Corporate Governance : Audit Committee Charter
ITEX Corporation (the "Company"), as part of its continuous
improvement efforts desires to strengthen its Board oversight of accounting and
reporting functions through this Charter setting forth the duties and authority
of the Company’s Audit Committee.
The Audit Committee (the "Committee") of the Board of Directors
shall be comprised of at least two (2) directors. If composed of only two (2)
members, at least one member shall meet the independence and experience
requirements of Rule 4200(a)(15) of the NASD’s listing standards, as such sections may be modified
or supplemented from time to time. If composed of three (3) or more members, a
majority of the members shall meet the independence and experience requirements
of Rule 4200(a)(15) of the NASD’s
listing standards. All Committee members will be financially literate, by
experience or otherwise, and at least one member will have accounting or
related financial management expertise. Audit Committee members shall not
simultaneously serve on the audit committees of more than two other public
companies. The members of the Audit Committee shall be appointed by the Board
on the recommendation of the Nominating Committee. Audit Committee members may
be replaced by the Board.
The Company’s independent auditors are selected approved by, and report
directly to the Audit Committee. If the Company establishes an internal audit
function, the head of such internal audit function shall also report directly
to the Audit Committee.
Statement of Policy
The Committee shall provide assistance to the Board of Directors in
fulfilling the Board members’ responsibility to the stockholders, potential
stockholders, and the investment community relating to corporate accounting and
reporting practices of the Company, as required by all applicable state and
federal laws, rules and regulations, and overseeing the quality and integrity
of financial reports of the Company. In so doing, it is the responsibility of
the Committee to maintain free and open communication between the members of
the Board of Directors, the independent auditors and the Company’s principal
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to prepare financial statements,
conduct audits or provide professional certification
as to whether the Company’s financial statements are complete and accurate;
this is the responsibility of management and the independent accountants.
In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the Board of Directors and stockholders that the
corporate accounting and reporting practices of the Company are in accordance
with all the requirements and are of the highest quality.
In carrying out these responsibilities, the Committee will:
- Obtain the full Board of
Directors’ approval of this Charter and review and reassess this Charter
as conditions dictate, but no less frequently than annually following the
review of the Company’s Annual Report, as prepared for filing with the Securities
and Exchange Commission.
- Review and approve all
compensation plans, agreements, and arrangements with the Company’s
executive officers, in cooperation with the Compensation Committee.
- Review and recommend to the
Board of Directors the selection of independent auditors to audit the
financial statements of the Company. In selecting the independent
auditors, the Committee will investigate any conflicts of interest.
- Have a clear understanding
with the independent auditors that the independent auditors are ultimately
accountable to the Committee, as the stockholders’ representatives, who
have the ultimate authority in deciding to engage, evaluate, and, if
appropriate, terminate their services.
- Review and concur with
management’s appointment, termination or replacement of the Company’s
principal financial officer and/or the head of the Company’s internal
audit function, if such position is created from time-to-time.
- Meet with the independent
auditors and financial management of the Company to review the scope of
the proposed audit and timely quarterly reviews for the current year and
the procedures to be utilized, the adequacy of the independent auditor’s
compensation, and, at the conclusion thereof, review such audit or review,
including any comments or recommendations of the independent auditors.
- Review with the independent
auditors, the Company’s principal financial officer, and financial and
accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company and elicit any recommendations for the
improvement of such internal controls or particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis
should be given to the adequacy of internal controls to expose any
payments, transactions or procedures that might be deemed illegal or
- Review reports received from
regulators and other legal and regulatory matters that may have a material
effect on the financial statements or related Company compliance policies.
- Review the internal audit
functions of the Company, including the independence and authority of its
principal financial officer, in meeting the Company’s reporting
obligations, the proposed audit plans for the coming year and the
coordination of such plans with the independent auditors.
- Inquire of management, the
internal audit staff, as applicable, and the independent auditors about
significant risks or exposures and to assess the steps management has
taken to minimize such risks to the Company, including critical accounting
- Direct the independent
auditors to communicate directly to each member of the Committee with
respect to any disagreement with the Company on any financial treatment or
accounting practice that is reflected in the quarterly reports on Form
10-QSB upon review.
- Receive, prior to each
meeting, 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.
- Review the quarterly
financial statements with financial management prior to the filing with
the Securities and Exchange Commission (or prior to the press release of
results, if possible), to determine that the independent auditors do not
take exception to the disclosure and content of the financial statements,
and to discuss any other matters required to be communicated to the
Committee by the independent auditors. The chair of the Committee, or a member
of the Committee designated by the chair, may represent the entire
Committee for purposes of this review and any required discussions with
the independent auditor.
- Review the financial
statements contained in the Annual Report to Stockholders with management
and the independent auditors to determine that the independent auditors
are satisfied with the disclosure and content of the financial statements
to be presented to the stockholders. Review with financial management and
the independent auditors the results of their timely analysis of
significant financial reporting issues and practices, including changes
in, or adoptions of, accounting principles and disclosure practices and
discuss any other matters required to be communicated to the Committee by the
auditors. Also review with the financial management team and the
independent auditors their judgments about the quality, not just
acceptability, of accounting principles and the clarity of the financial
disclosure practices used or proposed to be used, and particularly, the
degree of aggressiveness or conservatism of the organization’s accounting
principles and underlying estimates and other significant decisions made
in preparing the financial statements.
- Provide sufficient
opportunity for the Company’s principal accounting officer and the
independent auditors to meet with the members of the Committee without
members of management present. Among the items to be discussed in these
meetings are the independent auditors’ evaluation of the Company’s financial,
accounting and auditing personnel and the cooperation that the independent
auditors received during the course of audits.
- Review accounting and
financial human resources and succession planning within the Company.
- Report the results of the
annual audit to the Board of Directors. If requested by the Board, invite
the independent auditors to attend the full Board of Directors meeting to
assist in reporting the results of the annual audit or to answer other
directors’ questions (alternatively, the other directors, particularly the
other independent directors, may be invited to attend the Committee
meeting during which the results of the annual audit are reviewed).
- On an annual basis, obtain
from the independent auditors, a written communication delineating all
their relationships and professional services as required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees. In addition, review with the independent auditors the nature
and scope of any disclosed relationships or professional
services and take, or recommend, that the Board of Directors take,
appropriate action to ensure the continuing independence of the auditors.
- Review and pre-approve all
non-audit services performed by the independent auditors.
- Review the report of the
Committee in the Annual Report to Stockholders and the Annual Report on
Form 10-KSB disclosing whether or not the Committee has reviewed and
discussed with management and the independent auditors, as well as
discussed within the Committee (without management or the independent
auditors present), the financial statements and the quality of accounting
principles and significant judgments affecting the financial statements.
Recommend to the Board whether the audited financial statements should be
included in the Company’s Annual Report on Form 10-KSB. In addition,
disclose the Committee’s conclusion on the fairness of presentation of the
financial statements in conformity with GAAP based on those discussions.
- Submit the minutes of all
meetings of the Committee to, or discuss the matters discussed at each
committee meeting with, the Board of Directors.
- Investigate any matter
brought to its attention within the scope of its duties, with the power to
retain outside counsel and other advisors for this purpose if, in its
judgment, that is appropriate.
- Review the Company’s
disclosure in the Proxy Statement for its Annual Meeting of Stockholders
that describes that the Committee has satisfied its responsibilities under
this Charter for the prior year. In addition, include a copy of this
Charter in the Annual Report to Stockholders or the Proxy Statement at
least triennially or the year after any significant amendment to the
- Review all complaints
received by the issuer regarding accounting, internal accounting controls
or auditing matters. All employees of the Company may anonymously send
concerns in writing to the Chair of the Audit Committee. The Audit
Committee will establish a procedure for the review of complaints,
investigation and retention of complaints for future reference.
- Review and approve all press
releases and other disclosure contained in any report filed with the
Securities and Exchange Commission, and review the report of the principal
financial officer with respect to the Company’s internal controls for
The Committee will prepare a report to be included in the Company’s Proxy
Statement for an Annual Meeting of Stockholders discussing whether the
Committee reviewed the financial statements with management and discussed the
Statement on Auditing Standards No. 61 and Independence Standards Board
Standard No. 1 with the independent accountants and if it has recommended to
the Board of Directors that the audited financial statements be included in its
annual report to be filed with the Securities and Exchange Commission.