|Gregor S. Bailar|
|Stephen M. Carter|
|Gordon J. Coburn|
|Kathleen A. Corbet|
|Stacey S. Rauch|
|Jeffrey R. Tarr|
Audit Committee Charter
1. Purpose. There shall be a committee of the Board of Directors (the “Board”) of CEB (the “Company”) to be known as the Audit Committee (the “Committee”). The Committee represents and assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting and financial reporting processes of the Company, including the integrity of the Company’s financial statements, oversight of risk assessment, and risk management relating to the Company’s accounting and financial reporting policies and procedures, the audits of the Company’s financial statements, the qualifications and independence of the public accounting firm engaged to prepare or issue an audit report on the financial statements of the Company (the independent auditor), performance of any persons performing internal audit functions, and such other duties as directed by the Board.
2. Membership and Organization.
The Committee shall be composed of at least three members, consisting entirely of “independent” directors, each of whom is appointed annually by the Board upon the recommendation of the Nominating and Corporate Governance Committee. For purposes hereof, “independent” will mean a director who meets both (a) the applicable director independence standards included in the listing requirements for New York Stock Exchange (“NYSE”) securities (or for any other exchange or trading system on which the Company’s securities are subsequently listed), any other requirements of applicable laws and regulations, and any additional director independence standards adopted by the Company, as well as (b) the applicable heightened independence requirements for members of an audit committee contained in Rule 10A-3(b) promulgated under the Securities Exchange Act of 1934 (the “1934 Act”), all as determined by the Board. Each member of the Committee must be financially literate, as such qualification is interpreted by the Board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Committee. Members of the Committee must not accept any consulting, advisory, or other compensation from the Company, other than for board services, and must not be an affiliate of the Company.
In addition, the Committee shall have at least one member who has accounting or related financial management expertise, as such qualification is interpreted by the Board in its business judgment. A Committee member who satisfies the definition of an “audit committee financial expert,” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K, as promulgated by the Securities and Exchange Commission (the “SEC”), and as determined by the Board, shall be deemed to have the relevant accounting or related financial management expertise. No member of the Committee shall serve simultaneously on the audit committees of more than two other public companies without the prior approval of the Board and the Board’s determination that such simultaneous service would not impair the ability of such member to effectively serve on the Committee.
Members of the Committee shall hold their positions for one year and until their successors are elected and qualified, or until their earlier death, resignation or removal. Members may be removed from the Committee, with or without cause, by a majority vote of the Board. All vacancies on the Committee shall be filled by a majority vote of the Board. The Board shall designate one member of the Committee as chairperson or delegate the authority to designate a chairperson to the Committee.
3. Operations. The Committee will meet as often as may be deemed necessary or appropriate in its judgment, generally no less than four times each year. All meetings shall be called by the chair of the Committee. The chair of the Committee shall preside over all sessions of the Committee and develop the agenda for each Committee meeting. Meetings may be held in person or by telephone or video conference call. The Committee shall elect a secretary who shall give notice personally or by mail, telephone, facsimile, or electronically to each member of the Committee of all meetings, not later than twelve noon of the day before the meeting, unless all of the members of the Committee waive notice thereof at or before the meeting, in which case the meeting may be held without the aforesaid advance notice. The Committee will cause to be kept adequate minutes of all its proceedings, and shall promptly inform the Board of the actions taken or issues discussed at its meetings. This will generally take place at the Board meeting following a Committee meeting. The majority of the members of the Committee shall constitute a quorum for the transaction of business.
4. Outside Advisors/Funding. The Committee shall have the resources, authority, and funding necessary to discharge its duties and responsibilities. The Company shall provide the appropriate funding, as determined by the Committee, for the payment of (i) compensation for outside counsel, accountants, experts and other professional advisors engaged by the Committee; (ii) compensation to the independent auditor for the purpose of rendering or issuing an audit report or performing other permissible services; and (iii) ordinary administrative expenses necessary or appropriate in carrying out its duties. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company, and the Committee will take all necessary steps to preserve the privileged nature of those communications.
5. Communications and Reporting.
The Committee will seek to maintain free and open communication with the independent auditors, the Company’s internal auditors, and the Company’s management. This communication will include periodic separate executive sessions with each of these parties. The Committee shall have full and unrestricted access to all personnel, records, operations, properties, and other information and resources of the Company as required to discharge its duties and responsibilities properly.
6. Responsibilities. In carrying out its responsibilities, the Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to promote accounting, reporting and financial practices that are in accordance with applicable requirements and are of the highest quality. The Committee’s primary responsibilities include:
Engagement and Oversight of Independent Auditor
Be directly and solely responsible for the appointment, compensation, retention and oversight of the work of the independent auditor. In this regard, the Committee shall appoint and retain, subject to ratification by the Company’s stockholders, compensate, evaluate, and terminate, when appropriate, the independent auditor. The independent auditor shall report directly to the Committee.<
- Establish policies and procedures for the engagement of the independent auditor to provide audit and permissible non-audit services, which shall include pre-approval of all permissible non-audit services to be provided by the independent auditor. Approve in advance all audit and permissible non-audit services to be provided by the independent auditor. The Committee may delegate to one or more of its members the authority to grant pre-approvals. By approving the audit engagement, an audit service within the scope of the engagement shall be deemed to have been pre-approved.
- At least annually:
review with the independent auditor the written statement from the auditor required by Independence Standards Board Standard No. 1, as amended, concerning any relationships between the auditor and the Company or any other disclosed relationships or services that may adversely impact the objectivity and independence of the auditor, and based on such review, take, or recommend that the full Board take, appropriate action to ensure the independence of the auditor;
review and evaluate the performance of the independent auditor to include the performance of the lead partner and other audit partners and assess whether lead partner, other audit partners or independent auditor rotation is required by SEC rules;
obtain and review a report from the independent auditor regarding (i) the independent auditor’s internal quality-control procedures, (ii) 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 within the preceding five years respecting one or more independent audits carried out by the firm, and (iii) any steps taken to deal with any such issues;
evaluate the qualifications and performance of the independent auditor, including considering whether the auditor’s quality controls are adequate; and
present its conclusions with respect to the independent auditor to the Board promptly after each such review.
Meet with the independent auditor and financial management of the Company to review and discuss (a) the independent auditor’s audit plan to include the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit results, any accompanying management letters and any difficulties the auditor encountered in the course of their audit work, including any restrictions on the scope of the independent auditor’s activities or on access to requested information, and any significant disagreements with management, and (b) any reports of the independent auditor with respect to interim periods.
Report the results of the annual audit to the Board. If requested by the Board, invite the independent auditor to attend the full Board meeting to assist in reporting the results of the annual audit or to answer questions (alternatively, directors and particularly the other independent directors may be invited to attend the Committee meeting during which results of the annual audit are reviewed).
Periodically meet with the independent auditor and the internal auditor, separately, without members of management present. Discussions with the independent auditor shall include the independent’s auditor’s evaluation of the Company’s financial, accounting, and internal auditing personnel and performance and the cooperation that the independent auditor received during the course of the audit.
Accounting and Financial Reporting
In connection with its review of the Company’s quarterly and annual reports and related financial statements, and prior to the release of the Company’s earnings for a fiscal quarter or year, as applicable:
Review with the independent auditor its evaluation of (i) the quality of the Company’s accounting policies and practices; (ii) alternative treatments of financial information within generally accepted accounting principles that have been discussed with management of the Company, ramifications of the use of such alternatives, and the independent auditor’s preferred treatment; and (iii) other matters required to be discussed with the Committee under generally accepted auditing standards, applicable laws, rules, listing standards and any requirements of or policies adopted by the Public Company Accounting Oversight Board (PCAOB).
(b) Discuss with management of the Company the foregoing matters, as appropriate.
Consider the independent auditor’s judgments about the quality (not just the acceptability) and appropriateness of the Company’s accounting principles used in the preparation of the Company’s financial statements. Inquire as to the independent auditor’s views about whether management’s choice of accounting principles appear reasonable from the perspective of income, asset and liability recognition, and whether those principles are common practices or are minority practices.
Annually, obtain from the independent auditor a report on compliance with Section 10A of the 1934 Act.
Consider and approve, if appropriate, material changes to the Company’s auditing and accounting principles and practices as suggested by the independent auditor, the internal auditor, or management.
Review any internal reports to management prepared by the internal auditor and management’s responses to these reports.
Review with management and the independent auditor the Company’s annual audited financial statements to be included in the Company’s Annual Report on Form 10-K and receive reports from the independent auditor in connection therewith as required by applicable SEC rules and professional standards. This review shall include at least (a) an analysis of the auditors’ judgment as to the quality of the Company’s accounting principles, setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements; (b) a review of the Company’s disclosures under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," including accounting policies that may be regarded as critical; (c) major issues regarding the Company’s accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles and financial statement presentations; (d) the reasonableness of significant judgments; (e) any material correcting adjustments identified by the independent auditor and any material unadjusted differences; and (f) any major issues as to the adequacy of the Company’s internal control over financial reporting. The Committee also shall discuss the results of the annual audit and any required attestation and any other matters required to be communicated to the Committee under generally accepted auditing standards, applicable laws, rules, listing standards and any requirements of or policies adopted by the PCAOB, including any matters required to be discussed by the Statement on Auditing Standards (SAS) No. 61, as may be amended or supplemented from time to time including by SAS No. 90.
Recommend to the Board, based on the foregoing review and discussion, whether the financial statements should be included in the Company’s Annual Report on Form 10-K.
Review with management and the independent auditor the Company’s quarterly unaudited financial statements to be included in the Company’s quarterly reports on Form 10-Q and receive reports from the independent auditor in connection therewith as required by applicable SEC rules and professional standards. This review shall include at least (a) a review of the Company’s disclosures under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," including accounting policies that may be regarded as critical; and (b) the independent auditor’s opinion with respect to the unaudited financial statements to determine that management and the independent auditor are satisfied with the content and disclosure in the financial statements to be included in the quarterly report. The Committee also shall discuss any other matters required to be communicated to the Committee under generally accepted auditing standards, applicable laws, rules, listing standards and any requirements of or policies adopted by the PCAOB, including any matters required to be discussed by the SAS No. 61 and the independent auditor’s review of quarterly information conducted in accordance with SAS No. 71, in each case as may be amended or supplemented from time to time including by SAS No. 90.
Periodically discuss with management, the internal auditor and the independent auditor to effect (or anticipated effect) of new and proposed regulatory and accounting policies and initiatives
Periodically receive reports from inside and outside legal counsel and others regarding legal, regulatory and other matters that have or could have a material effect on the Company’s financial statements.
Prepare any reports that are required to be included in the Company’s proxy statement, and review any disclosures to be made by the Company regarding audit and non-audit services provided by the independent auditor.
Internal Audit Function
- Periodically review the internal audit function of the Company, including the independence of its reporting obligations and the adequacy of the internal audit budget and staffing.
- Periodically review and approve the proposed internal audit plans, and review progress on the conduct of the internal audit plan, a summary of findings from completed internal audits, and the status of open recommendations from previously completed internal audits.
- The head of the Company’s internal audit function shall functionally report directly to the Committee. The head of the internal audit function shall otherwise report for administrative purposes to the Company’s Chief Financial Officer. The Committee shall be consulted prior to the appointment or removal of the head of the internal audit function.
Review with the independent auditors, the internal auditor, and management (a) the adequacy and effectiveness of the Company’s internal control over financial reporting, including any significant deficiencies or material weaknesses therein and (b) any significant changes in such internal control over financial reporting that is reported to the Committee by the independent auditor, the internal auditor or management. Elicit recommendations for the improvement of such internal controls or particular areas where new or more detailed controls or procedures are desirable, and develop, in consultation with management, a timetable for implementing such recommendations.
- Review and discuss disclosures made by the Chief Executive Officer and Chief Financial Officer in connection with the certification of the Company’s annual and quarterly reports and the matters covered by such disclosures.
Earnings and Other Information
- Review and discuss with management and the independent auditor, as appropriate, earnings press releases and other financial information before their public use or other dissemination, including particularly any “pro forma” information or any non-GAAP financial measures, and any earnings guidance to be disseminated to the public, communicated to ratings agencies, included in any Current Report on Form 8-K or otherwise properly used in any other public presentation.
Risk Assessment and Management
- Periodically review and discuss with management the Company’s major risk exposures regarding the Company’s accounting and financial reporting policies, and related to the activities of the Internal Audit and Information Technology functions, and the procedures and the measures management has taken to monitor, measure and control such exposures and elicit recommendations for the improvement of the Company’s risk assessment and mitigation procedures. The Committee shall promptly report to the full Board any risk that is reasonably likely to be material to the Company.
Employment of Former Audit Staff
- Establish policies for the hiring of employees and former employees of the independent auditor.
Related Person Transactions
- Review and approve all related person transactions and establish policies and procedures for the review and approval of related person transactions.
Receipt of Complaints
- Establish and oversee procedures for handling complaints regarding accounting, internal accounting controls, and auditing matters, including procedures for confidential, anonymous submission of concerns by employees regarding accounting and auditing matters.
- In coordination with the Nominating and Corporate Governance Committee, annually review and make recommendations to the Board regarding the performance of the Committee and the adequacy of the charter of the Committee.
- Assume such other duties as the Board may from time to time delegate.