IMS Health Incorporated Audit Committee of the Board of Directors
Charter (amended and restated as of October 21, 2003)
The Audit Committee shall:
The function of the Audit Committee is oversight. The management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation’s financial statements. Management is also responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent public accountants are responsible for planning and carrying out a proper audit of the Corporation’s annual financial statements, reviews of the Corporation’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, and other procedures. In fulfilling their responsibilities hereunder, it is recognized that members of the Audit Committee are not full-time employees of the Corporation and are not, and do not represent themselves to be, performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards.
The Audit Committee will fulfil its
responsibilities primarily by carrying out the activities enumerated in Section
IV of this Charter.
The Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise “independent” under the rules of the New York Stock Exchange, Inc., the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Board of Directors shall also determine that each member is “financially literate,” and that at least one member of the Audit Committee has “accounting or related financial management expertise,” or shall otherwise satisfy the applicable membership requirements under the rules of the New York Stock Exchange, Inc., as such requirements are interpreted by the Board in its business judgement, and whether any member of the Audit Committee is an “audit committee financial expert,” as defined by rules of the SEC. If the Board has determined that a member of the Audit Committee is an audit committee financial expert, it may presume that such member has accounting or related financial management expertise.
No director may serve as a member of the Audit Committee if such director serves on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Audit Committee, and discloses this determination in the Corporation’s annual proxy statement. No member of the Audit Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Corporation other than (i) director’s fees, which may be received in cash, stock, restricted stock, restricted stock units, stock options or other in-kind consideration ordinarily available to directors; (ii) a pension or other deferred compensation for prior service that is not contingent on future service; and (iii) any other regular benefits that other directors receive.
The members of the Audit Committee shall be appointed by the Board based on nominations recommended by the Corporation’s Nominating and Governance Committee, and shall serve at the pleasure of the Board and for such term or terms as the Board may determine. Unless a Chairperson is designated by the full Board, the members of the Audit Committee may elect a Chairperson by majority vote of the full Audit Committee membership.
The independent public accountants shall submit to the Audit Committee annually a formal written statement (the “Auditors’ Statement”) describing: the public accountants’ internal quality-control procedures; any material issues raised by the most recent internal quality-control review or peer review of the public accountants, 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 public accountants, and any steps taken to deal with any such issues; and (to assess the public accountants’ independence) all relationships between the independent public accountants and the Corporation, including each non-audit service provided to the Corporation and the matters set forth in Independence Standards Board No. 1.
The independent public accountants shall submit to the Audit Committee annually a formal written statement of the fees billed in each of the last two fiscal years for each of the following categories of services rendered by the independent public accountants: (i) the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q or services that are normally provided by the independent public accountants in connection with statutory and regulatory filings or engagements; (ii) assurance and related services not included in clause (i) that are reasonably related to the performance of the audit or review of the Company’s financial statements, in the aggregate and by each service; (iii) tax compliance, tax advice and tax planning services, in the aggregate and by each service; and (iv) all other products and services rendered by the independent public accountants, in the aggregate and by each service.
The Audit Committee shall meet at least quarterly, or more frequently as circumstances dictate, to discuss with management the annual audited financial statements and quarterly financial statements, as applicable. As part of its job to foster open communication, the Audit Committee should meet periodically with management, the individual in charge of the internal auditing function of the Corporation and the independent accountants separately to discuss any matters that the Audit Committee or any of these groups believes should be discussed privately. The Audit Committee may request any officer or employee of the Corporation or the Corporation’s outside counsel or independent public accountants to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. Members of the Audit Committee may participate in a meeting of the Audit Committee via conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.
IV. Responsibilities and Duties
To fulfil its responsibilities and duties the Audit Committee, to the extent it deems necessary or appropriate, shall:
Independent Public Accountants
1. Directly appoint, retain, compensate, evaluate and terminate the independent public accountants, including sole authority to approve all audit engagement fees and terms, provided that the independent public accountants’ appointment shall be subject to shareholder approval. The Committee shall also directly appoint, retain, compensate, evaluate and terminate any other Registered Accounting Firm to be engaged by the Corporation for the purpose of preparing or issuing an audit report or performing audit, review or attest services for the Corporation, including sole authority to approve all audit engagement fees and terms;
2. Pre-approve all audit and non-audit engagements of the independent public accountants and the fees associated therewith. All requests for pre-approval must include a detailed description of the services proposed to be rendered and, whenever possible, shall be presented to the Audit Committee at a regularly scheduled meeting. The Audit Committee shall note the review of such requests in its official minutes, along with its decision. By this Charter, the Audit Committee hereby delegates to each of its Chairperson and any other member determined to be an “audit committee financial expert,” acting singly, the authority to pre-approve any audit or non-audit services if the need for consideration of a pre-approval request arises between regularly scheduled meetings. Any such approvals by the Chairperson or the “audit committee financial expert,” together with full documentation, shall be presented to the Audit Committee at its next scheduled meeting;
3. Ensure that the independent public accountants prepare and deliver annually an Auditors’ Statement (it being understood that the independent public accountants are responsible for the accuracy and completeness of this statement) and discuss with the independent public accountants any relationships or services disclosed in this Statement that may impact the quality of audit services or the objectivity and independence of the Corporation’s independent public accountants;
4. Obtain from the independent public accountants in connection with any audit a timely report relating to the Corporation’s annual audited financial statements describing all critical accounting policies and practices used, 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 public accountants, and any material written communications between the independent public accountants and management, such as any “management” letter or schedule of unadjusted differences;
5. Review and evaluate the qualifications, performance and independence of the lead partner of the independent public accountants;
6. Discuss with management the timing and process for implementing the rotation of the lead audit partner, the concurring partner and any other active audit engagement team partner and consider whether there should be a regular rotation of the audit firm itself;
7. Take into account the opinions of management and the Corporation’s internal audit function in assessing the independent public accountants’ qualifications, performance and independence; and
8. Instruct the independent public accountants that the independent public accountants are ultimately accountable to the Board and the Audit Committee, as representatives of the shareholders.
Internal Auditing Function
1. Review the appointment and replacement of the provider of the Corporation’s internal auditing function or the employee in charge of the internal auditing function; and
2. Advise the employee in charge of the internal auditing function that he or she is expected to provide to the Audit Committee summaries of and, as appropriate, the significant reports to management prepared by the internal auditing function and management’s responses thereto.
Financial Reporting Principles and Policies and Internal Audit Controls and Procedures
1. Advise management, the individual in charge of the internal auditing function and the independent public accountants that they are expected to provide to the Audit Committee a timely analysis of significant financial reporting issues and practices, including major changes to the Corporation’s accounting principles and practices proposed by management, and any significant changes in auditing standards or audit scope applicable to the independent public accountants’ audit;
2. Consider any reports or communications (and management’s and/or the internal audit function’s responses thereto) submitted to the Audit Committee by the independent public accountants required by or referred to in SAS 61 (as codified by AU Section 380), as it may be modified or supplemented;
3. Meet with management, the individual in charge of the internal auditing function and the independent public accountants:
o to discuss the scope of the annual audit;
o to review the form of opinion the independent public accountants propose to render to the Board and shareholders;
o to discuss the annual audited financial statements and quarterly financial statements, including the Corporation’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
o to discuss any significant matters arising from any audit, including any audit problems or difficulties, whether raised by management, the internal auditing function or the independent public accountants, relating to the Corporation’s financial statements;
o to discuss any “management” or “internal control” letter issued, or proposed to be issued, by the independent public accountants to the Corporation;
o to discuss, as appropriate: (a) any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation’s selection or application of accounting principles, and major issues as to the adequacy of the Corporation’s internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management and/or the independent public accountants 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 U.S. 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 Corporation; and
o to discuss any significant difficulties the independent public accountants encountered during the course of the review or audit, including any restrictions on their activities or access to requested information and any significant disagreements with management;
4. Inquire of the Corporation’s chief executive officer and chief financial officer as to the existence of any significant deficiencies in the design or operation of internal controls that could adversely affect the Corporation’s ability to record, process, summarize and report financial data, any material weaknesses in internal controls, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal controls;
5. Discuss guidelines and policies governing the process by which senior management of the Corporation and the relevant departments of the Corporation assess and manage the Corporation’s exposure to risk, and to discuss the Corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures;
6. Obtain from the independent public accountants assurance that the audit was conducted in a manner consistent with Section 10A of the Securities Exchange Act of 1934, as amended, which sets forth certain procedures to be followed in any audit of financial statements required under the Securities Exchange Act of 1934;
7. Discuss with the Corporation’s General Counsel any significant legal, compliance or regulatory matters that may have a material effect on the financial statements or the Corporation’s business, financial condition or compliance policies, including material notices to or inquiries received from governmental agencies;
8. Discuss and review the type and presentation of information to be included in earnings press releases;
9. Discuss the types of financial information and earnings guidance provided, and the types of presentations made, to analysts and rating agencies;
10. Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by Corporation employees of concerns regarding questionable accounting or auditing matters; and
11. Establish hiring policies for employees or former employees of the independent public accountants.
Reporting and Recommendations, Etc.
1. Review this Charter at least annually and recommend any changes to the full Board;
2. Report through its Chairperson its activities to the full Board following meetings of the Audit Committee and to make such recommendations with respect to the above matters and other matters as the Audit Committee may deem necessary or appropriate;
3. Maintain minutes or other records of meetings and activities of the Audit Committee;
4. Prepare any report or other disclosures, including any recommendation of the Audit Committee, required by the rules of the SEC to be included in the Corporation’s annual proxy statement; and
5. Prepare and review with the Board an annual performance evaluation of the Audit Committee, which evaluation shall compare the performance of the Committee with the requirements of this Charter. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the Committee Chair or any other member designated by the Committee to make this report.
V. Delegation to Subcommittee
The Audit Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Audit Committee.
VI. Resources and Authority
The Audit Committee shall have the resources and authority appropriate to discharge its responsibility, including the authority to select, retain, terminate and approve the fees and other retention terms of special or independent counsel, accountants or other expert and advisors, as it deems necessary or appropriate, without seeking approval of the Board or management.