Audit Committee Charter
XēDAR
Corporation
Board of Directors
AUDIT
COMMITTTEE CHARTER
I. Purpose
The Audit Committee (the
“Committee”) of the Company is appointed by, and generally acts on behalf of,
the Board of Directors (the “Board”) of XēDAR Corporation (the “Company”). The Board has established the governing
principles of the Committee through the adoption of this Charter. The Committee’s principal purpose shall be: (i) to
assist the Board in its oversight of (i) the integrity of the Company’s
financial statements; (ii) the Company’s compliance with legal and regulatory
requirements; (iii) the Company’s Internal Controls; and (iv) the performance
of the Company’s Internal Audit function;
(ii) to
interact directly with and evaluate the performance of the Independent Auditors,
including to determine whether to engage or dismiss the Independent Auditors,
to approve their fees, and to monitor the Independent Auditors’ qualifications
and independence; and
(iii) if necessary, to
prepare the report required by the rules of the Securities and Exchange
Commission (the “SEC”) to be included in the Company’s proxy statement.
With respect to financial reporting, and compliance
with laws and regulations, management is responsible for the Company’s reporting
process and the system of Internal Controls. Management is responsible for the completeness and accuracy of the
Company’s financial statements and the fair presentation of the financial
condition, results of operations and cash flows of the Company. Management is also responsible for assuring
compliance with applicable laws and regulations and with the Company’s Code of
Business Ethics.
The Independent Auditors are responsible for
performing an independent audit of the Company’s consolidated financial
statements in accordance with generally accepted auditing standards and
expressing an opinion on the conformity of those audited financial statements
in accordance with generally accepted accounting principles (“GAAP”). The Independent Auditors shall provide an
attestation report on management’s assessment of Internal Controls over
financial reporting in accordance with Rule 2-02(f) of Regulation S-X
promulgated by the SEC.
Consistent with the specific duties of the Committee
listed below, it is the responsibility of the Committee, working in conjunction
with management and the Independent Auditors, to oversee and monitor these
policies and procedures in a manner that achieves its objectives.
II. Responsibilities and Duties
A. Financial Reporting
1. General
The Committee shall review and discuss with management
and the Independent Auditors, as appropriate, the following:
(i) the
Company’s policies and procedures regarding disclosures that may impact the
financial statements;
(ii) significant
financial reporting issues and judgments;
(iii) the
adequacy of the Company’s Internal Controls and any actions taken to address
reportable or material control deficiencies;
(iv) financial
statement presentation;
(v) regulatory
and accounting initiatives;
(vi) all
alternative treatments of the Company’s financial information, including the
use of “pro forma” or “adjusted” non-GAAP information, the ramifications of the use of such
alternative disclosures and treatments and the treatment preferred by the Independent
Auditors;
(vii) any
reports prepared by the Independent Auditors and provided to the Committee
relating to significant financial reporting issues and judgments including,
among other things, the Company’s selection, application and disclosure of critical
accounting principles and practices, all alternative assumptions, estimates or
methods used by the Independent Auditors or that have been discussed with management
and the effects, if any, such treatments have on the Company’s financial
statements and the treatment preferred by the Independent Auditors;
(viii) all
“special-purpose” entities, off-balance sheet structures and complex financing
transactions;
(ix) any
disagreements that may have occurred between the Independent Auditors and
management relating to the Company’s financial statements or disclosures;
(x) any
correspondence with regulators or published reports that raise material issues
with respect to, or that could have a significant effect on, the Company’s
financial statements; and
(xi) any
other matters required to be discussed by applicable auditing standards, laws
or regulation.
2. Preparation and Release of Financial Information
(i) The
Committee shall review and obtain an understanding of the scope and timing of
the annual audit as well as the results of the audit work performed by the Independent
Auditors. For quarterly information, the
Committee shall obtain an understanding of the extent to which the Independent Auditors
review quarterly financial information.
(ii) The
Committee shall meet with the Company’s general counsel, and outside counsel
when appropriate, to discuss legal matters that may have a significant impact
on the Company’s financial results and related disclosures.
(iii) The
Committee shall review earnings press releases prior to their release, as well
as the types of financial information and earnings guidance provided to
analysts and rating agencies.
(iv) The
Committee shall review and discuss with management and the Independent Auditors
the annual audited financial statements to be included in the Company’s annual
report on Forms 10-K or 10-KSB, the quarterly financial statements to be included in the
Company’s Forms 10-Q or 10-QSB, and any other financial disclosures prior to their
release to determine that the Independent Auditors are satisfied with the
disclosure and content of the financial statements to be presented.
(v) The
Committee shall recommend to the Board whether the audited financial statements
should be included in the Company’s Form 10-K.
3. Audit
Committee Report
If required by the rules of the SEC, the Committee shall prepare annually a report in
accordance with the applicable rules and regulations of the SEC for inclusion
in the Company’s proxy statement.
B. Monitoring Compliance with Laws
The Committee shall meet periodically with the senior
member of the Internal Audit department, the Company’s general counsel, and
where appropriate, the Independent Auditors to review the Company’s policies
and procedures regarding compliance with applicable laws and regulations and
with the Company’s Code of Business Ethics. Specifically, the Committee shall among other actions it deems
appropriate, perform the following:
(i) oversee
the implementation of the Company’s Code of Business Ethics;
(ii) review
significant cases of conflict of interest, misconduct, or fraud under the Code
of Business Ethics and the resolution of such cases in accordance with
applicable SEC rules and American Stock Exchange LLC ("AMEX") listing standards;
(iii) review
the Company’s policies and processes for compliance with U.S. and foreign country export controls,
laws and regulations; and
(iv) review
the Company’s policies and processes for compliance with the Foreign Corrupt
Practices Act and the Federal Sentencing Guidelines.
C. Oversight of Disclosure Controls
and Procedures and Internal Controls and Procedures
1. The
Committee shall oversee the Company’s (i) disclosure controls and procedures,
(ii) Internal Controls over financial reporting (as defined by the SEC), as
well as (iii) Internal Controls generally (collectively, “Internal
Controls”). The Committee will review
with the Independent Auditors, the Company’s internal auditors, and financial
and accounting personnel, the adequacy and effectiveness of the Internal
Controls of the Company. This review
will include any recommendations for the improvement of such Internal Controls
or areas where new or more detailed Internal Controls are desirable.
2. The
Committee shall evaluate whether management is setting the appropriate tone at
the top by communicating the importance of effective Internal Controls.
3. The
Committee shall evaluate the adequacy of such Internal Controls to expose
payments, transactions, or procedures that might be deemed illegal or otherwise
improper.
D. Oversight of Internal Audit
1. The
Committee shall oversee the activities, organizational structure and
qualifications of the Internal Audit department. The Internal Audit department shall report
functionally to the Committee and administratively to the Company’s Chief
Financial Officer.
2. A
representative from the Internal Audit department shall attend Committee
meetings and report, at least semi-annually, to the Committee on audit results
for the period and the status of the audit schedule. Reports may be made at more frequent intervals
if deemed necessary by the Committee or as may be requested by the Internal Audit
department.
3. The
Committee shall review and approve the annual internal audit plan, objectives,
schedules and any special projects undertaken by the Internal Audit department.
4. The
Committee shall discuss with the Internal Audit department any changes to, and
the implementation of, the internal audit plan and any special projects and
discuss with the Internal Audit department the results of the internal audits
and special projects.
5. The
Committee shall review any significant reports to management prepared by the Internal
Audit department, management’s responses and the status of any recommended
corrective action. Particular emphasis
will be given by the Committee to significant control deficiencies and actions
taken by management to correct them.
6. The
Committee shall discuss with the Internal Audit department any audit problems
or difficulties, including any restrictions on the scope of the Internal Audit
department’s activities or on access to requested information, and management’s
response to same and any other matters required to be brought to its attention.
7. The
Committee may request, either directly, or through the Chief Financial Officer,
that the Internal Audit department perform special studies, investigations, or
other services in matters of interest or concern to the Committee.
8. The
Committee shall review the effectiveness of the Internal Audit function.
9. The
Committee shall periodically review the charter of the Internal Audit department
to ensure that it provides for the independence, objectivity and authority of
the Internal Audit function, and make recommendations thereto. The Committee shall ensure that the members
of the Internal Audit department shall have unrestricted access to all of the
Company’s records, reports, personnel, and physical properties as may be determined
by the members of the Internal Audit department to be relevant to the
performance of their audits.
10. The
Committee shall review and approve the appointment and replacement of the
senior member of the Company’s Internal Audit department.
E. Oversee Relationship with
Independent Auditors
1. Appointment and Authorization of Services
a. The
Committee shall have the sole authority to retain, set fees and retention terms,
terminate and oversee the activities of the Company’s Independent Auditors.
b. The
Independent Auditors shall report directly to the Committee. The Company shall provide for appropriate
funding, as determined by the Committee, for payment of fees to the Independent
Auditors.
c. The
Committee shall review and approve in advance the retention of the Independent
Auditors for the performance of all audit and lawfully permitted non-audit
services and the fees for such services. The Committee may delegate to one or more of its members the authority
to grant pre- approvals for the performance of non-audit service and shall
report the pre-approval to the full Committee at its next scheduled
meeting. The Committee shall
periodically notify the Board of approvals.
d. Prior
to the audit, the Committee shall meet with the Independent Auditors to discuss
the planning and staffing of the audit.
2. Oversight of Independence
and Qualifications of Independent Auditors
a. To
assess the independence of the Independent Auditors, the Committee shall, at
least annually, obtain and review a report by the Independent Auditors
describing all relationships between the firm and the Company and all
professional services provided to the Company. The Committee shall review with the Independent Auditors the nature and
scope of all disclosed relationships or professional services and take, or
recommend that the Board take, appropriate action to ensure the continuing
independence of the auditors.
b. The
Committee shall, at least annually, obtain and review a report by the
Independent Auditors describing: (a) the
auditing firm’s internal quality-control procedures; and (b) any material
issues raised by the most recent internal quality-control review, or peer
review, of the firm, or by any inquiry or investigation by governmental or
professional authorities or a private sector regulatory board, within the
preceding five years, and any steps taken to deal with any such issues.
c. After
reviewing the reports from the Independent Auditors and the Independent Auditors’
work throughout the audit period, the Committee will conduct an annual
evaluation of the Independent Auditors’ performance and independence, including
whether the Independent Auditors’ quality controls are adequate. In making its evaluation, the Committee shall
take into account the opinions of management and the senior members of the
Company’s Internal Audit department. The
Committee shall present its conclusions with respect to the evaluation of the
Independent Auditors to the Board.
3. Other Oversight Responsibilities
a. The
Committee shall discuss with the Independent Auditors any audit problems or
difficulties, including any restriction on the scope of the auditor’s
activities or on access to requested information, and management’s response to
same and any other matters required to be brought to its attention under
auditing standards.
b. The
Committee shall set clear policies for the hiring by the Company of employees
or former employees of the Independent Auditors so as to preserve the
independence of the Independent Auditors.
4. Limitation of Audit Committee’s Role
a. The
Independent Auditor, management and the Internal Audit department are or shall
be ultimately accountable to the Audit Committee, in its capacity as a
committee of the Board, and to the full Board. While the Audit Committee has the oversight, supervisory and other
powers and responsibilities set forth in this Audit Committee Charter, it is
not the responsibility of the Committee to plan or conduct audits, to implement
internal controls, or to determine or certify that the Company’s financial
statements are complete and accurate or are in compliance with generally
accepted accounting principles. These
matters and tasks are the responsibility of the Company’s management and/or the
Independent Auditor to bring appropriate matters to the attention of the Committee,
and to keep the Committee informed of matters which the Company’s management or
the Independent Auditor believe require attention, guidance, resolution or
other actions. While it is not the duty
of the Audit Committee to conduct investigations or to assure compliance with
applicable laws, rules and regulations, the Committee may take such actions
with respect to such matters, as it deems necessary or advisable in fulfilling
its duties identified above.
b. To
the fullest extent permissible under applicable law, each member of the
Committee is entitled to rely in good faith upon the records of the Company and
upon such information, opinions, reports or statements presented to the
Committee by any of the Company’s officers, employees, or committees, the Independent
Auditor, the Internal Audit department or any other person as to matters the
member reasonably believes are within such other person’s professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Company.
III. Other Powers and Responsibilities
A. Evaluations
With the assistance of the Corporate Governance
Committee, the Committee shall annually review and assess its own performance
and the performance of each Committee member and report to the Board the
results of its evaluation. In conducting
this review, the Committee shall address matters that it considers relevant to
its performance, including at a minimum, the adequacy, appropriateness and
quality of the information and recommendations presented to the Board, the
manner in which they were discussed or debated, and whether the number and
length of meetings of the Committee were adequate for the Committee to complete
its work in a thorough and thoughtful manner.
B. Investigations; Retention of
Professional Advisors
1. The
Committee shall have the power to conduct or authorize investigations into any
matters within the Committee’s scope of responsibilities. Management shall provide or arrange to
provide such other information, data and services as the Committee may
request. The Committee shall conduct
such interviews or discussions as it deems appropriate with personnel of the
Company, and/or others whose views would be considered helpful to the
Committee.
2. The
Committee shall have the authority to obtain advice, counsel and assistance
from internal and external legal, accounting and other advisors for any reason,
including but not limited to any special investigations deemed necessary by the
Committee. The Company shall provide
appropriate funding for the Committee to retain such advisors without requiring
the Committee to seek Board approval.
C. Risk Management
The Committee shall discuss periodically with management
the Company’s policies and guidelines regarding risk assessment and risk
management, as well as the Company’s major financial risk exposures and steps
management has taken to monitor and control such exposures. The Committee also shall review the Company’s
existing processes and policies with respect to risk assessment and risk
management.
D. Related-party Transactions
The Committee shall review and approve or disapprove all
transactions between the Company (and its subsidiaries) and its directors,
executive officers, and greater than ten percent (10%) shareholders.
E. Grievance Procedures
The Committee shall establish procedures (i) for the
receipt, retention, and treatment of complaints received by the Company
regarding internal controls, or auditing matters, and (ii) for the
confidential, anonymous submission by the Company employees of concerns
regarding questionable accounting or auditing matters.
F. Disputes with Management
The Committee shall resolve any significant
disagreements between the Independent Auditors and management, and between the Internal
Audit department and management.
G. Revision of Charter
The Committee shall review and reassess the adequacy
of this Charter annually and recommend any proposed changes to the Board for
its approval.
H. Reports
The Committee shall make regular reports to the Board
on its activities, including reviewing any issues that arise respecting the
quality and integrity of the Company’s public reporting, the Company’s
compliance with legal and regulatory requirements, the performance and
independence of the Company’s Independent Auditors, the performance of the
Company’s Internal Audit department and the effectiveness of the Company’s
Internal Controls.
I. Miscellaneous
1. The
Committee shall perform any other activities consistent with this Charter, the
Company’s Articles of Incorporation, Bylaws, and governing law, as the
Committee or the Board deem necessary or appropriate.
2. The
Company will provide appropriate funding for ordinary administrative expenses
of the Committee that are necessary or appropriate in carrying out its duties.
IV. Membership and Organization of
Committee
A. Size of Committee
The Committee shall consist
of at least two directors or three directors if the Company is no longer a "small business issuer" that is eligible to file reports on Form 10-KSB..
B. Member Qualifications
1. Each
of the members of the Committee shall meet the independence and experience
requirements of Rule 803A of the rules of the AMEX and applicable federal securities laws, including the
additional audit committee independence requirements set forth in Section
10A(m)(3) of the Exchange Act of 1934, as amended, and the rules, particularly Rule 10A-3, promulgated
thereunder.
2. Each
of the members of the Committee must be able to read and understand financial
statements, including the Company’s statement of financial condition, income
statement and cash flow statement at the time of his or her appointment to the
Committee. At least one member shall be
a financial expert with the education and past employment experience necessary
for compliance with the audit committee composition requirements of Rule 803B(2)(a)(iii) of the AMEX. To the extent possible, at least one member
shall be an “audit committee financial expert” as that term is defined by the
SEC.
3. Generally,
no member of the Committee may serve simultaneously on the audit committees of
more than three public companies without a specific Board determination that
such simultaneous service will not impair the ability of such Committee member
to serve on the Committee. 3. No member of the Committee shall have participated in the preparation of the financial statements of the Company or any of its current subsidiaries at anytime during the previous three years.
C. Appointment
The members of the Committee shall be appointed by the
Board upon the recommendation of the Corporate Governance Committee. The Corporate Governance Committee shall
recommend, and the Board shall designate, one member of the Committee to serve
as Chairperson.
D. Term
Members of the Committee will be appointed for
one-year terms and shall serve until their resignation, retirement, or removal
by the Board or until their successors shall be appointed. The Board may fill vacancies on the Committee
and remove a member of the Committee at any time with or without cause. No member of the Committee shall be removed
except by majority vote of the independent directors of the Board then in
office.
V. Conduct of Meetings
A. Frequency
The Committee shall meet as often as it may deem
necessary and appropriate in its judgment, but not less than quarterly, either in person or telephonically. Half of the members of the Committee shall
constitute a quorum. The Chairman of the
Board or any Committee member shall have the right to call a special meeting of
the Committee.
B. Non-Committee Member Attendees
1. The
Committee may request that any directors, officers or employees of the Company,
or other persons whose advice and counsel are sought by the Committee, attend
any meeting to provide such information as the Committee requests.
2. The
Committee shall meet with the Independent Auditors, the senior member of the
Company’s Internal Audit department, and management in separate executive
sessions as often as it deems necessary and appropriate.
C. Conduct of Meetings
The Committee shall fix its own rules of procedure,
which shall be consistent with the Bylaws of the Company and this Charter.
D. Minutes
Written minutes of Committee meetings shall
be maintained with the books and records of the Company.
E. Delegation of Authority
The Committee may delegate authority to one or more
members of the Committee when appropriate, but no such delegation shall be
permitted if the authority is required by law, regulation or listing standard
to be exercised by the Committee as a whole.
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