Audit Committee Charter - Catuity Inc.
CATUITY, INC.
AUDIT COMMITTEE CHARTER (revised 10-22-01)
Organization
This charter governs the operations of the Audit Committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
Board of Directors. The committee shall be appointed by the Board of Directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company as described in the
Independence paragraph below. All committee members shall be financially
literate, [or shall become financially literate within a reasonable period of
time after appointment to the committee,] and at least one member shall have
accounting or related financial management expertise.
Statement of Policy
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls and the annual independent audit of
the Company's financial statements. In so doing, it is the responsibility of the
committee to maintain free and open communication between the committee,
independent auditors and management of the Company. 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 power to retain outside counsel, or other experts for this
purpose.
Independence
As used in this charter, "Independent Director" means a person other than an
officer or employee of the Company or its subsidiaries or any other individual
having a relationship that, in the opinion of the Board, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered independent:
1. a director who is employed by the Company or any of its affiliates ;
2. a director who accepts compensation from the Company or any of its
affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for service on the Board, benefits under a
tax-qualified retirement plan, or non-discretionary compensation;
3. a director who is a member of the immediate family of an individual who
has been employed by the Company or any of its affiliates in the past
year as an executive officer. Immediate family includes a person's
spouse, parents, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law, and anyone
who resides in the director's home;
4. a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
Company made, or from which the Company received, payments (other than
those arising solely from investments in the Company's securities) that
exceed five percent (5%) of the Company's consolidated gross revenues
for that year, or $200,000, whichever is more;
5. a director who is employed as an executive of another entity where any
of the Company's executives serve on that entity's compensation
committee.
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Responsibilities and Processes
The primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. The Audit Committee is responsible for the duties
set forth in this charter but is not responsible for either the preparation of
the financial statements or the auditing of the financial statements. Management
has the responsibility for preparing the financial statements and implementing
internal controls and the independent accountants have the responsibility for
auditing the financial statements and monitoring the effectiveness of the
internal controls. The review of the financial statements by the Audit Committee
is not of the same quality as the audit performed by the independent
accountants. 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 the 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 recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
- The committee shall have a clear understanding with management
and the independent auditors that the independent auditors are
ultimately accountable to the Board and the Audit Committee,
as representatives of the Company's shareholders. The
committee shall have the ultimate authority and responsibility
to evaluate and, where appropriate, replace the independent
auditors. The committee shall discuss with the auditors their
independence from management and the Company and the matters
included in the written disclosures required by the
Independence Standards Board. Annually, the committees shall
review and recommend to the board the selection of the
Company's independent auditors, subject to shareholders'
approval, if required.
- The committee shall discuss with the independent auditors the
overall scope and plans for their audit including the adequacy
of staffing and compensation. Also, the committee shall
discuss with management and the independent auditors the
adequacy and effectiveness of the accounting and financial
controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs.
Further, the committee shall meet separately with the
independent auditors, with and without management present, to
discuss the results of their examinations.
- The committee shall review with management and the independent
auditors the financial statements to be included in the
Company's Annual Report on Form 10-K (or the annual report to
shareholders if distributed prior to be included in the
Company's Annual Report on form 10-K (or the annual report to
shareholders if distributed prior to the filing of Form 10-k)
including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in
the financial statements. Also, the committee shall discuss
the results of the annual audit and any other matters required
to be communicated to the committee by the independent
auditors under generally accepted auditing standards.