Audit Committee Charter of Vital Signs Inc

[PAGE]
 
                     CHARTER FOR INTERNAL AUDIT FUNCTION OF
 
                               VITAL SIGNS, INC.
 
PURPOSE:
 
    Internal audit is a function established to independently examine and
evaluate the activities of the Company as a service to the Audit Committee of
the Board of Directors of the Company in particular and to management in
general. It is a control, which functions by examining and evaluating the
adequacy and effectiveness of internal controls. To this end, Internal audit
will furnish the Audit Committee and management with analysis, summaries and
recommendation concerning the system of disclosure controls and system of
internal; controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established.
 
RESPONSIBILITY:
 
    Internal audit responsibility is to review the policies, procedures and
management controls of the Company to ensure that the activities are properly
managed and to promote effective controls at reasonable cost. In discharging the
responsibility, Internal audit shall:
 
     Review systems and operations to assess the extent to which organizational
     objectives are achieved and the adequacy of controls over activities
     leading to such achievement;
 
     Evaluate the relevance, reliability and integrity of management and
     financial information;
 
     Appraise utilization of resources with regard to economy, efficiency and
     effectiveness;
 
     Assess the means of safeguarding assets and verify their existence;
 
     Ascertain the extent of compliance with established policies, procedures
     and instructions;
 
     Recommend improvements in procedures and systems to prevent waste,
     extravagance and fraud;
 
     Advise on appropriate systems of controls and other accounting and
     operational matters in a consulting capacity;
 
     Draw attention to any failure to take remedial action; and
 
     Carry out any ad hoc appraisals, inspections, investigations, examinations
     or reviews requested by the Audit Committee or by senior management.
 
DUTIES:
 
    Subject to the approval of the Audit Committee, Internal Audit is authorized
to:
 
     Decide on the nature, scope and timing of the audits;
 
     Enter all premises of the Company and have access to and inspect all
     documents and records;
 
     Require any officer of the Company to supply such information and
     explanations as may be needed; and
 
     Have discussions with line managers and employees of the Company at any
     reasonable time.
 
REPORTING:
 
    Subject to the overall guidelines and policies of the Audit Committee,
Internal Audit shall be solely responsible for the planning, implementation and
reporting of internal audits. For this purpose, Internal Audit shall:
 
     Prepare an annual audit plan and budget in consultation with management for
     submission to the Audit Committee for approval;
 
     Conduct the audits in an effective, professional and timely manner;
 
     Report to management as soon as practical on completion of each audit;
 
     Report quarterly to the Audit Committee on the performance of the Company
     during the period.