CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
FIRST FINANCIAL CORPORATION
The Audit Committee (the Committee) is appointed by the Board of Directors (the Board) to assist the Board in fulfilling its oversight responsibilities with respect to monitoring (1) the integrity of the financial statements of First Financial Corporation (the Company), (2) the independent auditor’s qualifications and independence, (3)the performance of the Company’s internal audit function and independent auditors, and (4)the compliance by the Company with legal and regulatory requirements.
The Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the Commission) to be included in the Company’s annual proxy statement.
The Committee shall consist of no fewer than three members. The members of the Committee shall meet the independence and experience requirements of NASDAQ STOCK MARKET, INC., Section 10A (m)(3) of the Securities Exchange Act of 1934 (the Exchange Act) and the rules and regulations of the Commission. As required by the Commission, if a member of the Committee meets the definition of a financial expert, as defined by the Commission, that member shall be so designated. The members of the Committee shall be appointed by the Board.
The Committee will meet at least quarterly but reserves the right to meet as often as it shall determine. The Committee shall meet periodically with management, the internal auditors and the independent auditor in separate executive sessions.
The Committee shall have the authority to retain special legal, accounting or other consultants to advise the Company. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Committee or to meet with any members of, or consultants to , the Company. The Committee shall periodically make reports to the Board.
The Committee shall have sole authority to appoint or replace the independent auditor. The Committee shall be directly responsible for the 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 Committee.
The Committee shall preapprove all auditing services and permitted non-audit services to be performed for the Company by its independent auditor. The Committee shall also approve fees for services as outlined in engagement letters or quoted by the independent auditors. Fees for routine preapproved services will be reported to the Committee as invoiced. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittees to grant preapprovals shall be presented to the full Committee at its next scheduled meeting.
The Committee, to the extent it considers necessary, shall:
1.) Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
2.) Review and discuss the annual audited financial statements with management and the
independent auditor, including disclosures made in management’s discussion and
analysis, accounting and auditing principles and practices, and the adequacy of internal
controls that could significantly affect the Company’s financial statements, and
recommend inclusion of the financial statements in the 10K to the Board.
3.) Review with management and the independent auditor the Company’s financial results
prior to the filing of Form 10Q and review results of the SAS 100 review of the
quarterly financial statements included in Form 10Q. Such review will include:
a.) all critical accounting policies and practices to be used.
b.) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
c.) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
4.) 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.
5.) Review 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.
6.) Report annually to the Board the appointment of the independent auditor and monitor the fees, duties and independence concerns.
7.) Approve in advance all audit services to be provided by the independent auditor,
including any written engagement letters related thereto. (By approving the audit
engagement , the audit service contemplated in any written engagement letter shall
be deemed to have been pre-approved.)
8.) Establish policies and procedures for the engagement of the independent auditor
to provide permissible non-audit services, which shall require pre-approval by the
Audit Committee of all permissible non-audit services to be provided by the
independent auditor. All engagements pertaining to internal control consulting require
approval of the specific engagement.
9.) Review the experience and qualifications of the senior members of the independent
auditor team and the quality control procedures of the independent auditor.
10.) Approve the retention of the independent auditor for any non-audit service and the fee
for such service.
11.) Receive periodic reports from the independent auditor regarding the auditor’s
independence, discuss such reports with the auditor, and if necessary, recommend that
the Board take appropriate action to satisfy itself of the independence of the auditor.
12.) Evaluate together with the Board the performance of the independent auditor and if the
performance is considered to be unsatisfactory, recommend that the Board replace the
13.) Discuss with the independent auditor the matters required to be discussed by Statement
on Auditing Standards No. 61 or other standards that may in time modify, supplement or
replace SAS 61 relating to the conduct of the audit.
a.) on an annual basis, the Committee shall ensure receipt of, and review with the
independent auditor, the written statement required by Independence Standards
Board (ISB) Standard No. 1, as may be modified, supplemented or replaced, and
discuss with the auditors their independence.
14.) Review with the independent auditor any significant difficulties the auditor may have
encountered in conducting the audit or working with management and any management
letter provided by the auditor and the Company’s response to that letter. Such review
a.) any significant difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities or access to required information, and any
disagreements with management.
b.) any changes required in the planned scope of the audit.
c.) any significant concerns about the internal audit department’s responsibilities,
budgeting and staffing.
15.) Ensure the rotation of the lead audit partner having primary responsibility for the audit
and the audit partner responsible for reviewing the audit as required by law.
16.) Obtain and review a report from the independent auditor periodically regarding
(a)the independent auditor’s internal quality control procedures, (b)any material issues
raised by the most recent quality control review or peer review of the firm.
17.) Review the appointment, performance and replacement of the senior internal auditing
18.) Review the reports to management prepared by the internal auditing department and
19.) Review and approve the annual internal audit plan.
20.) Establish procedures for the receipt, retention and treatment of complaints received
by the Company regarding accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
21.) Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise material
issues regarding the Company’s financial statements or accounting policies.
22.) Discuss with the independent auditor any illegal act(s) identified during the conduct
of the audit, if applicable, and any conclusions reached regarding such matter(s).
23.) Ascertain that there have been no violations of the Company’s Code of Business
Conduct and Ethics, which shall include a review of insider and related party
26.) The Committee shall approve all transactions with related parties, including loans
and extensions of credit, fees and commissions for services, purchases or sales of assets
and any other financial arrangements. For purposes of this responsibility, the definition
of related parties will follow the definition of insider loans, as provided in Regulation O.
While 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 the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor.