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The general area of responsibility of the Audit Committee is to
direct and monitor the operation of audits, both internal and
external, and to scrutinize the elements, the basis and the
performance of the financial reporting for accuracy, prudent
accounting practices, financial volatility and compliance with
regulatory and accounting requirements.
Each member of the Audit Committee must be independent.
Independencies require the member to not be compensated for any
other services other than those performed as a board member or a
board committee member. The committee member and his or her family
members cannot be an affiliate or have any current transactions
(such as consulting agreements) with the company or the bank. In
addition, former employees of the company or the bank can not serve
on the Audit Committee until the termination of the cooling off
period of three years. All committee members at their appointment
must be able to read and understand the financial statements of the
company. The legal, accounting and securities counsel of the bank
are excluded from serving on this committee.
Of the Audit Committee, a preference is to designate a financial
expert from the directorship as a member. Due to the stringent
qualifications as listed below, a financial expert has not been
designated to the committee. A financial expert should be more than
financially literate - as indicated by governing law. The financial
expert must have acquired through education and experience as a
public accountant or an auditor or a principal financial officer or
a similar position in an entity with the same characteristics:
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Understanding of GAAP and
financial statements.
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Experience with corporate issues.
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Experience with application of
principals for accounting estimates, accruals, and reviews.
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Experience with internal
controls.
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Understanding of audit committee
functions.
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Experience in preparation of
financials or an audit of a similar entity.
The Audit Committee will be solely
responsible for hiring and overseeing the outside auditor. The
responsibilities in this area include negotiating the engagement
terms, the scope of the audit and the approval of the audit fees as
well as assessing the qualifications and the independence of the
outside auditors. Management may be consulted for their evaluation
of the auditors. The initial meeting and the annual meeting with the
external auditors or independent auditing firm should encompass a
discussion of the company=s critical accounting policies, operations
and financial position, public reporting practices, internal
controls, related party transaction and other significant
information imperative in the conducting of an audit.
The Audit Committee will meet quarterly. At the quarterly meetings,
the Audit Committee will receive quarterly financial reports
presented by the Chief Executive Officer and the Chief Financial
Officer and summary audit reports provided by the Internal Auditor.
Reports may be received from the External Auditor, if applicable.
The Audit Committee plays an important role in the proper disclosing
of the company=s financial data and other related information to the
public through regulatory means. To address this role, critical
accounting policies, alternative accounting treatments within
generally accepted accounting principles, and the importance of
timely or Areal time@ financial disclosures will be considered at
each meeting.
Standards for Audit Committees require the Audit Committee of the
company to review internal controls, internal audit procedures and
stock transactions of related parties and to establish procedures to
receive and respond to any concerns and complaints regarding the
company=s financial reporting and accounting.
Discussions during the meeting of the Audit Committee will be
maintained in the minutes as well as any actions taken. Members of
management, not limited to the Chief Executive Officer, Chief
Financial Officer and Internal Auditor, will meet with the committee
to assist in a comprehensive review of the reports presented and to
answer questions regarding material transactions and potential
trends and risks in the operation.
As needed, the Audit Committee will have the authority to consult
with external professional sources on matters and areas that may be
outside of the member=s realm of knowledge and expertise.
The Audit Committee will submit a report to be included in the
annual proxy statements and will submit the Charter of the Audit
Committee at least once every three years to be included in the
proxy statements. The members of the committee will be required to
disclose his or her background and experience information to be
included with the proxy statement.
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