Board of Directors and Audit Committee
Objective
The majority of the board and all of the Audit Committee members are independent from management, have clearly articulated responsibilities and understand those responsibilities
EL1.3A The Company maintains a formal corporate governance policy that outlines the responsibilities of the board. The policy requires the majority of directors be independent of the Company. The policy also provides a detailed definition of independence. The Chairman is responsible to monitor Board independence and seek legal opinion or general counsel if there is a question of independence that could cause a conflict of interest. The Board minutes annually that a review has been taken of board independence.
EL1.3B Director and Audit Committee independence rules, as dictated by securities rules, are considered in the determination of director eligibility.
EL1.3C For each Committee the Company maintains formal written charters that have been approved by the board of directors and are reviewed on a annual basis.
EL1.3D The Audit Committee charter requires each of the Audit Committee to independent of the company’s management and for one member of the Audit Committee to be a financial expert.
EL1.3E No Audit Committee member can serve as a consultant or service provider to the company.
EL1.3F The board and audit committee meet on a quarterly basis.
EL1.3G The Company maintains formal written job descriptions for the directors. These are reviewed annually by the Board , updated as required with the review or changes being minuted. The Chairman is responsible to communicate changes in director’s job descriptions to the CEO and CFO.
Objective
The Audit Committee has appropriate interaction with and meets regularly with the independent auditors and is responsive to issues raised by the auditor
Control# Description of control
EL1.3H The Audit Committee meets regularly and privately with the independent auditors at least twice per year. Minutes of the meetings are maintained by the Chair of the Audit Committee
EL1.3I The Audit Committee deals with the appointment, termination and retention issues regarding the independent auditor including approving all remuneration. Resolutions are required for the appointment or removal of the auditor and to approve the auditor’s remuneration and expenses.
EL1.3J The Audit Committee considers whether non-audit services provided by the independent auditor are compatible with maintaining auditor independence and reviews and approves any fees associated with such non-audit services it provides e.g. for taxation and consultancy services. A resolution is required to approve the payment of all non-audit services provided by the auditor and that the services provided do not compromise the auditor’s independence.
EL1.3K The Audit Committee approves the terms of the independent audit, as detailed in the engagement letter
EL1.3L The Audit Committee reads and critically assesses the methodology and scope of the independent auditors plan annually
EL1.3M The Audit Committee is appropriately supportive of the auditor when issues arise, and management and the auditor disagree. The Audit Committee charter documents how such disputes are to be resolved.
EL1.3N The Audit Committee reviews the performance of the independent auditor annually and minutes whether it has been satisfactory or details specific issues that need to be addressed with a requirement that if there are such issues that their resolution is documented.
EL1.3O The Audit Committee, in conjunction with management, reports known deficiencies and management’s assertions in regard to the company’s internal control structure and procedures for financial reporting to the independent auditors every quarter with details of the actions taken to remedy the deficiencies. If necessary the Chairman of the Audit Committee requests a specific meeting between the Audit Committee, the CEO and CFO and the Auditor to discuss the nature of the weaknesses in more detail and the actions to be taken to resolve them.
Objective
The Audit Committee:
• maintains a high level of interaction and involvement with senior financial management and internal auditors;
• is supplied with appropriate information on a timely basis and exercises effective oversight; and
• asks the right questions, including questions that indicate an understanding of the critical accounting policies and judgmental accounting estimates
Control# Description of control
EL1.3P The Audit Committee meets privately every quarter with the CFO
EL1.3Q The Audit Committee, in accordance with the audit committee charter, reviews the scope of the internal audit plan annually that is used to assess the Company’s control environment and effectiveness.
EL1.3R The Audit Committee is required to be provided by the CFO with information sufficiently in advance of Audit Committee meetings
EL1.3S Matters reported to the Audit Committee, or submitted for consideration, are adequately documented. The Audit Committee Chairman directly or requests the CEO or CFO to arrange for other employees or 3rd parties to be in attendance at Audit Committee meetings
EL1.3T The Audit Committee assesses the appropriateness of management’s adoption/revision of accounting policies. The Audit Committee obtains information on GAAP changes that may affect the company’s accounting policies and financial reporting requirements by reviewing changes in the CICA handbook, and by attending conferences and seminars as required
EL1.3U Subsequent to meetings with management, the Audit Committee debriefs the Board of Directors of the meeting discussions as appropriate. The debriefing is documented in the board minutes.
EL1.3V On an annual basis, the CFO prepares a summary of the internal audit functions staff including experience and qualifications. The Audit Committee ensures that the CFO and the internal audit departments have sufficient resources and skills to adequately perform their roles. The Audit Committee minutes its review process of the internal audit function resource levels.
EL1.3W The Audit Committee has unfettered direct access to internal audit and vice versa. Either party can request a private meeting should there be issues of non-compliance, ethical or any other significant issues to be resolved
EL1.3X The Audit Committee members are provided quarterly financial statements, including a comparison of current period actual results to budget as well as certain operating statistics and analyses
EL1.3Y Company policy, as documented in the Policy Manual, dictates that the Audit Committee members or the Board of Directors be notified by the CFO within 5 business days, of any litigation deemed likely to result in the loss of $100,000 or more, any regulatory investigation, defalcation, violations of insider trading rules, political payments, embezzlement, other improper act of any employee or Whistleblower matters.
EL1.3Z A process exists for informing the Audit Committee members or the Board of Directors of sensitive information and significant issues (e.g. investigations and improper acts) within 5 business days
EL1.3AA It is required in the Board of Directors and Audit Committee charters that sufficient time be devoted to matters so that the Audit Committee members and/or the Board of Directors are able to constructively challenge management’s recommendations and probe for explanations of past results (e.g., budget variances) including the sufficiency of the information received before the approval of the release of financial statements or approval of the annual budget and plan.
EL1.3BB Policies require that when Audit Committee members and/or directors have concerns about advice given by management, they seek independent professional advice (e.g. independent legal counsel). The Chairman of the Board and Chairman of the Audit Committee (if different) are explicitly authorized to hire and pay for outside advisors.
EL1.3CC The Board specifically addresses management’s adherence to the code of conduct.
EL1.3DD The Board and Audit Committee are involved sufficiently in evaluating the effectiveness of the “tone at the top.” (COSO)
EL1.3EE The audit committee monitors compliance by its external audit firm with audit partner rotation requirements.
Considering:
• The SEC rule implementing Section 203 prohibits specified audit partners from providing audit services to an issuer for more than 5 or 7 consecutive years, depending on the partner’s role on the audit engagement.
EL1.3FF Audit committee receives regular communications from the external auditor. Specifically, all critical accounting policies and practices, all alternative accounting and disclosure treatments of material financial information that have been discussed with management, other material written communications between the auditor and management (e.g. a schedule of unadjusted audit differences, management representation letters, engagement letters, independence letter).
Communications with the audit committee are required to occur prior to filing the annual report with the SEC.
