1. Role of the Audit Committee
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibility to the shareholders relating to the Company’s financial accounting, reporting, internal control practices, risk management systems and processes, and the quality and integrity of the financial reports of the Company. The Committee selects, reviews and evaluates the performance and independence of the Company’s independent auditors. This Committee evaluates the performance of the internal audit function and internal auditors. It also reviews any potential conflict of interest of the executive officers.
2. Structure and Operations
2.1 Composition and Qualifications. The Committee’s composition and qualifications shall meet the requirements of the rules of Securities and Exchange Commission, as well as the applicable regulations of the company’s Manual on Corporate Governance. Accordingly, the Committee shall be comprised of not less than three members of the Board of Directors, one of whom is determined by the Board of Directors to be “independent” under the rules of Securities and Exchange Commission (the “SEC”). Each member shall be financially literate, as signified by the ability to read and understand fundamental financial statements and shall have adequate understanding of risk management principles.
2.2 Appointment and Removal. The members of the Committee shall be appointed by the Board of Directors, taking into consideration the recommendation of the Nomination Committee, and shall serve at the pleasure of the Board and for such terms as the Board may determine. The members of the Committee may be removed, with or without cause, by the Action of the Board of Directors.
2.3 Chairman. The Committee shall designate one member of the Committee as its chairperson. The Chairman shall have accounting or related financial management expertise. The Committee Chairman will chair in all regular sessions of the Committee and set the agendas for the Committee meetings.
2.4 Subcommittees. The Audit Committee may delegate any of its responsibilities and duties to one or more members of the Compensation Committee, as they shall deem necessary or appropriate.
2.5 Availability of Outside Advisors. The Committee may directly engage outside advisors (legal, accounting, and any others as deemed necessary or appropriate in carrying its duties and responsibilities) of its choosing at the Company’s expenses. The Company shall provide funding determined appropriate by the Committee for any such advisors and firms.
2.6 Access to Information and employees. The Committee is empowered to investigate any matter relating to its purpose, duties or responsibilities that it deems appropriate and shall have full and direct access to all books, records, facilities and personnel of the Company.
2.7 Attendance at Committee Meetings. The Committee shall meet at least four times each year and at such times, as the Committee shall consider appropriate to fulfill its duties and responsibilities. Members are expected to attend meetings in person but in special circumstances by means of video or telephone conference call or other electronic means. Written or electronic minutes of each meeting shall be prepared and filed with the records of the Company and shall be available to any and all Directors for the Company.
2.8 Meeting Attendees. The Committee may invite any Director, member of the management or any other person to its meetings, as it may deem desirable or appropriate.
3. Authority and Responsibilities
The primary responsibility of the committee is, through the provision of checks and balances, to support corporate governance process and to oversee the Company’s financial reporting process on behalf of the board and report the results of their activities to the board. The Committee may assume additional functions or adopt additional policies and procedures as may be appropriate to carry out its purposes.
3.1 General Responsibilities
3.1.1 Maintain open communications with the internal auditor, the independent accountants/auditors, management, and the Board of Directors. Monitor compliance with the provisions and requirements of this Manual;
3.1.2 Assess management’s programs and policies regarding the adequacy and effectiveness of internal controls over the accounting and financial reporting system within the Board.
3.1.3 Review and discuss significant financial exposures or risks and evaluate the steps management has taken to monitor, control, and report and mitigate such risk to the company.
3.1.4 Conduct and authorize investigations into matter within its scope of responsibility.
3.1.5 Meet separately in executive sessions with the internal auditor and the Company’s independent accountants/auditors at each regularly scheduled Committee meeting and with management from time to time as appropriate to discuss any matters the Committee or these persons or groups believe should be discussed privately.
3.1.6 Review policies and procedures covering officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the internal audit department or the independent accountants/auditors.
3.1.7 Review periodically with the General Counsel any legal and regulatory matters that may have a material effect on the Company’s financial statements, operations, compliance policies and programs and the manner in which these matters have been disclosed in the financial reports.
3.1.8 Meet with management and the independent accountants/auditors to review and discuss the company’s annual financial statements and Recommend to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 17-A.
3.1.9 Recommend to the Board of Directors restrictions on the Company’s hiring of employees or former employees of the independent accountants/auditors who were engaged on the Company’s account.
3.1.10 Review with management, the general counsel, the internal auditor and the independent accountants/auditors, disclosures of insider and affiliated party transactions.
3.1.11 Review and approve other relevant reports or financial information to be submitted by the company to any government body or the public, including management certifications as required by SRC Rule 68 as amended and relevant reports such as management representation letters.
3.2 Responsibilities relating to the engagement of the independent accountants /auditors and the appointment of the internal auditor.
3.2.1 The Committee shall have the sole authority to appoint or replace the independent accountants/auditors (subject to stockholder ratification). The Committee shall be directly responsible for the compensation and oversight of the work of the independent accountants for the purpose of rendering or issuing an audit report or related work or performing other audit Review and assess the independence and professional qualifications, competence and performance of the independent accountants and observe rotation process of independent accountants or firms. The independent accountants shall report directly to the Committee open communications with the internal auditors, the independent accountants, management, and the Board of Directors.
3.2.2 Review the experience and qualifications of the senior members of the independent accounts’ audit team. Ensure the rotation of partners on the audit engagement team in accordance with the applicable law.
3.2.3 Review and approve all audits and permitted non-audit services to be performed by the independent accountants.
3.2.4 Review and approve the Internal Audit Charter, including the appointment of Internal Auditor. Review periodically the Internal Audit Charter to ensure compliance with the International Standards on the Professional Practice of Internal Auditing.
3.2.5 Review and concur in the appointment, replacement, reassignment or dismissal of the internal auditor. The Internal Auditor shall have audit, accounting and finance background and preferably be a CPA. The internal auditor shall report matters within his or her authority directly to the Committee.
3.2.6 At least annually, obtain and review any and all reports required by the PSE or SEC relating to the independent accountant’s internal quality control.
3.3 Responsibilities relating to the review of internal audits, the annual external audit and the review of financial statements.
3.3.1 Request the independent accountants /auditors to confirm that they report directly to the committee and that they will provide the Committee with timely analyses of significant financial reporting and internal control issues.
3.3.2 Review with management significant risks and exposures identified by management, the internal auditor or the independent accountants/auditors, and management’s steps to address them.
3.3.3 Review the scope/audit plans and the scope of the external audit with the independent accountants/auditors.
3.3.4 After the completion of the annual audit examination (and before the audit report is filed with the Commission), review with management and the independent accountants:
a. The Company’s annual financial statements and related footnotes, including disclosures made in Management’s Discussion and Analysis.
b. The independent accountant’s audit of and report on the financial statements.
c. The qualitative judgments about the appropriateness and acceptability of accounting principles, financial disclosures and underlying estimates, including (i) critical accounting policies and practices to be used and (ii) alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, including ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent accountants.
d. Any significant difficulties or disputes with management encountered during the course of the audit and management’s response, including any restrictions on the scope of their work or access to required information.
e. The effect of regulatory and accounting initiative.
f. The effect of off-balance sheet structures, if any, on the Company’s financial statements.
g. Any major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies.
h. Any other matters about the audit procedures or findings that Generally Accepted Auditing Standards (GAAS) require the auditors to discuss with the Committee, including any material written communications between independent accountants and management.
3.3.5 Review and confirm the annual audit and strategic plans prepared by the Internal Auditor.
3.3.6 Discuss with management and internal auditor on a timely basis (i) any significant deficiencies in the design or operation of internal controls and any material weaknesses therein, (ii) any fraud involving management or other employees who have a significant role in the Company’s internal controls and (iii) any employee complaints or published reports which raise material issues regarding the Company’s accounting, internal accounting controls or auditing matters:
a. Any difficulties the internal auditor has encountered while conducting audits, including any restrictions on the scope of his/her work or access to required information
b. Any changes to the planned scope of the internal audit plan that the Committee thinks advisable.
c. The internal audit department’s budget and staffing.
3.3.7 Review significant findings of internal audit and Management’s response in correcting weaknesses. Support the internal audit function and reviews the effectiveness of the internal audit function, including compliance with the standards of the Professional Practice of Internal Auditing.
3.3.8 Review and discuss with management the Company’s quarterly financial statements prior to filings of SEC form 17Q. Discuss with management press releases related to earnings and financial information and earnings guidance provided to analyst and rating agencies.
3.3.9 Review management’s processes in place to prevent and detect fraud. Review procedures for the receipt, retention and treatment of complaints received by the Company, including confidential, anonymous submissions by employees of the Company, regarding the Company’s accounting, internal accounting controls or auditing matter.
4. The committee shall assess its performance and compliance with the Manual on Corporate Governance and other relevant regulatory requirements by accomplishing SEC Annual Corporate Governance Self-Evaluation Report pending the development of the “Self-assessment questionnaire” benchmarking practices against the Audit Charter/ CCGAC.
5. While the Audit Committee is responsible for reviewing the Company’s policies and practices with respect to risk assessment and management, it is the responsibility of the Chief Executive Officer and senior management to develop, implement, report and evaluate its risk management framework and the appropriate level of the company’s exposure to risk.
6. This Policy is reviewed as deemed necessary.