Audit Committee Charter
The Audit Committee reports to the Board of Directors. Its primary focus is to assist the Board in fulfilling its responsibilities to shareholders related to financial accounting and reporting, the system of internal controls established by management and the adequacy of auditing relative to these activities. The Committee is granted the authority to investigate any activity of the Company and it is empowered to retain, at the Company’s expense, persons having special legal, accounting or other consultants or experts as necessary to assist the Committee in fulfilling its responsibilities. In addition, the Committee will perform such other functions as assigned by law, the Company’s Bylaws or the Board of Directors.
The Committee shall be composed of not less than three members, appointed annually by the Board. The Committee shall be composed of directors who are independent, as defined by The Nasdaq Stock Market, are non-executive directors and are free of any relationship that, in the opinion of the Board of Directors, would interfere with their exercise of independent 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, and at least one member of the Committee shall have accounting or related financial management expertise.
The Committee shall meet at least four times a year. The agenda of each meeting will generally be prepared by the Chief Financial Officer or equivalent (“Finance Officer”), with input from the Committee Chairman prior to the meeting date. The Committee may ask members of management or others to attend meetings and provide pertinent information as necessary.
Relationship with Independent Accountant
· The outside auditor is accountable to the Audit Committee. The Audit Committee shall provide for an open avenue of communications between the independent accountant and the Board and, at least once annually, meet with the independent accountants in private session.
· The Audit Committee shall exercise the ultimate authority and responsibility to select, evaluate, oversee and, where appropriate, replace the independent accountant. In connection with this duty, the Committee shall receive on an at least annual basis a written statement from the independent accountant detailing all relationships between the independent accountant and the Company, consistent with requirements of the Independence Standards Board. The Committee shall review and approve all audit and non-audit services, except de minimus services, to be performed by the independent accountants services. The Audit Committee shall also review and approve all fees and other compensation to be paid to the independent accountants.
· Review with the independent accountants (1) the proposed scope of their examination with emphasis on accounting and financial areas where the Committee, the accountants or management believe special attention should be directed; (2) results of their audit, including their opinion on the financial statements and the independent accountant’s judgment on the quality, not just the acceptability, of the Company’s accounting principles as applied in the financial statements; (3) their evaluation of the adequacy of the system of internal controls; (4) significant disputes, if any, with management; and (5) cooperation received from management in the conduct of the audit.
· Prior to releasing year-end earnings, discuss the results of the audit with the independent accountants. Discuss certain matters required to be communicated to Audit Committee in accordance with AICPA SAS 61.
· Receive reports directly from independent accountants and resolve any disagreements between management and the independent accountants regarding financial reporting.
· The Finance Officer is accountable to the Chairman of the Committee. The Audit Committee shall provide for an open avenue of communication between the Accounting Department and the Board and, at least once annually, meet with the Finance Officer in private session.
· Review and concur in the appointment, replacement, reassignment or dismissal of the Finance Officer and review his/her independence from management.
· Review the Accounting Department’s mission, objectives and resources and its annual plan, including its coordination with the independent accountants.
· Review the results of the Internal Audit activities and its evaluation of the system of internal controls and discuss with the Finance Officer any difficulties encountered in the course of audits, including any restrictions on the scope of work or access to required information.
· Before publication, review the quarterly and annual financial statements and related footnotes with both management and the independent accountant.
· Review critical accounting policies, any significant changes in accounting principles and material contingencies, including pending or threatened litigation.
· Review significant accounting, reporting, regulatory or industry developments affecting the Company.
· Require management to maintain a review system to promote compliance with applicable governmental rules and regulations relating to the Company’s financial statements, reports and other financial information disseminated to governmental organizations and the public. Receive reports regarding the Company’s system of internal controls and disclosure controls and procedures.
· Review and reassess the adequacy of this Charter at least annually. Submit the charter to the Board of Directors for approval and have the document published at least every three years in accordance with regulations of the Securities and Exchange Commission.
· Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls or auditing matters; and (b) the submission by employees of concerns on a confidential and anonymous basis regarding accounting and auditing matters.
· Periodically review, with management and the Finance Officer, programs established to monitor compliance with the Company’s code of conduct, including the Foreign Corrupt Practices Act.
· Review and approve all related party transactions.
· Discuss with management, the independent accountant and the Finance Officer any issues regarding significant risks or exposures and assess the steps management has taken to minimize such risk.
· Annually prepare a report to shareholders as required by the Securities and Exchange Commission. The report should be included in the Company’s annual proxy statement.