) to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles, (c) to design
and implement internal controls and procedures and disclosure controls and procedures,
or (d) to conduct other types of auditing or accounting reviews or procedures.
Each member of the Committee shall be entitled to rely on (a) the integrity of
those persons and organizations within and outside the Company that provide information
to the Committee and (b) the accuracy and completeness of the financial and other
information provided to the Committee by such persons or organizations absent
actual knowledge to the contrary (which shall be promptly reported to the Board
of Directors). II. Composition The
Committee shall be comprised of three or more directors, as determined by the
Board, all of whom shall be independent as determined by the Board pursuant to
the standards set forth in Exhibit A of the Company's Corporate Governance Guidelines.
In addition to being independent, members of the Committee may not receive any
compensation other than directors' fees from the Company. All members of the Committee
shall have a working familiarity with basic finance and accounting practices,
and at least one member of the Committee shall be an "audit committee financial
expert," as such term is defined by the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Committee members shall not simultaneously
serve on the audit committees of more than two other public companies. The
members of the Committee shall be elected by the Board annually on the recommendation
of the Nominating and Corporate Governance Committee and shall serve until the
earlier to occur of her or his resignation or removal or the election and qualification
of such member's successor. Unless a Chair of the Committee is elected by the
full Board, the members of the Committee may designate a Chair by majority vote
of the full Committee membership. Any member of the Committee may be removed with
or without cause by a majority of the Board. All vacancies in the Committee shall
be filled by the Board. III. Meetings The
Committee shall meet at least four times during each fiscal year or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least quarterly with management, the Vice President of
Internal Audit and the independent auditors, in separate executive sessions. The
Committee may request that any officer or employee of the Company, the Company's
outside counsel or the Company's independent auditors attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee. Meetings
of the Committee may be called by the Chief Executive Officer of the Company,
the Chair of the Committee or any other two or more members of the Committee.
A majority of the Committee shall constitute a quorum for the transaction of business.
The action of a majority of those present at a meeting, at which a quorum is present,
shall be the act of the Committee. The Committee may also act by unanimous written
consent. The Committee may delegate authority to act upon specific matters within
determined parameters to a subcommittee consisting of one or more members, consistent
with applicable law. Any such subcommittee shall report any action to the full
Committee at its next meeting. The Committee shall keep a record of its actions
and proceedings and make a report thereof from time to time to the Board. In addition,
the Committee, or its Chair, should communicate with the independent auditors
and management quarterly to review the Company's financial statements consistent
with Section IV of this charter. IV. Powers,
Duties and Responsibilities The Committee shall
have the power, duty and responsibility to:
Review of Documents/Reports and
Disclosure Matters
Review, at least annually,
and, if necessary, revise this Charter periodically as conditions dictate. Upon
any revision, submit the revised Charter to the Nominating and Corporate Governance
Committee and the Board of Directors for approval.
Review
and discuss with management and the independent auditors the Company's annual
audited financial statements and other financial information, including the Company's
disclosures under the section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations," prior to filing the Company's
Form 10-K. Each such discussion and review shall include, among other things,
a discussion of significant issues regarding accounting principles, practices
and judgments, and a recommendation to the Board of Directors as to whether the
annual audited financial statements should be included in the Form 10-K.
Review
and discuss with management and the independent auditors the Company's quarterly
financial statements and other financial information, including the Company's
disclosures under the section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the results of the
independent auditor's review of the quarterly financial statements, prior to filing
the Company's Form 10-Q. Each such discussion and review shall include, among
other things, a discussion of whether there were any significant changes to the
Company's accounting principles and any items required to be communicated by the
independent auditors in accordance with AICPA Statement of Auditing Standards
("SAS") 61 therein. The Chair of the Committee may represent the entire
Committee for purposes of this review.
Review
the significant internal reports to management prepared by the Internal Audit
Department and management's responses, which review should consider the integrity
of the Company's financial reporting processes and controls.
Review
and discuss reports from the independent auditors on (a) all critical accounting
policies and practices to be used, (b) all alternative treatments of financial
information within generally accepted accounting principles that have been discussed
with management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditor, and (c) other
material written communications between the independent auditor and management,
including, but not limited to, any: (i) management letter; (ii) schedule of unadjusted
differences; (iii) listings of adjustments and reclassifications not recorded,
if any; (iv) reports on observations and recommendations on internal controls;
(v) engagement letter; or (vi) independence letter. In connection therewith, the
Committee shall consider the independent auditors' written judgments about the
quality and appropriateness of the Company's accounting principles as applied
in its financial reporting.
Discuss with
management the Company's earnings press releases, including the use of "non-GAAP
financial measures" as defined by the rules and regulations of the SEC, as
well as financial information and earnings guidance provided to analysts and rating
agencies. Such discussion may generally address the types of information to be
disclosed and the types of presentations to be made in any such communications.
Discuss
the guidelines and policies related to risk assessment and risk management, including
the Company's major financial exposures and the steps management has taken to
monitor and control such exposures.
Review
disclosures made to the Committee by the Company's Chief Executive Officer and
Chief Financial Officer in accordance with the periodic report certification requirements
imposed by the rules and regulations of the SEC, regarding any significant deficiencies
in the design or operation of internal controls or material weaknesses therein
and any fraud involving management or other employees who have a significant role
in the Company's internal controls.
Review
and discuss with management and the independent auditors, as appropriate: (a)
major issues regarding accounting principles and financial statement presentations,
including any significant changes in the Company's selection or application of
accounting principles, and major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control deficiencies;
(b) analyses prepared by management 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 (c) the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures, on the financial
statements of the Company.
Consider and
approve, if appropriate, major changes to the Company's accounting principles
and practices as suggested in writing by the independent auditors, management
or the Internal Audit Department.
Report
regularly, and at least quarterly, to the Board. The Committee shall promptly
review with the Board 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, qualifications and independence of the
Company's independent auditors, or the performance of the Company's internal audit
function and the Internal Audit Department.
Independent
Auditors
The Committee has sole authority
to appoint, retain, terminate, evaluate and oversee the Company's independent
auditors, including determining the terms of engagement and the resolution of
any disagreements between management and the independent auditors regarding financial
reporting. Such authority may not be delegated to the Board or management. In
exercising such authority, the Committee shall consider, among other things, the
independent auditors' independence and effectiveness. The independent auditors
shall report directly to the Committee.
The
Committee shall pre-approve all audit services and permitted non-audit services
to be performed by any independent auditors in accordance with the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder, and has the sole authority to approve the fees and compensation
to be paid to the Company's independent auditors for such services. The Chair
of the Committee may grant pre-approval of audit and permitted non-audit services,
provided that the Chair's pre-approval decisions shall be presented to the full
Committee at its next scheduled meeting.
Obtain
and review the independent auditors' annual report to the Committee. This annual
report shall describe: (a) the independent auditors' internal quality control
procedures; (b) any material issues raised by the most recent internal quality-control
review (or peer review) of the independent auditors 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 the independent auditors,
and any steps taken to deal with any such issues; and (c) in order to assess the
independent auditors' independence, all relationships between the independent
auditors and the Company. The Committee shall review this annual report on at
least an annual basis when evaluating the independent auditors, and require updates
to such annual report where the Committee believes that it is reasonable to request
such updates.
Review and discuss annually
with the independent auditors all significant relationships the auditors have
with the Company to determine their independence and receive a letter from the
independent auditors regarding their independence.
Review
the qualifications, performance and independence of the independent auditors,
including the "audit partners" of the independent auditors (as such
term is defined by the rules and regulations of the SEC), and approve any proposed
discharge of the independent auditors when circumstances warrant. When evaluating
the independent auditors and its audit partners, the Committee should consider:
(a) the opinions of the Company's management and Internal Audit Department (or
other personnel responsible for the internal audit function); (b) considerations
as to independence of the independent auditor, including whether permitted non-audit
services are compatible with maintaining the independent auditors' independence;
(c) whether the independent auditors' quality controls are adequate; (d) whether,
to assure continuing auditor independence, rotation of the audit partners has
occurred in accordance with the rules and regulations of the SEC; and (e) whether,
to assure continuing auditor independence, there should be a regular rotation
of the independent auditors. The Committee shall present the conclusions of its
evaluations of the independent auditors and its audit partners to the independent
auditors and the Board.
Consult periodically
with the independent auditors, out of the presence of management and the Internal
Audit Department, about internal controls and the completeness and accuracy of
the Company's financial statements.
Review
the independent auditors' audit plan, which review should include the scope of
work, staffing, locations, reliance upon management and internal audit and general
audit approach.
Prior to filing of the
Company's year-end earnings and the audit report, discuss the results of the audit
with the independent auditors, including matters required to be communicated to
audit committees in accordance with SAS 61 and Rule 2-07 of Regulation S-X. Obtain
from the independent auditors assurance that the audit was conducted in a manner
consistent with Section 10A of the Exchange Act, which sets forth certain procedures
to be followed in any audit of financial statements required under the Exchange
Act.
Process and Procedures
Establish
regular and separate systems of reporting to the Committee by each of: (a) management;
(b) the independent auditors; and (c) the Internal Audit Department regarding
any significant judgments made in management's preparation of the financial statements
and the view of each as to appropriateness of such judgments.
Review
regularly and separately with each of management, the independent auditors and
the Internal Audit Department any problems or difficulties encountered during
the course of the audit work, including any restrictions on the scope of work
or on access to requested information.
Review
regularly any significant disagreement among management and the independent auditors
or the Internal Audit Department in connection with the preparation of the financial
statements.
Review regularly with the independent
auditors: (a) any accounting adjustments that were noted or proposed by the independent
auditors but were "passed" by management as immaterial or otherwise;
(b) any communications between the persons comprising the audit team of the independent
auditors and the national office of the independent auditors respecting auditing
or accounting issues presented by the engagement; and (c) any "management"
or "internal control" letter issued, or proposed to be issued, by the
independent auditors to the Company.
Review,
with the independent auditors, the Internal Audit Department and management, the
extent to which changes or improvements in financial or accounting practices,
as approved by the Committee, have been implemented. This review should include
a discussion of the responsibilities, budget and staffing of the Company's internal
audit function.
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 the confidential, anonymous submission by the Company's employees of concerns
regarding questionable accounting or auditing matters.
Other
Powers, Duties and Responsibilities
Prepare
annually the report to stockholders and publish the report in the Company's annual
proxy statement as required by the SEC.
Perform
any other activities consistent with this Charter, the Company's By-laws and applicable
law as the Committee or the Board deems necessary or appropriate.
Periodically
review with the Company's General Counsel, significant legal matters that may
have a material impact on the financial statements and any material reports, notices
or inquiries received from regulators or governmental agencies.
Authorize
or conduct special investigations and studies that arise out of the Committee's
areas of responsibility.
Retain, in the
Committee's sole authority and discretion, independent or outside counsel, accountants
or others to advise and assist the Committee in connection with any of its activities,
as the Committee determines necessary to carry out its duties.
Determine,
and submit to the Company, the Committee's funding needs for payment of: (a) compensation
to the independent auditors; (b) ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out the Committee's duties; and
(c) if applicable, compensation to independent counsel, accountants or any others
retained to assist the Committee.
Establish,
in the Committee's sole authority and discretion, and in accordance with the rules
and regulations of the SEC, hiring policies for employees or former employees
of the Company's independent auditors.
Work
with the Nominating and Corporate Governance Committee and the Board of Directors
to establish and maintain a process for the annual evaluation of the performance
of the Committee and, pursuant to such process, conduct an annual evaluation of
the performance of the Committee.
EXHIBIT
A
CHARTER OF THE AUDIT COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS
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I.
PURPOSE The primary purpose of the Audit Committee
is to assist the Board of Directors in fulfilling its oversight responsibilities
to the Company's stockholders and associates and the investment community by reviewing:
(a) the financial reports and other financial information of the Company; (b)
the Company's systems of internal controls; and (c) the Company's auditing, accounting
and financial reporting processes generally. Consistent with this purpose, the
Audit Committee should encourage continuous improvement of, and should foster
adherence to, the Company's policies, procedures and practices at all levels.
The Audit Committee's primary duties and responsibilities
are to: (a) serve as an independent and objective party to monitor the Company's
financial reporting process and internal control systems; (b) review and appraise
the audit efforts of the Company's independent auditors and Internal Audit Department;
and (c) provide an open avenue of communication among the independent auditors,
financial and senior management, the Internal Audit Department and the Board of
Directors. The Audit Committee will primarily
fulfill these responsibilities by carrying out the activities enumerated in Section
IV of this Charter. In fulfilling their responsibilities
hereunder, it is recognized that members of the Audit Committee are not employees
of the Company and are not, and do not represent themselves to be, accountants
or auditors by profession or experts in the fields of accounting and auditing.
As such, it is not the duty or responsibility of the Audit Committee or its members
(i) to plan or conduct audits, (ii) to determine that the Company's financial
statements are complete and accurate and are in accordance with generally accepted
accounting principles or (iii) to conduct other types of auditing or accounting
reviews or procedures. Each member of the Audit Committee shall be entitled to
rely on (i) the integrity of those persons and organizations within and outside
the Company that provide information to the Audit Committee and (ii) the accuracy
and completeness of the financial and other information provided to the Audit
Committee by such persons or organizations absent actual knowledge to the contrary
(which shall by promptly reported to the Board of Directors). II.
COMPOSITION The Audit Committee members shall
meet the independence and experience requirements of the New York Stock Exchange.
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors free from any relationship
that, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee. All members of the Committee
shall have a working familiarity with basic finance and accounting practices,
and at least one member of the Committee shall have accounting or related financial
management expertise. The members of the Committee
shall be elected by the Board annually and shall serve until their successors
shall be duly elected and qualified. Unless a Chair of the Committee is elected
by the full Board, the members of the Committee may designate a Chair by majority
vote of the full Committee membership. III.
MEETINGS The Committee shall meet at least
four times during each fiscal year or more frequently as circumstances dictate.
As part of its job to foster open communication, the Committee should meet at
least annually with management, the director of the Internal Audit Department
and the independent auditors, in separate executive sessions, to discuss any matters
that the Committee or each of these groups believes should be discussed privately.
In addition, the Committee, or at least its Chair, should communicate with the
independent auditors and management quarterly to review the Company's financial
statements consistent with IV.4 and IV.9 below. IV.
RESPONSIBILITIES AND DUTIES To fulfill its
responsibilities and duties the Audit Committee shall: DOCUMENTS/REPORTS
REVIEW Review, at least annually, and, if
necessary, revise this Charter periodically as conditions dictate. Upon any revision,
submit the revised Charter to the Board of Directors for approval. Publish the
Charter as required by the rules and regulations of the Securities and Exchange
Commission.
Review the Company's annual audited financial statements and any
reports or other financial information, as appropriate, prior to filing, which
review should include discussion with management and independent auditors of significant
issues regarding accounting principles, practices and judgments and recommend
to the Board of Directors whether the annual audited financial statements should
be included in the Annual Report on Form 10-K.
Review the significant internal
reports to management prepared by the Internal Audit Department and management's
responses, which review should consider the integrity of the Company's financial
reporting processes and controls.
Review with financial management and the
independent auditors the Company's quarterly financial results prior to filing.
Discuss any significant changes to the Company's accounting principles and any
items required to be communicated by the independent auditors in accordance with
AICPA Statement of Auditing Standards ("SAS") 61. The Chair of the Committee
may represent the entire Committee for purposes of this review.
INDEPENDENT
AUDITORS The independent auditors are ultimately
accountable to the Audit Committee and the Board of Directors. The Committee shall
recommend to the Board of Directors on an annual basis the selection of the independent
accountants, considering their independence and effectiveness, and approve the
fees and other significant compensation to be paid to the independent auditors.
On an annual basis, the Committee should review and discuss with the auditors
all significant relationships the auditors have with the Company to determine
their independence and receive a letter from the independent auditors regarding
their independence.
Review the performance of the independent auditors and
approve any proposed discharge of the independent auditors when circumstances
warrant.
Periodically consult with the independent auditors, out of the presence
of management, about internal controls and the completeness and accuracy of the
Company's financial statements.
Review the independent auditors' audit plan,
which review should include the scope of work, staffing, locations, reliance upon
management and internal audit and general audit approach.
Prior to filing
of the Company's year-end earnings, discuss the results of the audit with the
independent auditors, including matters required to be communicated to audit committees
in accordance with SAS 61, and obtain from the independent auditors assurance
that the audit was conducted in a manner consistent with Section 10A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which sets forth
certain procedures to be followed in any audit of financial statements required
under the Exchange Act.
FINANCIAL REPORTING PROCESSES Consider
the independent auditors' written judgments about the quality and appropriateness
of the Company's accounting principles as applied in its financial reporting.
Consider and approve, if appropriate, major changes to the Company's accounting
principles and practices as suggested in writing by the independent auditors,
management or the Internal Audit Department.
PROCESS IMPROVEMENT Establish
regular and separate systems of reporting to the Audit Committee by each of (a)
management, (b) the independent auditors and (c) the internal auditors regarding
any significant judgments made in management's preparation of the financial statements
and the view of each as to appropriateness of such judgments.
Following completion
of the annual audit, review separately with each of management, the independent
auditors and the Internal Audit Department any significant difficulties encountered
during the course of the annual audit, including any restrictions on the scope
of work or access to required information.
Review any significant disagreement
among management and the independent auditors or the Internal Audit Department
in connection with the preparation of the financial statements.
Review with
the independent auditors, the Internal Audit Department and management the extent
to which changes or improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented. (This review should be conducted
at an appropriate time subsequent to implementation of changes or improvements,
as decided by the Committee.)
OTHER RESPONSIBILITIES Annually
prepare a report to stockholders and publish the report in the Company's annual
proxy statement as required by the Securities and Exchange Commission.
Perform
any other activities consistent with this Charter, the Company's By-laws and applicable
law as the Committee or the Board deems necessary or appropriate.
Review with
the Company's General Counsel, significant legal matters that may have a material
impact on the financial statements and any material reports, notices or inquiries
received from regulators or governmental agencies.
Authorize or conduct special
investigations and studies which arise out of the Audit Committee's areas of responsibility.
The Audit Committee shall be empowered to retain independent counsel, accountants
or others to assist it in connection with any investigation.
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