2003 Audit Charter: LLLL-3 COMMUNICATIONS HOLDINGS, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is established for the primary purpose of assisting the
Board of Directors in oversight of the:
1. Quality and integrity of the Company's financial statements and reports,
2. Company's compliance with legal and regulatory requirements,
3. Qualifications and independence of the independent auditors, and
4. Performance of the Company's internal audit function and independent
In addition, the Audit Committee shall prepare the report that SEC rules
require to be included in the Company's annual proxy statement.
In fulfilling its responsibilities, the Audit Committee has the authority to
obtain advice and assistance from outside legal, accounting, financial, or
other advisors to perform its duties and responsibilities.
The Company shall provide appropriate funding, as determined by the Audit
Committee, for compensation to the independent auditor and to any advisors that
the Audit Committee chooses to engage.
The Audit Committee shall consist of at least three directors, all of whom are
determined by the Board of Directors to meet the independence and expertise
requirements required by the New York Stock Exchange (NYSE) Listed Company
Manual and Securities and Exchange Commission (SEC) rules.
The chairperson and members of the Committee shall be appointed by the Board of
All members of the Committee shall be financially literate and at least one
member of the Committee shall be an "audit committee financial expert" as
determined by the Board, in compliance with the criteria established by the SEC
and the NYSE.
If an Audit Committee member simultaneously serves on the audit committee of
more than three public companies (including the Company), the Board must
determine that such service will not impair such member's ability to
effectively serve on the Audit Committee and disclose such determination in the
Company's annual proxy statement.
No member of the Committee shall receive compensation other than (i) director's
fees for service as a director of the Company, including reasonable
compensation for serving on the Committee and regular benefits that other
directors receive and (ii) a pension or similar compensation for past
performance, provided that such compensation is not conditioned on continued or
future service to the Company.
The Audit Committee shall meet at least five times a year, or more often if
circumstances so require.
The Committee shall act only on the affirmative vote of at least a simple
majority of its members.
The Audit Committee's policies and procedures should remain flexible, in order
to best react to changing conditions and help ensure that the Company's
accounting and reporting practices accord with all requirements and are of the
highest quality. The Audit Committee shall:
1. Be directly responsible for the selection, appointment, compensation,
and termination of the Company's independent auditors.
2. Inform each independent auditor performing auditing work for the Company
that such firm shall report directly to the Committee.
3. Be directly responsible for the oversight of the auditing work of any
independent auditor employed by the Company (including the resolution of
any disagreement between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
4. Pre-approve both audit and permitted non-audit services to be performed
by the independent auditors and related fees. The Audit Committee may (i)
delegate to one or more of its members the ability to pre-approve such
services and fees, provided that any such pre-approval is presented to
the full Committee at its next scheduled meeting and/or (ii) pre-approve
audit and non-audit services based on policies and procedures adopted by
the Committee, provided (a) the policies and procedures are detailed as
to the particular service, (b) the Committee is informed of each service,
(c) such policies and procedures do not include delegation of the
Committee's responsibilities to management and (d) such policies and
procedures are disclosed in the Company's annual reports.
5. Meet with the independent auditors and the financial management to
review the scope of the audit proposed for the current year and the audit
procedures to be utilized and any subsequent changes to such scope and/or
6. Discuss with the independent auditors and with management, as
appropriate, the following:
(a) The matters required to be discussed by Statement on Auditing
Standards No. 61 and the Sarbanes-Oxley Act of 2002 relating
to the conduct of the audit or quarterly reviews;
(b) Independent auditors' responsibilities under auditing
standards generally accepted in the United States of America,
and under applicable rules and regulations, and any exchange,
which lists the Company's securities;
(c) Management judgments and accounting estimates;
(d) Audit adjustments, both those recorded in the Company's
financial statements and those not recorded;
(e) Disagreements with management, if any, and management's
response to such disagreements;
(f) Consultations with other accountants, if any;
(g) Major issues, if any, regarding accounting principles and
financial statement presentation, including any analysis
prepared by management and/or the independent auditor setting
forth significant financial reporting issues and judgments
made in connection with the preparation of the financial
(h) Difficulties encountered in performing the audit, if any, and
7. Discuss with the independent auditors prior to the filing by the Company
of its annual report and at such other times as the Committee deems
(a) All critical accounting policies and practices of the Company;
(b) All alternative treatments of financial information under
generally accepted accounting principles (GAAP) related to
material items that have been discussed with management,
ramifications of such alternative disclosures and treatments,
and the treatment preferred by the independent auditors; and
(c) Other material written communications between the independent
auditors and management of the Company.
8. At least annually, obtain and review a report by the independent
auditors describing: the auditing firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality control review, or peer review, of the auditing firm, 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 auditing firm, and any steps taken to deal with
any such issues; and (to assess the auditor's independence) all
relationships between the independent auditor and the Company.
9. Ensure that all auditing personnel are rotated in accordance with, and
to the extent required by, applicable laws and regulations.
10. Confirm with the independent auditors that none of their auditing
personnel assigned to the audit of the Company's financial statements
earns or receives any compensation based on selling engagements to the
Company to provide any services, other than audit, review or attest
services, to the extent such compensation would compromise the
independence of such auditing personnel or the auditor under the rules
promulgated by the SEC.
11. Review with the independent auditors, the internal auditor, and the
financial and accounting management, the adequacy and effectiveness of
the Company's accounting and disclosure controls and financial reporting
processes, and elicit any recommendations for improvement or particular
areas where augmented controls are desirable. Particular emphasis should
be given to the adequacy of such controls to provide that information
required to be disclosed by the Company in its periodic reports is
recorded, processed, summarized, and reported in an appropriate and
12. Review the internal audit function, including the independence and
authority of its reporting obligations, the audit plans proposed for the
coming year, and the coordination of such plans with the work of the
13. Review periodically a summary of findings from completed internal
audits and a progress report on the proposed internal audit plan, with
explanations for any deviations from the original plan and review such
summary and plan with the internal audit department.
14. Review the adequacy of the internal audit staff and review and concur
in the appointment, replacement or dismissal of the Internal Audit
15. Review annually with management and the independent auditors the effect
of regulatory and accounting initiatives, as well as review and approve
any off-balance sheet structures on the Company's financial statements.
16. Review the annual audited financial statements and quarterly financial
statements with management and the independent auditors, and related
disclosure under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Determine that the independent
auditors are satisfied with the disclosure and content of the financial
statements. Any year-to-year changes in accounting principles or
practices should be reviewed.
17. Recommend to the Board of Directors as to whether the annual financial
statements of the Company should be included in the Annual Report on Form
10-K to be filed with the SEC.
18. Discuss with management, in general terms, earnings press releases, as
well as financial information and earnings guidance provided to analysts
and rating agencies.
19. Discuss with management policies with respect to risk assessment and
20. Set clear hiring policies for employees or former employees of the
independent auditors in accordance with applicable laws and regulations.
21. Establish procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, auditing matters, or violations of the Company's
Code of Conduct, and (ii) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
22. Periodically meet separately in executive session with each of
management, the internal audit director, and the independent auditors to
discuss any appropriate matters.
23. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, including in the Company's
periodic reports to the SEC.
24. Periodically inquire of the Company's General Counsel, as to the
Company's compliance with relevant legal and regulatory requirements, and
as to the adequacy of control systems in place to assure such compliance.
25. Annually review and evaluate the performance of the Committee relative
to the Audit Committee's purpose, duties and responsibilities outlined
26. Annually review and assess the adequacy of this charter and recommend
any changes to the Board of Directors for approval.
27. Annually report to the Board of Directors regarding the execution of
the Committee's duties and responsibilities.
28. Report to the Board of Directors the matters discussed at each Audit
Committee meeting. A copy of the minutes shall be placed with the
Company's minute books.
29. Investigate any matter brought to the attention of the Committee that
is considered appropriate and is within the scope of its
30. Prepare an Audit Committee report required to be included in the
Company's annual proxy statement. The report will include at least the
(a) A statement that the Committee has reviewed and discussed the
audited financial statements with management;
(b) A statement that the Committee has discussed with the
independent auditors the matters required by Statement on
Auditing Standards No. 61, Required Communications with Audit
(c) A statement that the Committee has received written
disclosures from, and held discussions with, the independent
auditors on matters required by Independence Standards Board
Statement No. 1, Independence Discussions with Audit
(d) A conclusion as to the Committee's recommendation to the Board
of Directors as to the filing of the Annual Report on Form
10-K with the SEC.