Audit Committee and its Charter<--Back
The Company’s Board of Directors has an Audit Committee composed of 3 members of the Board of Directors. The Board of Directors has adopted a charter for the Audit Committee which can be seen below. The “audit committee financial expert” designated by the Board is an experienced CPA. The Audit Committee is responsible for (i) selecting an independent public accountant for ratification by the stockholders, (ii) reviewing material accounting items affecting the consolidated financial statements of the Company, and (iii) reporting its findings to the Board of Directors.
The following Charter describes the responsibilities of the Sono-Tek Audit Committee:
- Annually in advance of the annual meeting of stockholders selects the independent public accountants to audit the books, records and accounts of the Corporation and submits such selection to the stockholders for ratification or rejection at such meeting, engages the independent public accountants and ensures that the scope of the audit is sufficiently comprehensive.
- Evaluates and, when appropriate, recommends to the Board of Directors the replacement of the independent public accountants.
- Reviews the quality and acceptability of each material accounting item affecting the financial statements of the Corporation which, in the opinion of the independent public accountants, might receive, under generally accepted accounting principles (“GAAP”), treatment varying from the proposed for such statements and transmits to the Board of Directors the Audit Committee’s decision on such accounting items.
- Reports to the Board on each Committee meeting (orally through its Chairman) and on a total year’s activity in written form on an annual basis.
In undertaking the above-mentioned responsibilities, the Sono-Tek Audit Committee undertakes the following activities:
- Meets with the independent public accountants to review their proposed plan for conducting the annual audit including its scope and degree of reliance on internal controls, reviews and approves the proposed fees for the audit, and approves any required special services; and
- Obtains from the independent public accountants a formal written Statement of Independence delineating all relationships with Sono-Tek, actively engages in a dialog with the independent public accountants with respect to any disclosed relationships or services that may affect their objectivity or independence and takes appropriate action to ensure their independence; and
- Receives reports from the management of Sono-Tek, which include material changes in accounting policy and significant changes in the substance and format of the financial statements.
In support of its primary duty, the Audit Committee also undertakes the following responsibilities and activities:
- Oversee the adequacy of the system of internal accounting controls of the Corporation.
(a) The Committee ensures itself that actual implementation of the policies of the Corporation, together with the procedures to be followed thereunder, assure the safeguarding of assets and the reliability of financial records. In this regard, the Committee reviews compliance with the Foreign Corrupt Practices Act and The Sarbanes Oxley Act. The Committee also receives reports on audit comments periodically from management, and annually from the independent public accountants, and a report on thefts and defalcations at least annually from the Chief Executive Officer and Chief Financial Officer of Sono-Tek.
(b) The Committee meets privately and individually with the Chief Executive Officer and Chief Financial Officer and the independent public accountants to determine that, among other items: (i) no outstanding differences of opinion exist between the independent public accountants and management; (ii) no material changes or modifications of accounting principles or practice exist which either the independent auditor or management wished to make and the other resisted; (iii) the internal auditor, if the company has created such a function, confirms the continued encouragement and support from management; and (iv) confirms that each has a right and duty of direct communication with the audit committee at any time.
- Receive a report annually on expenses reported by the top elected officers of the corporation.
- Review the corporation’s annual financial statements and the independent public accountants’ report thereon prior to publication of the statements.
- Ensures the delivery of a report from the Audit Committee to the Board of Directors (the “Audit Committee Annual Report”) disclosing whether or not, with respect to prior fiscal year: (i) management has reviewed the audited financial statements with the Audit Committee, including a discussion of the quality of the accounting principles as applied and significant judgments affecting the Corporation’s financial statements; (ii) the independent public accountants have discussed with the Audit Committee the independent public accountants’ judgments of the quality of those principles as applied and the judgments referenced in (i) above under the circumstances; (iii) the members of Audit Committee have discussed among themselves, without management or the independent public accountants present, the information disclosed to the Audit Committee, in (i) and (ii) above; and (iv) the Audit Committee, in reliance on review and discussions conducted with management and the independent public accountants pursuant to (i) and (ii) above, is satisfied that the Corporation’s financial statements are fairly presented in conformity with Generally Accepted Accounting Principles (GAAP) in all material respects. Additionally, the Audit Committee shall ensure that the Annual Report of the Audit Committee is included in the Corporation’s annual report to shareholders and Form 10-KSB Annual Report.
- Reviews and discusses with the independent public accountants and a representative of the Corporation’s financial management the financial information contained in the Corporation’s Form 10-QSB Report prior to its filing and the Corporation’s earnings announcements prior to release, including significant adjustments, management judgments and accounting estimates, significant new accounting policies and outside auditor disagreements with management.
- Conducts special reviews at its own discretion within the parameters of its basic responsibilities or in other areas at the request of the Chairman of the Board or the Board of Directors.
- Ensures the disclosure of the Audit Committee charter at least triennially in the annual report to stockholders and in the next annual report to shareholders after any significant amendment to that charter.
- Reviews and updates the Audit Committee charter as conditions dictate, but at least triennially.
- Periodically review globalization issues, strategies, related risks and controls related to foreign offices, joint ventures and alliances abroad.
In order to successfully execute its responsibilities, the Sono-Tek Audit Committee maintains a high degree of independence both in establishing its agenda and directly accessing various members of Sono-Tek and subsidiary management. This ensures an independent and open exchange of views and confirms the authority and responsibility of internal and external auditors and financial management to inform the Audit Committee, formally and informally, of any such matters within the duties and responsibilities of that Committee. Such communication is achieved through both formal reports to the Committee and a direct line of communication by the Chief Financial Officer, General Counsel, independent public accountants, and others in the Corporation to the Chairman of the Committee and the Committee itself.
By meeting its clearly delineated responsibilities through informed and dynamic activity and communication processes, the Audit Committee can enable the Board to fulfill its fiduciary responsibilities relative to the Corporation’s internal controls and financial reporting process.