FMSB » Topics » Audit Committee Charter

This excerpt taken from the FMSB DEF 14A filed Mar 17, 2005.
Audit Committee Charter

[This charter shall be reviewed, updated and approved annually by the Board of Directors.]

I. Purpose and General Role

      The Audit Committee of the Board of Directors shall be responsible for the accounting and financial reporting processes of the Company (including as appropriate hereunder the Company’s subsidiaries), including the audits of the Company’s financial statements, and shall be responsible for the oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company. The Audit Committee shall be directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditors. The Audit Committee may also be responsible for such other duties as directed by the Board.

      Although the Audit Committee has the responsibilities, duties and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct the specific audits or to directly determine that the Company’s financial statements and disclosures are complete, accurate and in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the external audit firm.

      The Committee is expected to maintain free and open communication, including separate executive sessions with each of: (a) the independent accountants, (b) the internal auditors and (c) the management of the Company. The Audit Committee may request any officer or employee of the Company or the Company’s independent auditing firm or outside counsel to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. In discharging this oversight role, the Committee is empowered to investigate any matter brought to its attention, with full power to retain outside counsel or other experts for this purpose. The Audit Committee shall be responsible for the resolution of any disagreements between management and the independent auditors or the internal audit group, should any such disagreements arise.

      The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditing firm for the purpose of rendering the audit report and an opinion on the Company’s financial statements. The Company shall also provide funding for and grants the Committee the specific authority to retain outside legal, accounting or other advisers deemed necessary to carry out their responsibilities and authorities under this Charter.

II. Membership and Independence

      The membership of the Committee shall consist of three or more directors, designated by the independent members of the Board of Directors, who are generally knowledgeable in financial and auditing matters. The Committee shall include at least one member with the requisite accounting or related financial management expertise to qualify as and be named as an “audit committee financial expert” as defined by the Securities and Exchange Commission. Each member shall be free of any relationship that, in the opinion of the Board, would interfere with his or her individual exercise of independent judgment, and each member shall meet the requisite director independence requirements for serving on audit committees as set forth in the corporate governance rules and standards of the Securities and Exchange Commission and NASDAQ. The members of the Committee and the Chairperson shall be elected annually by the Board of Directors.

      The independent members of the Board of Directors shall appoint one member of the Audit Committee as chairperson. He or she shall be responsible for leadership of the Committee, including preparing the agenda, presiding over the meetings, making committee assignments and reporting to the Board of Directors. The chairperson will also maintain regular liaison with the CEO, CFO, the lead independent audit partner and the director of internal audit.



III. Authority, Responsibilities, Guidelines and Duties

      The Audit Committee’s primary responsibilities include:

A. Relationship with External Auditor

      1. Appointing and, if appropriate, terminating the independent auditor, which the Company will retain to audit the financial statements of the Company and to perform related services. The Committee will determine the compensation for such public accounting firm. In so doing, the Committee will request from the auditor a written affirmation that the auditor is in fact independent, discuss with the auditor any relationships that may impact the auditor’s independence, and oversee the auditor’s independence. The Committee will also periodically review the independent auditor’s lead partner for the Company audit. The Committee shall also review, in advance of the Company audit, the amount of work on the audit which the independent auditor anticipates may be performed by persons who are not full-time, permanent employees of the independent auditor, if any.

      2. Overseeing and reviewing any permitted non-audit services to be considered with the independent auditors. Any such services shall be pre-approved by the Committee provided, however, that if any such services were not initially recognized as non-audit services and the aggregate amount of such services would constitute no more than five percent of the total cost of all the auditors services for such fiscal year, such services may be approved by the chairperson of the Committee prior to the completion of the audit.

      3. Overseeing the independent auditor relationship by discussing with the auditor the nature and rigor of the audit process, receiving and reviewing audit reports, and providing the auditor full access to the Committee (and the Board) to report on any and all appropriate matters.

      4. Reviewing the audited financial statements and discussing them with management and with the independent auditor. These discussions shall include consideration of the quality of the Company’s accounting principles as applied in its financial reporting, including review of estimates, reserves and accruals, review of judgmental areas, review of audit adjustments, whether or not recorded, and such other inquiries as may be appropriate. Based on the review, the Committee shall make its recommendation to the Board as to the inclusion of the Company’s audited financial statements in the Company’s annual report on Form 10-K.

      5. Reviewing matters required to be communicated by the independent auditors in accordance with Statement on Auditing Standards No. 61. Such matters may be communicated to the chairperson of the Committee who may represent the entire Audit Committee for purposes of this review and response.

B. Internal Audit Department

      1. Overseeing the internal auditor team and providing ongoing review, guidance and oversight to the internal controls and internal audit activities of the Company including reviewing the organization, plans and results of such activity. Internal auditor matters may be communicated to the chairperson of the Committee who may represent the entire Audit Committee for purposes of an initial review of the issues and, if appropriate, a response.

      2. Discussing with management and the internal auditors the quality and adequacy of the Company’s internal controls.

      3. Reviewing and concurring with the appointment and, as appropriate, the termination of the senior members of the internal auditor team.

C. Other Audit Committee Responsibilities

      1. Reviewing with management and the independent auditor the quarterly financial information prior to the Company’s filing of Form 10-Q. This review may be performed by the Committee or its chairperson.



      2. Discussing with management the status of pending litigation, regulatory matters, taxation matters and other areas of oversight to the legal, regulatory and compliance area as may have a material impact on the financial statements or otherwise be appropriate.

      3. Discussing significant financial risk management and exposures and the steps management has taken to monitor, control and report such risk management.

      4. Establishing procedures for the receipt, retention and confidential treatment of complaints or concerns received by the Committee and 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. These procedures will be communicated to all employees on at least an annual basis.

      5. Reporting Audit Committee activities to the full Board and issuing annually a financial report to be included in the annual proxy statement for submission to the shareholders.



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