Audit Commitee Charter
ROLE OF THE AUDIT COMMITTEE
The role of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities with respect to (1) the integrity and accuracy of the Corporation’s financial statements, (2) the Corporation’s compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence, (4) the performance of the Corporation’s internal audit function and independent auditor and (5) the integrity and effectiveness of the Corporations system of internal controls. The role of the Audit Committee also includes encouragement of strong, positive working relationships and free and open communication among the directors, the independent auditor, the internal auditors, counsel and the Corporation’s management.
COMMITTEE COMPOSITION
- The Audit Committee shall consist of at least three directors, all of whom have no relationship to the Corporation that may interfere with the exercise of their independence from management. References to "Corporation" in this Charter shall refer to the Corporation and all of its subsidiaries.
- The Board of Directors shall make determinations of independence with respect to possible appointees and shall appoint the members of the Audit Committee and its Chairman annually at its organizational meeting. The Board shall apply the rules and restrictions of the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers relating to independence and consider employment, officer, business, family and other relationships in making such determinations and appointments.
- Each member of the Audit Committee shall be financially literate; as such qualification is interpreted by the Board of Directors in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Audit Committee. Financial literacy includes a working familiarity with basic financial and accounting practices.
- The Chairman of the Audit Committee must have accounting or related financial management expertise, as the Board of Directors interprets such qualification in its business judgment, and as required by the Sarbanes-Oxley Act.
AUDIT COMMITTEE MEETINGS
- The Audit Committee shall hold at least four regular meetings annually, and shall meet more frequently as deemed necessary to fulfill the responsibilities prescribed in this Charter or by the Board of Directors. Special meetings of the Committee may be called by the Chairman of the Audit Committee.
- The Chairman of the Committee shall consult quarterly with the independent auditor and management of the Corporation in separate executive sessions to discuss any matters that the Committee or each such group or person believes should be discussed privately.
- The Committee shall request that members of management, counsel, the Internal Audit function and the Corporation’s independent auditor, if applicable, participate in Committee meetings, as deemed appropriate by the Committee. Periodically and at least annually the Committee shall meet in private session with only Committee members present.
- The Committee shall periodically report on its meetings and other activities to the Board of Directors, shall keep accurate minutes of its meetings and shall present such minutes to the Board of Directors for its approval.
RESPONSIBILITIES AND DUTIES
CHARTER/REPORT- The Audit Committee Charter and any revisions thereto shall be approved by the Board of Directors.
- The Audit Committee shall review and reassess the adequacy of the Audit Committee Charter on an annual basis, or more frequently as needs dictate, and recommend to the Board of Directors any revisions considered appropriate.
- The Audit Committee Charter shall be included as an appendix to the Corporation’s proxy statement in accordance with the rules and regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such rules and regulations may be modified or supplemented from time to time ("SEC Rules").
- The Committee shall prepare and publish in the Corporation’s proxy statement an Audit Committee Report as, and when required, by SEC Rules.
- The Committee in carrying out its responsibilities, believes its policies and procedures should remain flexible in order to best react to changing conditions and circumstances.
The independent auditor for the Corporation is accountable to the Board of Directors and the Audit Committee of the Corporation.
The Audit Committee shall:
- Have sole authority over the appointment, retention, discharge or replacement of the independent auditor, and the approval of all audit engagement fees and terms.
- Receive and discuss with management and the independent auditor the letter from the independent auditor regarding the auditor’s independence required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as such Standard may be modified or supplemented from time to time.
- Obtain and review a report from the independent auditor at least annually regarding (a) the auditor’s internal quality-control procedures, (b) any material issues raised by the most recent 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 Corporation.
- Periodically and at least annually, evaluate and discuss with the independent auditor such auditor’s independence, effectiveness and performance, including the experience and qualifications of the senior members of the independent auditor team and any disclosed relationships or services that may impact the objectivity and independence of the independent auditor.
- Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the lead audit partner or the independent auditor on a regular basis.
- Present its conclusions regarding its evaluation of the independent auditor to the Board of Directors and recommend to the Board any appropriate action to satisfy the Committee and/or the Board of the qualifications, performance and independence of the independent auditor.
- Approve the audit plan and the scope of the audit on an annual basis or as otherwise necessary, and approve any modifications thereto.
- Have sole authority over the engagement of the independent auditor to perform non-audit services, and the approval of all fees associated with such engagement.
- Review the extent to which independent public accountants other than the principal independent auditor are used by the Corporation and the rationale for such use.
- Recommend to the Board policies for the Corporation’s hiring of employees or former employees of the independent auditor who were engaged on the Corporation’s account.
The Audit Committee shall:
- Review and approve the appointment, replacement, reassignment, or dismissal of the persons and/or firms performing the internal audit function and periodically and at least annually review their performance.
- At least annually review and approve the internal audit plan, and periodically ensure adequate resources are available to execute the plan.
- Review the results of completed internal audits with the internal auditor and monitor corrective actions taken by management, as deemed appropriate.
- Review with the independent auditor its assessment of internal audit function practices and objectivity.
The Audit Committee shall:
- Review the coordination of audit efforts of the internal audit function and the independent auditor to assure completeness of coverage, reduction of redundant efforts, and the effective use of audit resources.
- Review and discuss with management and the independent auditor the audited financial statements of the Corporation, including management’s discussion and analysis.
- Review and discuss with management and the independent auditor of the Corporation’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor’s reviews of the quarterly financial statements.
- Review with the independent auditors, the Corporation’s internal auditor, if applicable, and the Corporation’s financial and accounting personnel, the adequacy and effectiveness of the accounting, financial and disclosure controls of the Corporation, including financial controls required by Sarbanes-Oxley Section 404 or the Public Company Accounting Oversight Board ("PCAOB"), and elicit and recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desireable. Particular emphasis should be given to the adequacy of such internal controls to expose any payments, transactions or procedures that might be deemed illegal or otherwise improper.
- Review with the independent auditor the independent auditor’s evaluation of the Corporation’s financial, accounting and internal audit personnel, and the cooperation received by the independent auditor during the course of the audit.
- Review any significant disagreement between management and either the independent auditor or the internal auditor in connection with the preparation of the financial statements.
- Discuss with management and the independent auditor the matters required to be disclosed or discussed by Statement on Auditing Standards No. 61 and No. 100 relating to the conduct of the audit. In particular, discuss:
- the adoption of, or changes to, the Corporation’s significant accounting principles or financial reporting policies;
- the management letter provided by the independent auditor and management’s response to that letter; and
- any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information.
- Review (a) the accounting treatment accorded significant transactions, (b) any significant accounting issues, including any second opinions sought by management on accounting issues, (c) the development, selection and disclosure of critical accounting estimates and analyses of the effects of alternative GAAP methods, regulatory and accounting initiatives, and off-balance sheet structures of the financial statements of the Corporation and (d) the Corporation’s use of reserves and accruals, as reported by management and the independent auditor.
- Discuss with the independent auditor and management the auditor’s judgments about the quality and acceptability of the Corporation’s accounting principles as applied in its financial reporting. If the independent auditor identifies any matters relating to such quality and acceptability in connection with its review of financial information, the Audit Committee shall receive from the independent auditor or management communication about such matters.
- Review with the independent auditors and the Corporation’s internal audit provider the adequacy and effectiveness of the accounting and financial controls of the Corporation.
- Make recommendations to the Board of Directors as to whether the audited financial statements should be included in the Corporation’s Annual Report on form 10-K for the last fiscal year for filing with the Securities and Exchange Commission.
- Receive from management and the independent auditor timely analysis of significant current financial reporting issues.
- Review of Affiliate Banks’ controls.
- Review with management, the internal auditor and the independent auditor the Corporation’s financial risks, the Corporation’s risk management process, any major issues as to the adequacy of the Corporation’s internal controls, and any special audit steps adopted in light of any material control deficiencies.
- Discuss with management the Corporation’s earnings press releases, including the use of "pro foma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.
- Obtain from the independent auditor assurance that Section 10A of the Securities Exchange Act of 1934 has not been implicated.
The Audit Committee shall:
- Establish, review and update (or cause management to update) periodically a Code of Ethics and assure that management has established a system to enforce the Code.
- Review reports concerning compliance of the Corporation’s directors, management, associates and others to whom the Code applies.
- Review the results of the internal audit function annual audit of corporate officer expenses and executive benefits.
- Review with the Corporation’s outside counsel legal compliance matters and any legal matter that could have a significant impact on the corporation’s financial statements.
- Conduct or authorize investigations into any matters within the scope of the Committee’s responsibilities, and retain independent legal counsel or other advisors at the expense of the Corporation, when needed, to assist in the conduct of any investigation or for any other purpose the Committee deems appropriate
- Annually evaluate its own performance.
- Establish appropriate processes and procedures surrounding the receipt, retention, and treatment of complaints received by the Corporation.
LIMITATION OF AUDIT COMMITTEE’S ROLE
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Corporation’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management, the independent auditor and the internal audit provider.
