2003 Audit Charter: GYAUDIT COMMITTEE CHARTER
The purposes of the Audit Committee of GenCorp Inc. are (a) to assist the Board of Directors in overseeing (i) the quality and integrity of the Company's financial statements, (ii) the qualifications and independence of the Company's independent auditors, (iii) the performance of the Company's internal audit function and independent auditors and (iv) the Company's compliance with legal and regulatory requirements; and (b) to prepare the report of the Committee to be included in the Company's annual proxy statement.
The Committee shall consist of three or more nonemployee directors who are independent of management, are free from any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a Committee member, and that otherwise satisfy the independence requirements of the NYSE and applicable laws and regulations of the U.S. Government. Each member of the Committee must be financially literate or must become financially literate within a reasonable period of time after appointment to the Committee. At least one member of the Committee shall qualify as a financial expert, as defined by the SEC. Qualifications of Committee members shall be determined by the Board in its business judgment.
The Committee shall have and may exercise the powers of the Board of Directors in managing the business and affairs of the Company in accordance with the following delegated duties and functions, to:
a. Have the sole and direct responsibility and authority for the appointment and termination (subject, if applicable, to shareholder ratification), compensation, evaluation and oversight of the work of the independent auditors (the "Auditors"), including resolving disagreements between management and the Auditors regarding financial reporting. The Auditors shall report directly to the Committee. The Committee shall have the responsibility and authority to approve in advance all audit and non-audit services to be provided by the Auditors and may delegate authority to grant such pre-approvals to one or more members of the Committee with a requirement to keep the entire Committee so advised;
b. Discuss with the Auditors the overall scope, plans, and staffing for their audit;
c. On an annual basis obtain and review a report describing (i) all relationships between the Auditors and the Company to assess the Auditors' objectivity and independence, as required by Independence Standards Board Standard No. 1, and take, or recommend that the Board take, appropriate action to assure continuing independence of the Auditors; (ii) the Auditors' internal quality-control procedures; and (iii) any material issues raised by the most recent quality-control review, or peer review, of the Auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years;
d. Review with management and the Auditors the preparation of the financial statements and related disclosures contained in the Company's annual and quarterly reports, including (i) the results of the Auditors' timely analysis of significant financial reporting issues and practices, including changes in, or adoptions of, accounting principles and disclosure practices; (ii) their judgments about the quality, not just acceptability, of accounting principles and the clarity of the financial disclosure practices used or proposed to be used;
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(iii) the degree of aggressiveness or conservatism of the Company's accounting principles and underlying estimates and judgments; (iv) regular reports from the Auditors on the critical accounting policies and practices of the Company and the effects of alternative GAAP methods on the financial statements; and (v) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements; (vi) and any related disagreements or other matters brought to the Committee's attention.
e. Discuss, at least annually, with the Auditors (i) the matters required to be discussed by Statement on Auditing Standards 61 relating to the conduct of the audit; (ii) the audit process, including any problems or difficulties encountered in the course of the performance of the audit; or significant disagreements; (iii) the Company's internal controls; and (iv) material written communications between the Auditors and the Company.
f. Review and evaluate the Company's system of internal controls, and recommend to management changes or improvements therein;
g. Review and evaluate the Company's internal audit function, including its independence, staffing and performance, and recommend to management changes or improvements therein;
h. Review and evaluate the appropriateness of the internal audit plans for the forthcoming year, including risk assessments, scope of coverage, planning and staffing;
i. Meet separately, at least once every fiscal quarter, with management and with the Auditors, and the internal auditors without members of management present;
j. Review and evaluate significant audit findings, including significant suggestions for improvements in systems and internal controls from the internal auditors and the Auditors;
k. Periodically review and discuss with management the Company's guidelines and policies with respect to the process by which the Company undertakes risk assessment and risk management, including discussion of the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures;
l. Review and discuss management's statement of its responsibility for and its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the Auditors' report on management's assessment;
m. Review and discuss with management the Company's practices regarding earnings press releases and the provision of financial information and earnings guidance by management to analysts and ratings agencies;
n. Review and discuss with the CEO and CFO the procedures undertaken in connection with the CEO and CFO certifications for annual and quarterly reports, including their evaluation of the Company's disclosure controls and procedures and its internal controls;
o. Review with management and the Auditors legal and regulatory matters that may have a material effect on the Company's financial statements or related compliance policies; any correspondence with regulators or governmental agencies that raise material issues regarding the Company's financial statements or accounting policies; and any material reports or inquiries received by the Company or any of its subsidiaries from regulators or governmental agencies;
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p. Establish and maintain procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;
q. Receive corporate attorney's reports of evidence of any material violation of securities laws or any breach of fiduciary duty;
r. Engage such outside legal, accounting, and other advisors as it shall deem necessary or appropriate;
s. Establish policies for the Company's hiring of employees or former employees of the Auditors;
t. Routinely communicate the results of all reviews and meetings with the entire Board of Directors;
u. Review this charter annually and obtain the Board of Directors' approval; and
v. Undertake and review with the Board an annual performance evaluation of the Committee.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the Auditors.