1. Review and reassess the adequacy of this charter (the Charter) at
least annually. Submit the Charter to the Board for approval and have
the Charter published as required by applicable law.
2. Review and discuss with Company management and the independent
auditors:
(i) the Company's yearly financial results prior to the release of
year-end earnings and the Company's annual audited
consolidated financial statements (including the Company's
disclosures under ¡¡ãManagement's Discussion and Analysis of
Financial Condition and Results of Operations) and the
194506.03-Los Angeles S1A
LA1:1035661.3 4
related report of the independent auditors prior to filing or
distribution of such statements,
(ii) the Company's quarterly financial results prior to the release of
quarterly earnings (including the type and presentation of
information to be included in the earnings press releases) and
the Company's quarterly financial statements (including the
Company's disclosure under Management's Discussion and
Analysis of Financial Condition and Results of Operations)
and the related report of the independent auditors prior to filing
or distribution of such statements, and
(iii) the Company's financial information and earnings guidance
provided to analysts and rating agencies.
Such review should include discussion with management and the
independent auditors of:
(a) significant issues regarding, and any material changes to,
accounting and auditing principles and financial statement
presentations, practices and judgments,
(b) the adequacy of internal controls that could significantly affect
the Company's financial statements, and any special audit steps
adopted in light of material control deficiencies,
(c) in the case of year-end financial results, the results of the audit,
and
(d) any items required to be communicated by the independent
auditors in accordance with Statement of Auditing Standards
(SAS) No. 61, as it may be amended or supplemented.
The Chair may represent the entire Committee for purposes of this
review.
3. Review an analysis prepared by management and the independent
auditors of significant financial reporting issues and judgments made
in connection with the preparation of the Company's financial
statements, including an analysis of the effect of alternative GAAP
methods on the Company's financial statements.
194506.03-Los Angeles S1A
LA1:1035661.3 5
4. In consultation with management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes and internal control policies and procedures.
5. Meet periodically with management to discuss significant financial
risk exposures and the steps management has taken to monitor, control,
and report such exposures. Review significant findings prepared
by the independent auditors and those charged with the internal
auditing function together with management¡¯s responses, including the
status of previous recommendations.
6. Review with management and the independent auditor the effect of
regulations and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
7. Obtain and review timely reports from the independent auditor
regarding:
(a) all critical accounting policies and practices to be used by the
Company,
(b) all alternative treatments of financial information within GAAP
that have been discussed with management, ramifications of
the use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditor, and
(c) all other material written communications between the
independent auditor and management, including any
management letter or schedule of unadjusted differences.
Such reports may be oral or in writing, but must be provided to the
Committee before any auditor's report is filed with the SEC.
Independent Auditors
8. Be solely and directly responsible for the appointment, compensation,
retention, evaluation, 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 performing other
194506.03-Los Angeles S1A
LA1:1035661.3 6
audit, review or attest services for the Company and, where
appropriate, the termination and replacement of such firm. Such
independent auditor shall report directly to and be ultimately
accountable to the Committee. The Committee has the ultimate
authority to approve all audit engagement fees and terms, with the
costs of all engagements to be borne by the Company.
9. Consider whether there should be regular rotation of the independent
auditor. Review and evaluate the lead partner of the independent
auditor. Ensure that the lead audit partner having primary
responsibility for the audit and the reviewing audit partner of the
independent auditor are rotated at least every five years and that other
audit partners (as defined by the SEC) are rotated at least every seven
years.
10. Review changes to the Company's auditing and accounting policies
and practices as suggested by the independent auditors, internal
auditors or management.
11. Review and approve the independent auditors' engagement letter and
approve the fees and other significant compensation to be paid to the
independent auditors.
12. Pre-approve all audit services and all non-audit services permitted to
be performed by the independent auditor. Such pre-approval may be
given as part of the Committee's approval of the scope of the
engagement of the independent auditor or on an engagement-byengagement
basis or pursuant to pre-established policies. In addition,
the authority to pre-approve non-audit services may be delegated by
the Committee to one or more of its members, but such members or
members non-audit service approval decisions must be reported to the
full Committee at the next regularly scheduled meeting. The
Company shall disclose in its Annual Reports on Form 10-K and its
Quarterly Reports on Form 10-Q any approval of non-audit services
during the period covered by the applicable report.
13. At least annually, obtain and review a report from the independent
auditor describing:
(a) the independent auditors internal quality-control procedures,
194506.03-Los Angeles S1A
LA1:1035661.3 7
(b) any material issues raised by the most recent internal qualitycontrol
review, or peer review, of the independent auditor, 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 independent auditor,
and any steps taken to deal with any such issues, and
(c) all relationships between the independent auditor and the
Company (to assess the independent auditor¡¯s independence).
14. Set clear hiring policies for employees and former employees of the
independent auditor.
15. Review the independent auditors' audit plan prior to the audit. Discuss
scope, staffing, locations, reliance upon management, and internal audit
and general audit approach. Monitor such plan's progress and results
during the year.
16. Consider the independent auditor's judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting
17. Obtain from the independent auditors any information pursuant to
Section 10A of the 1934 Act and take any and all action required by
Section 10A to be taken by the Committee, and cause the Board to
take, any and all action required by Section 10A to be taken by the
Board, in response to any such information.
18. Review with the independent auditors any problems or difficulties the
auditors may have encountered in the course of their audit work, and
any management letter provided by the independent auditors and the
Company's response to that letter. Such review should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information, and
(b) Any changes required in the planned scope of the independent
audit.
194506.03-Los Angeles S1A
LA1:1035661.3 8
19. Discuss with the independent auditor any accounting adjustments that
were noted or proposed by the independent auditor but were passed
on. Review any communications between the audit team and the audit
firms national office respecting auditing or accounting issues
presented by the engagement and any management or internal
control letter issued, or proposed to be issued, by the audit firm to the
Company.
Internal Audit Function and Legal Compliance
20. Review the budget, plan, changes in plan, activities, responsibilities,
staffing, organizational structure, and qualifications of the internal
auditor, as needed.
21. Review the appointment, performance, and replacement of the senior
internal audit executive, manager or firm.
22. Review significant reports prepared by the internal auditor together
with management's response and follow-up to these reports.
23. On at least an annual basis, review with the Company's counsel any
legal matters that could have a significant impact on the Company's
financial statements, the Company's compliance with applicable laws
and regulations, and any inquiries received from regulators or governmental
agencies.
Other Audit Committee Responsibilities
24. Annually prepare a report as required by, and stating the information
specified by, the proxy rules under the 1934 Act, which report shall be
included in the Company's annual meeting proxy statement (or, if
applicable, information statement in lieu thereof).
25. Recommend to the Board, based on the Committee's review and
discussions with management and the independent auditors, whether
or not the audited financial statements should be included in the Company's
Annual Report on Form 10-K for the last fiscal year for filing
with the SEC.
194506.03-Los Angeles S1A
LA1:1035661.3 9
26. Confirm that the Company's interim financial statements to be included
in the Company's Quarterly Report on Form 10-Q have been
reviewed by the Company's independent auditors.
27. Perform any other activities consistent with the Charter, the Company's
Bylaws, and governing law, as the Committee or the Board
deems necessary or appropriate.
28. Maintain minutes of meetings and periodically report to the Board on
significant results of the foregoing activities.
29. Establish, review, and update periodically a Code of Conduct and
ensure that management has established a system to enforce this Code.
30. Establish procedures for the receipt, retention and treatment of
complaints received by the Company from Company employees
regarding accounting, internal accounting controls, or auditing matters,
and the confidential, anonymous submission by Company employees
of concerns regarding questionable accounting or auditing matters.
31. Annually perform self-assessment of audit committee performance.
32. Review financial and accounting personnel succession planning within
the Company.
33. Review at least annually a summary of directors' and officers' related
party transactions and potential conflicts of interest and the Company's
policies relating to the avoidance of conflicts of interest. Review past
and proposed transactions between the Company, on the one hand, and
any of its directors or executive officers, on the other hand. Review
policies and procedures as well as audit results associated with directors'
and officers' expense accounts and perquisites, including the use
of corporate assets. Consider the results of any review of any of the
foregoing by the Company's independent auditors.
34. Obtain reports from management, the Company's senior internal
auditor, the independent auditors and internal and external legal
counsel that the Company's subsidiaries and any foreign affiliated
entities are in conformity with applicable accounting and legal
requirements.
194506.03-Los Angeles S1A
LA1:1035661.3 10
35. Report regularly to the Board with respect to the quality or integrity of
the Company¡¯s financial statements, the Company's compliance with
applicable legal or regulatory requirements, the performance and
independence of the Company¡¯s independent auditors, and the
performance of the internal audit function.
36. Confirm that the Company has prepared and filed, on an annual basis
after the Board appoints the Committee and at any subsequent time
when the composition of the Committee changes, the written
certification required by the rules of the Exchange.