Audit Committee – Charter
Organization – The Audit Committee of the Board shall have at least three members, all of whom shall be independent, as such term is defined by the NYSE. The members of the committee shall also satisfy any financial literacy requirements of the NYSE. At lease one member of the committee shall have accounting or related financial management expertise as determined by the Board of Trustees. Committee members shall be appointed by the Board of Trustees on the recommendation of the Nomination and Corporate Governance Committee. Committee members shall hold their offices for one-year and until their successors are elected and qualified, or until their earlier resignation or removal. All vacancies in the committee shall be filled by the Board. The Board shall designate one member as chairman of the committee, and the committee shall keep a separate book of minutes of their proceedings and actions. Members shall not simultaneously serve on the audit committee of more than three public companies.
The committee shall meet at least four times each year and more frequently as circumstances dictate. To foster open communication, the committee should meet at least annually with management and the independent auditor and CenterPoint's internal auditors in separate sessions.
All meetings shall be at the call of the chairman of the committee, any member of the committee, or any member of the Board. A majority of the members of the committee shall constitute a quorum for the transaction of business.
The committee may form one or more subcommittees, each of which may take such actions as may be delegated by the committee. The committee shall periodically report on its activities to the Board and make such recommendations and findings as it deems appropriate. The committee members shall perform an annual evaluation of the committee, as administered by the Nominating and Corporate Governance Committee. The committee has the authority to conduction any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent auditor as well as anyone in the organization. The committee may, in its sole discretion and at CenterPoint's expense, retain and terminate legal, accounting, or other consultants or experts it deems necessary in the performance of its duties and without having to seek approval of the Board.
Purpose – The committee’s primary duties and responsibilities shall be:
Although the committee has the responsibilities and powers set forth in this charter, it is not the duty of the committee to plan or conduct audits or to determine that CenterPoint's financial statements are complete and accurate or are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the committee to conduct general investigations or to assure compliance with laws, regulations, or CenterPoint's compliance policies.
Responsibilities & Duties
The committee shall review and reassess the adequacy of this charter at least annually. The committee shall submit this charter to the Board for approval and have the document published at least every three years in accordance with regulations promulgated by the SEC and the NYSE.
The committee shall review CenterPoint's annual audited financial statements and quarterly financial statements prior to filing with the SEC or distribution to shareholders and the public. Review should include discussion with management and the independent auditor of significant issues regarding accounting principles, practices, and judgments, including CenterPoint's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Based on this review, the Committee shall make recommendations to the Board as to whether CenterPoint's annual financial statements should be filed with the SEC.
The committee shall discuss earnings press releases generally including the use of "pro forma" or "adjusted" non-GAAP presentations, as well as financial information and earnings guidance provided to analysts and ratings agencies.
The committee shall appoint, retain, or replace the independent auditor (subject, if applicable, to shareholder ratification), and pre-approve all audit plans, engagement fees, and terms (including providing comfort letters in connection with securities underwritings) and all significant non-audit engagements with the independent auditor. The committee may consult with management and may delegate to one or more members of the committee the authority to pre-approve such audit services, subject to certain limitations as determined by the audit.
The committee shall ensure the rotation of the lead audit partner as required by law and consider whether to rotate the audit firm itself.
The committee shall establish and observe pre-approval policies and procedures for the engagement of the independent auditor to provide permitted audit and non-audit service.
The committee shall, on an annual basis, review, assess, and discuss with the independent auditor all relationships it has with CenterPoint that could impair the auditor's independence. Except to the extent permitted by the applicable law, the independent auditor may not perform the following services for CenterPoint:
The committee shall review the independent auditor's audit plan and discuss with the auditor its scope, staffing, locations, reliance upon management, and general audit approach. The committee shall review with the independent auditor any problems or difficulties the auditor may have encountered in the conduct of the audit and resolve any disagreements between the auditors and management.
The committee shall develop and recommend to the Board objective policies for hiring employees or former employees of the independent auditor with due regard for the continuing independence of the auditor.
The committee shall obtain and review a report by the independent auditor describing the auditor's internal quality-control procedures. This report shall include all material issues raised by the most recent internal quality-control review, or peer review of the 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 firm as well as all steps taken to deal with the issues raised by such review, inquiry, or investigation such issues.
Financial Reporting Process
The committee shall discuss any management judgments, accounting estimates, significant changes in CenterPoint's accounting practices, significant audit adjustments, any disagreements with management, any difficulties encountered in performing the audit, and any other matters required to be communicated to audit committees in accordance with SAS No. 61.
The committee shall consider the auditor’s judgments about the quality (not just the acceptability) and appropriateness of CenterPoint’s accounting principles as applied in financial accounting. The committee shall inquire as to the independent auditor’s views about whether management’s choices of accounting principles appear reasonable from the perspective of income, asset, and liability recognition, and whether those principles are common practices or minority practices.
In consultation with management and the independent auditor, the committee shall consider the integrity of CenterPoint’s financial reporting processes and controls, both external and internal. The committee shall discuss with both parties any significant financial risk exposures and the steps management has taken or will take to monitor, control, and report such exposures, including CenterPoint’s risk assessment and risk management policies. The committee shall review significant findings prepared by the independent auditor together with management’s responses, including the status of previous recommendations.
The committee shall review: 1) the accounting treatment accorded significant transactions; 2) any significant accounting issues, including any second opinions sought by management on accounting issues; 3) the development, selection, and disclosure of critical accounting estimates and analyses of the effects of alternative GAAP methods, regulatory and accounting initiatives, and off-balance sheet structures on the financial statements of CenterPoint; and 4) CenterPoint’s use of reserves and accruals, as reported by management and the independent auditor.
Internal Controls & Legal Compliance