AUDIT COMMITTEE CHARTER OF CHARTER PACIFIC CORPORATION LIMITED
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1. Purpose.
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The Audit Committee of the Board of Directors shall assist the Board in fulfilling its oversight responsibility with respect to:
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Charter Pacific's accounting and financial reporting practices and the audit process;
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the quality and integrity of Charter Pacific's financial statements;
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the independent auditors' qualifications, independence, and performance;
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the performance of Charter Pacific's internal audit function; and
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legal and regulatory compliance (recognizing that other board committees assist the Board of Directors in reviewing certain areas of legal and regulatory compliance).
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2. Composition.
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The Audit Committee should be composed of non-executive Directors, with a majority being independent. The Chairman of the Audit Committee may not be the Chairman of the Board. Each member must satisfy the applicable requirements of the Australian Securities Exchange or any other stock exchange on which Charter Pacific's shares may trade and the Australian Corporations Act 2001, as such requirements are interpreted by the Board in its business judgment. Director's fees are the only compensation an Audit Committee member may receive from Charter Pacific.
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3. Authority and Responsibilities
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The Audit Committee is directly responsible for the appointment, termination, compensation, and oversight of the work of Charter Pacific's independent auditors (including the resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. It shall report regularly to the Board. Charter Pacific's independent auditors shall report directly to the Audit Committee. The Audit Committee shall pre-approve all permissible non-audit services and all audit, review or attest engagements required under the securities laws to be rendered by the independent auditors. Alternatively, Charter Pacific may enter into engagements to render such services pursuant to pre-approval policies and procedures established by the Audit Committee; provided, that such policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service and such policies and procedures do not include the delegation of Audit Committee responsibilities under the Australian Auditing Standards and Corporations Act 2001 to management.
The Audit Committee may, to the extent it deems necessary or appropriate, conduct or authorize investigations into any matter within the scope of its authority and may retain legal counsel, accountants and others to assist it in the conduct of its responsibilities, including investigations. The Audit Committee shall receive appropriate funding, as determined by the Audit Committee, from Charter Pacific, for payment of (a) compensation to the independent auditor employed by Charter Pacific for the purpose of rendering or issuing an audit report or performing other audit, review or attest services for Charter Pacific, (b) compensation to any special legal, accounting or other consultants employed by the Audit Committee and (c) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties. The Audit Committee may consult with management and may delegate any of its responsibilities and duties to one or more members of the Audit Committee, except to the extent such delegation would be inconsistent with the requirements of the Australian Stock Exchange's Listing Rules.
The Audit Committee shall:
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meet separately, periodically, with Charter Pacific's independent auditors and with Charter Pacific's management; and
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at least annually, evaluate the qualifications, performance, and independence of Charter Pacific's independent auditors and appoint a firm of independent public accountants to act as Charter Pacific's independent auditors. This evaluation shall include the review and evaluation of the lead partner of Charter Pacific's independent auditors and take into account the opinions of Charter Pacific's management.
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In connection with this evaluation and appointment, the Audit Committee shall obtain and review a report by Charter Pacific's then current independent auditors describing:
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the independent auditors' internal quality-control procedures;
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any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditors, 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 auditors, and any steps taken to deal with any such issues; and
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all relationships between the independent auditors and Charter Pacific.
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The Audit Committee shall:
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discuss with the independent auditors any relationships disclosed in that report and shall, if necessary, take appropriate action to ensure the auditors' independence; and
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oversee compliance of Charter Pacific's rotation policy for the partners and employees of its independent auditors with the requirements of the Australian Auditing Standards and the Australian Corporations Act 2001. The Audit Committee shall consider the regular rotation of Charter Pacific's independent auditors and report its conclusions to the Board.
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Review and discuss with management and the independent auditors:
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the annual audited financial statements and interim financial statements, including Charter Pacific's disclosures under the "operating and financial review and prospects" and the matters required to be discussed pursuant to the Australian Auditing Standards, before their incorporation into Charter Pacific's filings with the Australian Stock Exchange and Australian Securities and Investment Commission;
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the scope, procedures and fees for the proposed audit for the current year and, at its conclusion, review that audit including any comments or recommendations by the independent auditors;
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major issues regarding accounting principles and financial statement presentations, including significant changes in Charter Pacific's selection or application of accounting principles and major issues as to the adequacy of Charter Pacific's internal controls and any special audit steps adopted in light of material control deficiencies;
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analyses prepared by management or Charter Pacific's independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and
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the effect of regulatory and accounting initiatives, as well as off-balance sheet structures (if any), on Charter Pacific's financial statements.
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Review and discuss with Charter Pacific's independent auditors:
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any problems or difficulties encountered in the course of the audit work, including any restrictions on the scope of the independent auditors' activities or on access to requested information and management's response, and any significant disagreements with management;
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any report by the independent auditors required by the Australian Auditing Standards and Corporations Act 2001 including any report relating to critical accounting policies and practices to be used in connection with the audit of Charter Pacific, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of the use of those alternative disclosures and treatments, and the treatment preferred by the independent auditors, and other material written communications between the independent auditors and management;
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any information obtained from the independent auditors with respect to illegal acts in accordance with the Australian Auditing Standards and Corporations Act 2001;
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review and discuss (with management and the independent auditors, as appropriate) Charter Pacific's major financial risk exposures and the steps management has taken to monitor and control those exposures, including Charter Pacific's risk assessment and risk management policies; and
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adopt guidelines governing the hiring of employees or former employees of the independent auditors who were engaged on Charter Pacific's account in compliance with the Australian Auditing Standards and Corporations Act 2001.
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Establish procedures for:
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the receipt, retention and treatment of complaints received by Charter Pacific regarding accounting, internal accounting controls or auditing matters;
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the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
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review any disclosures made to the Audit Committee by Charter Pacific's Managing Director or Company Secretary relating to their certification obligations under the Australian Auditing Standards and Corporations Act 2001; and
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review with the independent auditors, and financial management, the adequacy, effectiveness and quality of the Charter Pacific's accounting and financial reporting principles, policies, procedures and controls, and elicit from them any recommendations for improvements.
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4. Education
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Charter Pacific is responsible for providing new members with appropriate orientation briefings and educational opportunities, and the full Committee with educational resources relating to accounting principles and procedures, current accounting topics pertinent to Charter Pacific and other material as may be requested by the Committee. Charter Pacific will assist the Committee in maintaining appropriate financial literacy.
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5. Annual Performance Evaluation.
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The Audit Committee shall review and assess the adequacy of its charter annually and recommend any proposed changes to the Board for approval. It also shall conduct an annual evaluation of the Audit Committee’s performance.