Audit Committee Charter
The Audit Committee of the Board of Directors assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and reporting practices of the Company, and such other duties as directed by the Board. The Committee's purpose is to oversee the accounting and financial reporting processes of the Company, the audits of the Company's financial statements, the qualifications of the public accounting firm engaged as the Company's independent auditor to prepare or issue an audit report on the financial statements of the Company and internal control over financial reporting, and the performance of the independent auditor and the Company's internal audit function as required under the Israeli Companies Law, 1999 (the "Companies Law").The Committee reviews and assesses the qualitative aspects of financial reporting to shareholders, the Company's processes to manage business and financial risk, and compliance with significant applicable legal, ethical, and regulatory requirements. The Committee is directly responsible for the appointment (subject to shareholder ratification), compensation, retention, and oversight of the independent auditor. The Committee decides whether to approve engagements or transactions that require Committee approval under the Companies Law and monitors deficiencies in the management of the Company.
While the Committee has the responsibilities and powers set forth herein, it is not the purpose or duty of the Committee to plan or conduct audits or to opine that the Company's financial statements are complete, accurate and prepared in accordance with generally accepted accounting principles. This is responsibility of management and the outside auditor.
The Company has adopted the exemptions under the Israel Companies Regulations (Relief for Public Companies Whose Securities are Listed for Trading on an Exchange Abroad) 5760- 2000 (Regulation 5d.), under which the Company is exempt from the following Companies Law requirements, among others: (i) the composition requirements under the Companies Law for members of the Audit Committee, including independence requirements, the requirement that external directors must be members of the Audit Committee, the requirement of who may be present at meetings and during discussions and decisions, and the quorum requirement and (ii) the requirement to appoint external directors and the requirement that an external director be a member of each committee of the Board of Directors.
The membership of the Committee consists of at least three directors, all of whom shall meet the independence requirements established by the Board and applicable laws, regulations, and listing requirements. Each member shall in the judgment of the Board have the ability to read and understand fundamental financial statements and otherwise meet the financial sophistication standard established by the requirements of the NASDAQ Stock Market Rules. At least one member of the Committee shall in the judgment of the Board be an "audit committee financial expert" as defined by the rules and regulations of the Securities and Exchange Commission and shall meet the applicable accounting and related financial experience required by Companies Law. The Board appoints the members of the Committee and may remove any member from the Committee at any time with or without cause. The Board shall designate one member of the Committee to be Chairman of the Committee.
All indemnification, exculpation, expense reimbursement and advancement provisions and rights available to members of the Committee in their capacities as directors of the Company shall be fully applicable with respect to their service on the Committee or any subcommittee thereof.
The Committee shall meet as often as it determines is appropriate to carry out its responsibilities under this Charter, but not less frequently than quarterly.
A majority of the members of the Committee shall constitute a quorum for purposes of holding a meeting and the Committee may act by a vote of a majority of the members present at such meeting. In lieu of a meeting, the Committee may act by unanimous written consent. The Chairman of the Committee, in consultation with the other committee members, may determine the frequency and length of the Committee meetings and may set meeting agendas consistent with this Charter.
The Committee will cause to be kept adequate minutes of its proceedings, and will report on its actions and activities at the next meeting of the Board. Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous consent.
The independent auditor shall be invited to every meeting of the Committee that relates to the financial statements of the Company. The internal auditor shall be invited to all Committee meetings. In addition, the internal auditor may request the Chairman of the Committee to convene a meeting to discuss a particular issue, and the Chairman of the Committee shall convene such meeting within a reasonable period of time, if the Chairman of the Committee finds it appropriate to do so. The Committee shall maintain minutes of its meetings.
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel or other experts or consultants, as it deems necessary to carry out its duties, including sole authority to approve the fees and other retention terms of such counsel, experts and consultants. The Company will provide the Committee with appropriate funding, as the Committee determines, for the payment of compensation to the Company's independent auditor, outside counsel, and other advisors as it deems appropriate, and administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention. The Committee will have access to the Company's books, records, facilities, and personnel. 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.
The Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee.
- Audit Oversight and Relationship with Independent Auditor
- Confirm the independence of the public accounting firm, including through receipt from the independent auditors of a formal written statement delineating all relationships between the auditor and the company and engaging in dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor.
- Recommend to the Board and shareholders the appointment, termination and approval of the compensation of, and oversee, the Company's independent auditor.
- Examine the scope of work of the independent auditor and its pay, and to bring such recommendations before the Board.
- Approve all audit and non-audit services to be provided by the independent auditor and review the audit firm's non-audit services and related fees.
- Oversee the hiring by the Company of any employees or former employees of the Company's auditors.
- Meet with the independent auditor in executive session to discuss any matters that the Committee or the independent auditor believes should be discussed privately.
- Prior to the annual audit, review the scope of the independent auditor's audit plan, including the scope, timing and procedures for the audit.
- Review with management and the independent auditor at the completion of the annual audit:
- the Company's annual financial statements and related footnotes;
- the independent auditor's audit of the financial statements and its report thereon
- any significant changes required in the independent auditor's audit plan;
- any correspondence with regulators or governmental agencies and any employee complaints or published reports that raise material issues regarding the Company's financial statements or accounting policies;
- any serious difficulties or disputes with management encountered during the course of the audit; and
- other matters related to the conduct of the audit that are to be communicated to the Committee under generally accepted auditing standards.
- Review, at least annually, with the Company's financial management and the independent auditor the Company's critical accounting policies, alternative treatments discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the registered public accounting firm, and any material written communications between the independent auditor and management (such as any management letters or schedules of unadjusted differences).
- Review with management any significant changes to GAAP policies or standards.
- Review, at least annually, (i) the material reserves established for the contingent liabilities of the Company and its subsidiaries, (ii) the Company's major financial risk exposures and the Company's policies for managing such risks and (iii) any "off-balance sheet" transaction or off-balance sheet assets or liabilities.
- Internal Control Oversight and Risk Management
- Propose to the Board the appointment of an internal auditor, and express its opinion with regard to the termination of the internal auditor's engagement by the Company as required under Companies Law.
- Meet with the internal auditor in executive session to discuss any matters that the Committee or the internal auditor believes should be discussed privately.
- Discuss with management and the Company's independent auditor about significant risks or exposures and assess the steps management has taken to minimize such risk to the Company.
- Consider and review with the independent auditor:
- the adequacy of the Company's internal financial controls, including computerized information system controls and security, and
- any related significant findings and recommendations of the independent auditor and internal audit together with management's responses thereto.
- Consider and review with management and the internal auditor:
- significant findings during the year and management's responses thereto
- any difficulties or disputes with management encountered in the course of his or her audits, including any restrictions on the scope of their work or access to required information, and
- any changes required in planned scope of his or her audit plan.
- Oversee the Company's internal auditing and the performance of the internal auditor; confirm that the internal auditor has sufficient tools and resources at his disposal, taking into account, among other, the special requirements of the Company and its size;
- Oversee the functioning of the internal auditor and approve its work plans. The Chairman of the Committee may instruct the internal auditor to perform special audits and shall review the internal auditor's reports of such audits as required under the Companies Law.
- The Committee shall establish and maintain procedures for the receipt, retention and treatment of complaints regarding shortcomings in the management of the Company or the Company's accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by employees of concerns regarding questionable auditing or accounting matters and ensure the protection of employees who have filed such complaints.
- Related Party Transactions
- Review policies and procedures with respect to transactions between the Company and officers and directors, or affiliates of officers or directors, or transactions that are not in the ordinary course of the Company's business.
- Decide whether to approve engagements or transactions that require Committee approval under the Companies Law.
- Determine, on the basis of detailed arguments, whether to classify certain engagements or transactions as material or extraordinary as applicable, and therefore as requiring special approval under the Companies Law.
- Review and approve any engagements or transactions that require the Committee's approval under the Companies Law.
- Public Financial Disclosures
- Meet with the independent auditors, internal auditors and the Company's senior management to review the scope and methodology of the proposed audits. Independent auditors and internal auditors shall provide regular reports to the Committee during the year on the underlying process and status of their audits and any findings or preliminary conclusions that have been reached.
- Review with management and the independent auditors the Company's annual and quarterly financial statements, including the Corporation's disclosure under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in its SEC reports. Throughout the year, the independent auditors shall review with the Committee their assessment as to the adequacy of the Company's structure of internal control over financial accounting and reporting, and their qualitative judgments as to accounting principles employed by the Company and the conclusions expressed in the Company's financial reports. The independent auditors shall review with the Committee significant judgments made by management in the preparation of the financial statements.
- Review major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, and major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies.
- Review the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
- Discuss with the independent auditors any difficulties encountered in the course of the audit, including any restrictions on the scope of their activities, difficulties accessing information and any significant disagreement with management. Concerns raised by the independent auditor shall be reviewed with management.
- Discuss the Company's earnings press releases, as well as the type and presentation of financial information and earnings guidance provided to analysts and rating agencies, including the presentation of "pro-forma" or "adjusted" non-GAAP information.
- In connection with each Quarterly Report on Form 10-Q and Annual Report on Form 10-K of the Company, review:
- management's disclosure to the Committee about all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data; and, any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls as required under Section 302 of the Sarbanes-Oxley Act, and
- the contents of the Chief Executive Officer and the Chief Financial Officer certifications to be filed under Sections 302 and 906 of the Sarbanes-Oxley Act.
- Recommend to the Board whether the audited financial statements should be included in the 10-K.
- Review and approve any report of an audit committee required by the SEC to be included in a proxy statement provided in connection with an annual meeting of the Company's shareholders.
- Annual Review of Charter
- Review the adequacy of this Charter as necessary and recommend to the Board any amendments or modifications to the Charter that the Committee deems appropriate.
AS AMENDED: August 4, 2016