I. Purpose
The Audit Committee (the “Committee”) is
appointed by the Board of Directors (the “Board”)
to assist the Board in fulfilling its oversight responsibilities.
The Audit Committee’s primary duties and responsibilities
are to:
- Monitor the integrity of the Company’s financial
reporting process and systems of internal controls regarding
finance, accounting, and legal compliance;
- Monitor the independence and performance of the Company’s
independent auditors;
- Provide an avenue of communication among the independent
auditors, management and the Board.
The Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and
it has direct access to the independent auditors as
well as anyone in the organization. The Committee has
the ability to retain, at the Company’s expense,
special legal, accounting, or other consultants or experts
it deems necessary in the performance of its duties.
The Committee will also prepare a report to shareholders
as required by the Securities and Exchange Commission
(“SEC”) to be included in the Company’s
annual proxy statement.
II. Composition
The Committee shall be comprised of at least two directors.
Each committee member will be independent and have a
basic understanding of finance and accounting in order
to be able to read and understand fundamental financial
statements. At least one member of the Committee shall
have accounting or related financial management expertise.
Committee members shall be appointed by the Board.
The Board shall designate one member of the Committee
as its Chairman. If an audit committee Chairman is not
designated or present, the members of the Committee
may designate a Chairman by majority vote of the Committee
membership.
III. Meetings
The Committee shall meet at least four times annually,
or more frequently as circumstances require. The Committee
should meet privately in executive session at least
annually with management, the independent auditors,
and as a committee to discuss any matters that the Committee
or each of these groups believe should be discussed.
In addition, the Committee should communicate with management
and the independent auditors quarterly to review the
Company’s financial statements and significant
findings based upon the auditors review and auditing
procedures.
The Committee shall also maintain minutes of their
meetings and periodically report to the Board on significant
matters relating to the Committee.
IV. Audit Committee Responsibilities and Duties
Review of Financial Statements and Earnings Releases
The Committee shall review and reassess the adequacy
of this Charter at least annually and recommend any
proposed changes to the Board for approval.
Prior to releasing the year-end earnings, the Committee
will discuss the results of the audit with the independent
auditors, and will discuss certain matters as required
to be communicated to audit committees in accordance
with applicable accounting standards.
The Committee shall review the Company’s annual
audited financial statements prior to filing with the
SEC as part of the Form 10-KSB. This review should include
discussion with management and independent auditors
of significant issues regarding accounting principles,
practices, and judgments.
In consultation with the management and the independent
auditors, the Committee shall consider the integrity
of the Company’s financial reporting processes
and controls, and discuss significant financial risk
exposures and the steps management has taken to monitor,
control, and report such exposures. The Committee shall
also review significant findings prepared by the independent
auditors together with management’s responses.
The Committee shall review with financial management
and the independent auditors the Company’s quarterly
financial results prior to the release of earnings and
the Company’s quarterly financial statements prior
to filing with the SEC as part of the Form 10-QSB. This
review and discussion will include any significant changes
to the Company’s accounting principles and any
items required to be communicated by the independent
auditors in accordance with applicable accounting standards
and principles.
Independent Auditors
The Committee is directly responsible for the appointment,
compensation and oversight of the work of the independent
auditors. The independent auditors will report directly
to the Committee.
The Audit Committee shall annually recommend to the
Board the appointment of the independent auditors and
approve any discharge of auditors when circumstances
warrant.
The Committee will annually review the qualifications,
performance and independence of the independent auditors.
The Committee’s evaluation shall also include
the review and evaluation of the lead partner of the
independent auditors. At least annually, the Committee
shall obtain and review a report from the independent
auditors regarding: the firm’s internal quality-control
procedures; 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, and any steps taken to deal with any
such issues; and, to assess the auditor’s independence,
all relationships between the independent auditor and
the Company. The Committee will also confer with management
in reviewing the qualifications, performance and independence
of the independent auditors.
The Committee shall approve all audit engagement fees
and terms and all non-audit engagements with the independent
auditors. The Chairman of the Committee may approve
any proposed non-audit engagements that arise between
Committee meetings, provided that any such decision
is presented to the full Committee at its next scheduled
meeting.
The Committee will also review the independent auditors’
audit plan, including the scope, staffing and locations
of their examination, reliance upon management, and
general audit approach, and consider the independent
auditors’ judgments about the quality and appropriateness
of the Company’s accounting principles as applied
in its financial reporting.
Legal Compliance
On at least an annual basis, the Committee should review
with the Company’s counsel any legal matters that
could have a significant impact on the organization’s
financial statements, the Company’s compliance
with applicable laws and regulations, and inquiries
received from regulators or governmental agencies.
Other Audit Committee Responsibilities
The Committee shall perform any other activities consistent
with this Charter, the Company’s by-laws, and
governing law, as the Committee or the Board deems necessary
or appropriate.
The Committee shall annually review a summary of director
and officers’ related party transactions and potential
conflicts of interest.
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