Delta Petroleum Corporation
The Audit Committee will assist the Board of Directors of the Company in
fulfilling its responsibilities with respect to matters involving the
accounting, financial reporting and internal control functions of the
Company and its subsidiaries. This will include assisting the Board in
overseeing (a) the integrity of the Company’s financial statements; (b) the
Company’s compliance with legal and regulatory requirements; (c) the
independent auditor’s qualifications and independence; and (d) the
performance of the Company’s independent auditor. The Audit Committee also
will prepare the Audit Committee report that Securities and Exchange
Commission (“SEC”) rules require to be included in the Company’s annual
The Committee’s responsibilities under this Charter do not relieve the
Company’s management of its responsibilities for (a) preparing the
Company’s financial statements so that they comply with generally accepted
accounting principles (“GAAP”) and fairly present the Company’s financial
condition, results of operations and cash flows; (b) issuing financial
reports that comply with the requirements of the SEC; and (c) establishing
and maintaining adequate internal control structures and procedures for
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall meet the independence and
experience requirements of applicable Nasdaq
Marketplace Rules, Section 10A(m)(3) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the rules and regulations of the
SEC. Each member of the Audit Committee shall, in the judgment of the
Board, be financially literate or must become financially literate within a
reasonable period of time after appointment to the Audit Committee. At
least one member of the Audit Committee must have accounting or related
financial management expertise, as determined by the Board, and, unless
otherwise determined by the Board of Directors, at least one member shall
be “an audit committee financial expert” as defined by the SEC. Audit
committee members shall not simultaneously serve on the audit committees of
more than two other public companies. Committee members may enhance their
familiarity with finance and accounting by participating in educational
programs conducted by the Company or an outside consultant.
The members of the Committee shall be appointed by the Board annually and
shall serve until their successors are duly elected and qualified. Unless a
Chair is elected by the full Board, the members of the Committee may
designate a Chair by majority vote of the full Committee membership. The
Board will have the power at any time to change the size and membership of
the Committee, to remove Committee members and to fill vacancies on the
Committee, provided that any new member satisfy the requirements of this
Charter and any other applicable requirements.
The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The Committee will meet following the end of each
fiscal quarter prior to the filing of the Company’s quarterly or annual
report with the SEC to review the financial results of the Company for the
preceding fiscal quarter or the preceding fiscal year, as the case may be.
During each quarterly meeting, or at such other times as the Committee may determine,
the Committee shall meet separately with management and the independent
auditor to discuss any matters that the Committee or any of these groups
believe should be discussed privately and to review the Company’s periodic
reports consistent with Section IV below. The Audit Committee may request
any officer or employee of the Company or the Company’s outside counsel or
independent auditor to attend a meeting of the Committee with or without
the presence of management or to meet with any members of, or consultants
to, the Committee.
The Committee will record and maintain minutes of its meetings. The
Chairman of the Committee or a Committee member designated by the Chairman
will make a report to the Board of the Committee’s meetings, actions taken
at meetings or by consent, and recommendations made since the most recent
Board meeting, unless the Committee has previously circulated an interim
report addressing the matter or matters.
IV. Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
1. Review, reassess the adequacy of and update this Charter
periodically, at least annually, as conditions dictate and recommend any
proposed changes to the Board for approval.
2. Review and discuss with management and the independent auditor
the Company’s annual audited financial statements and related disclosures,
including the Company’s disclosures under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and recommend
to the Board that the audited financial statements be included in the
Company’s annual report on Form 10-K.
3. Review and discuss with management and the independent auditor
the Company’s quarterly financial statements and related disclosures prior
to the filing of its Form 10-Q, including the results of the independent
auditor’s review of the quarterly financial statements.
4. In connection with each quarterly and annual report of the
Company, review (a) management’s disclosure to the Committee under Section
302 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”); and (b) the
contents of the Chief Executive Officer and Chief Financial Officer
certifications to be furnished or filed with the SEC under Sections 302 and
906 of Sarbanes-Oxley.
5. Review and discuss with management the Company’s earnings press
releases, including the use of “pro forma” or “adjusted” non-GAAP
information, as well as financial information and earnings guidance
provided to analysts and rating agencies. The Chair of the Committee may
represent the entire Committee for purposes of this review.
6. Prepare the report required to be included in the Company’s
annual proxy materials.
7. Review and discuss
quarterly reports from the independent auditors on:
a) All critical accounting policies and practices to be used.
b) All alternative treatments of financial information within GAAP
that have been discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by the
c) Other material written communications between the independent
auditor and management, such as any management letter or schedule of
8. Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives as well as off-balance sheet
structures on the Company’s financial statements.
9. Be directly responsible for the appointment (subject to
shareholder ratification, if applicable), retention, termination,
compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work. The independent
auditor shall report directly to the Audit Committee.
10. Approve all audit and permissible non-audit services to be
provided by the independent auditor, establish a policy for the Committee’s
pre-approval of audit and non-audit services to be provided by the
independent auditor and annually review and pre-approve the audit and
non-audit services that are to be covered by the pre-approval policy.
11. Obtain and review a report from the independent auditor at
least annually regarding (a) the independent auditor’s internal
quality-control procedures; (b) any 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; (c) any steps taken to deal with any such issues;
and (d) all relationships between the independent auditor and the Company.
Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor’s quality
controls are adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor’s independence, taking into account
the opinions of management. The Audit Committee shall present its
conclusions with respect to the independent auditor to the Board.
12. Discuss, as needed, with the independent auditor the matters
required to be discussed by Statement on Auditing Standards No. 61 relating
to the conduct of the audit, including any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities or
access to requested information, and any significant disagreements with management.
13. Review and
reassess, at least annually, the qualifications, performance and
independence of the independent auditor, including a review and evaluation
of the lead partner of the independent auditor team.
14. Prior to engaging the independent auditor to perform an audit
of the Company’s financial statements, (a) obtain from the independent
auditor a formal written statement delineating all relationships between
the accountants and the Company, consistent with Independence Standards
Board Standard No. 1 or such other standard as may be promulgated by the
Public Company Accounting Oversight Board; (b) actively engage in a
dialogue with the independent auditor with respect to any disclosed
relationships or services that may impact the auditor’s objectivity and
independence; and (c) recommend that the Board take appropriate action in
response to the independent auditor’s report to satisfy the Board of
15. Oversee the rotation of the audit partners as required by law.
Consider whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent auditing firm on
a regular basis.
16. Establish hiring policies for employees or former employees of
the independent auditor who participated in any capacity in the audit of
17. Discuss with the national office of the independent auditor
issues on which they were consulted by the Company’s audit team and matters
of audit quality and consistency.
18. Confirm with the independent auditor that it is aware of no
violations of Rule 13b2-2 under the Exchange Act relating to improper
influence on the conduct of audits, or any illegal act that would require
the independent auditor to inform management of the Company and the Audit
Committee as required by Section 10A(b) of unusual transactions.
19. Meet with the independent auditor prior to the audit to discuss
the proposed scope, planning and staffing of the audit. Review the fees and
other significant compensation to be paid to the independent auditor.
C. Financial Reporting Process and Disclosure Matters
20. In consultation with management and the independent auditor,
review the integrity of the Company’s financial reporting processes, both
internal and external.
21. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Company’s financial statements, including any
significant changes in the Company’s selection or application of accounting
principles, any major issues as to the adequacy of the Company’s internal
controls and any special steps adopted in light of material control
22. Review, on a quarterly basis, the significant accounting
principles, policies and practices followed by the Company in accounting
for and reporting its financial results of operations in accordance with
D. Process Improvement
23. Establish regular and separate systems of reporting to the
Audit Committee by each of management and the independent auditor regarding
any significant judgments made in management’s preparation of the financial
statements and the view of each as to appropriateness of such judgments.
24. Review with the independent auditor and management the extent
to which changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented.
25. Review and advise the Board with respect to the Company’s
policies and procedures regarding compliance with applicable laws and
regulations relevant to the scope of the Audit Committee’s
26. Review with the Company’s internal and outside counsel legal
matters that may have a material impact on the financial statements, the
Company’s compliance policies and any material reports or inquiries
received from regulators or governmental agencies.
27. Approve transactions between the Company and a related party
and any other conflict of interest situations.
28. Review the findings of any examinations by regulatory agencies.
29. Discuss with management and the independent auditor the
Company’s major financial risk exposures and the steps management has taken
to monitor and control such exposures, including the Company’s risk
assessment and risk management policies.
30. Establish procedures for (a) the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters; and (b) the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
31. Respond as it determines to be appropriate (after consulting
with legal counsel selected by the Committee) to any report of evidence of
a material violation of the securities laws that the Committee receives
from the Company’s chief legal officer, if any, or from any attorney
appearing and practicing before the SEC in the representation of the
32. Conduct a review
and evaluation, at least annually, of the performance of the Audit
Committee and its members, including a review of the compliance of the
Committee with this Charter.
33. Undertake such additional actions within the scope of its
primary functions as the Board or Audit Committee shall determine.
The Committee will have the right to use reasonable amounts of time
of the Company’s accounting personnel and the independent auditor, other
internal staff and legal counsel and also will have the right to hire
independent accounting experts, lawyers and other consultants and advisors
to assist and advise the Committee in connection with its responsibilities.
The Company will provide for appropriate funding, as determined by the
Audit Committee, for payment of compensation to the independent auditor and
any experts, lawyers, consultants or advisors employed by the Audit