Audit Committee Charter
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This charter governs the operations of the Audit Committee (the “Committee”) of the board of directors (the “Board”) of TGR Financial, Inc. (the “Company”). The Committee shall review this charter on an annual basis and recommend any proposed changes to the Board.
The Committee shall be comprised of at least three (3) directors each of whom is (i) “independent” under the rules of the NASDAQ Stock Market (“NASDAQ”) except as permitted by NASDAQ Rule 4350-1(d) and the Sarbanes-Oxley Act of 2002, and the rules promulgated thereunder, (ii) does not accept any consulting, advisory or other compensatory fee from the Company other than in his or her capacity as a member of the Board or any committee of the Board, (iii) is not an “affiliate” of the Company or any subsidiary of the Company, as such term is defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iv) has not participated in the preparation of the financial statements of the Company or any subsidiary at any time during the past three years. Members shall be appointed either by a majority of independent directors or by a nominations committee comprised solely of independent directors.
All members of the Committee must be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. In addition, at least one (1) member of the Committee shall be an “audit committee financial expert,” as defined by the Commission, and at least two (2) members shall have “banking or related financial management expertise,” as defined in 12 CFR Part 363 of the Federal Deposit Insurance Corporation regulations. Committee members shall not serve on more than two other public company audit committees, unless the Board determines that simultaneous service would not impair the ability of the Committee member to serve effectively on the Committee and the Board discloses such determination in the Company’s annual proxy statement, if any. The Committee shall report the results of its activities to the Board.
The Committee shall provide assistance to the Board with respect to its oversight of:
• the integrity of the Company’s financial statements;
The Committee shall prepare its report to be included in the Company’s annual proxy statement, if any, as required by regulations of the Commission.
III. Authority and Funding.
It is the responsibility of the Committee to maintain free and open communication between the Committee, its internal auditors, and management of the Company, and the Company’s independent auditors. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the authority to engage outside counsel, auditors and other advisers as it determines necessary to carry out its duties, at the expense of the Company. The Committee shall have the authority to engage, and determine funding for, independent counsel and other advisors to the Committee.
The Company shall provide appropriate funding, as determined by the Committee, for:
• compensation to the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
IV. Duties and Responsibilities.
The Committee’s role is one of oversight, and the Committee recognizes that the Company’s management is responsible for the preparation and publication of the Company’s financial statements and that the independent auditors are responsible for auditing those financial statements. In addition, the Committee recognizes that the Company’s financial management personnel, as well as the independent auditors, because of the nature of their relationship with the Company, are in a position to devote more time and acquire greater knowledge and more detailed information regarding the Company than Committee members; consequently, in carrying out its oversight responsibilities, the Committee shall not be deemed to provide any expert or special assurance as to the Company’s financial statements or any professional certification as to the independent auditors’ work.
The Committee, in carrying out its responsibilities, believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. The Committee should take appropriate actions to set the overall corporate “tone” for quality financial reporting, sound business risk practices and ethical behavior. The following shall be the principal duties and responsibilities of the Committee. These are set forth as a guide with the understanding that the Committee shall have the discretion to conduct activities in addition to those listed herein as it deems appropriate given the circumstances.
Oversight of the Company’s Relationship with the Independent Auditors
1. The Committee shall be directly responsible for the appointment (subject, if applicable, to shareholder ratification), compensation, retention, evaluation, termination and oversight of the work of the independent auditors for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, including resolution of disagreements between management and the auditors regarding financial reporting. The Committee shall direct the independent auditors to report directly to the Committee.
2. The Committee shall approve, in advance, all auditing services and all non-audit services, including the fees and terms thereof, to be performed by the independent auditors that are permitted under Section 10A of the Exchange Act and the rules and regulations of the Commission thereunder, subject to the de minimis exceptions under such rules for permissible non-audit services that are nonetheless approved by the Committee prior to the completion of the audit. The Committee may form, and delegate authority to, subcommittees consisting of one or more members of the Committee when appropriate, including the authority to grant preapprovals of audit and permissible non-audit services, provided that decisions of such subcommittee to grant preapprovals shall be presented to the Committee at its next ensuing meeting.
4. The Committee shall review with the independent auditors any audit problems or difficulties and management’s response.
5. The Committee shall set clear hiring policies for employees or former employees of the independent auditors that are consistent with Section 10A(l) of the Exchange Act, the regulations of the Commission and NASDAQ’s listing standards.
Financial Statement and Disclosure Matters
6. The Committee shall meet to review and discuss the Company’s annual audited financial statements and quarterly financial statements with management and the independent auditors, including reviewing the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” prior to the filing of the respective Annual Report on Form 10-K or Quarterly Report on Form 10-Q, if required to be filed by the Company. Also, the Committee shall discuss the results of the annual audit and the quarterly reviews and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards.
8. The Committee shall receive a report from the independent auditors, prior to the filing of its audit report with the Commission, if required, on all critical accounting policies and practices of the Company, all alternative treatments of financial information within generally accepted accounting principles in the United States (“GAAP”) that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the independent auditors, and other material written communications between the independent auditors and management.
9. The Committee shall review:
11. The Committee shall review the disclosures and certifications made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer during their certification process under Section 302 and 906 of the Sarbanes-Oxley Act of 2002 for the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, if required to be filed by the Company.
Oversight of the Company’s Internal Audit Function
12. The Committee shall require that the internal General Auditor or third party outsourced internal auditor of the Company, report directly to the Chairman of the Audit Committee, with administrative oversight provided by an appropriate executive officer of the Company.
13. The Committee shall review the appointment of the internal General Auditor or third party outsourced internal auditor, as needed, and review the role and scope of the work performed by the internal auditors, approve the audit plan, periodically review the plan status and findings, and review the adequacy of staffing and financial budget.
14. The Committee shall receive periodic communications from the internal General Auditor or third party outsourced internal auditor on the completion status of the annual audit plan, as well as a summary of significant changes made to such plan.
Compliance Oversight Responsibilities
15. The Committee shall discuss with management, the other committees of the Board, the internal auditors, and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including the Company’s policies and procedures with respect to risk management and risk assessment. The Committee shall review the compliance, loan review and internal risk reports addressing legal and regulatory compliance and current and potential litigation risk within the Company. The Committee shall review the periodic examinations made by regulatory authorities and any replies required in connection with the examinations.
17. The Committee shall receive corporate attorneys’ reports of evidence of a material violation of securities laws or breaches of fiduciary duty.
18. The Committee shall investigate any reported known or suspected violations by senior executives and financial managers of any Company ethical code or policies where required, and shall oversee an appropriate response, corrective action and preventive measures for both. The Committee shall review any proposed amendments or waivers for senior executives and financial managers to the codes and shall make a recommendation to the full Board for appropriate action, which will be subject to public disclosure as required by regulations of the Commission and NASDAQ’s listing standards.
19. Periodically, the Committee shall meet separately with management, the internal auditors and the independent auditors to discuss issues and concerns warranting Committee attention. The Committee shall provide sufficient opportunity for the internal auditors and the independent auditors to meet privately with the members of the Committee. The Committee may also meet periodically by itself to discuss matters it determines require private Committee or Board attention.
21. The Committee shall review and approve all “transactions with related persons” of the Company, including any such transaction that would be required to be disclosed in any relevant filing of the Company with the Commission, pursuant to the Commission’s Item 404 of Regulation S-K.
22. The Committee delegates authority to the Chief Administrative Officer or the Chief Risk Officer to negotiate audit fees.