The
Audit Committee |
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Purpose
The Audit Committee approves, monitors,
evaluates, advises or makes recommendations
on matters affecting the external audit,
the financial reporting and accounting
control, and the disclosure policies
and practices of The Churchill Corporation
(the “Corporation”). The
Audit Committee (the "Committee")
assists the Board of Directors (the “Board”)
in fulfilling its oversight responsibilities
by reviewing:
- The financial information that
will be provided to the shareholders
and others; including the quarterly
financial statements and any other
material financial information; the
annual audited financial statements
and the Management’s Discussion
and Analysis (“MD&A”)
section of the Annual Report prior
to review and approval by the Board;
- The systems of internal controls
that management and the Board have
established;
- In consultation with the Governance
and Nominating Committee, the Policy
Regarding Disclosure and Confidentiality
(the “Disclosure Policy”)
and associated disclosure procedures
of the Corporation;
- All audit processes,
including the terms of engagement
of the Corporation’s
external auditors (the “Auditor”)
and the audit plan;
- The Directors’ indemnification
and insurance programs; and
- The financial
reporting, information systems and
risk management processes of the
Corporation.
Composition
and Operations
- The Committee shall be composed
and operate in accordance with the
Standing Committees of the Board General
Terms of Reference. Pursuant to section
3.1(1) and (2) of Multilateral Instrument
52-110 Audit Committees and section
101(2) of the Business Corporations
Act of Alberta, the Committee must
be composed of a minimum of three (3)
Directors.
- The Committee shall be comprised
exclusively of independent Directors.
All members must be financially literate.
The terms “independent” and “financially
The Churchill Corporation Audit Committee
Terms of Reference
literate” will be interpreted
as outlined in Multilateral Instrument
52-110 Audit Committees.
- The Committee
shall meet at least four times each
year.
- The President and Chief Executive
Officer (“CEO”) and the
Chief Financial Officer (“CFO”)
would be expected to be available to
attend meetings or portions thereof.
- The Auditor shall report directly
to the Committee, shall meet at least
twice annually with the Committee and
would be expected to be available to
attend meetings or portions thereof
as requested by the Committee and to
be heard at those meetings on matters
relating to the Auditor's duties.
- The
Committee shall meet periodically,
and at least annually, with the Auditor
without management being present.
- The
Committee shall meet with the Auditor,
as it deems appropriate to consider
any matters of concern that the Auditor
determines should be brought to the
attention of the Board or shareholders.
- The Committee has access to the Corporation’s
senior management and documents as
required to fulfil its responsibilities
and is provided with the resources
necessary to carry out its responsibilities.
- The Committee provides open avenues
of communication amongst management
(particularly the CFO), employees,
external and internal auditors and
the Board. In particular any person
may provide to the Committee his concerns
or complaints regarding accounting,
internal accounting controls and auditing
matters. The Corporation has a Policy
Regarding Whistleblowing which outlines
a formal procedure to be followed.
Duties and Responsibilities
Subject to the powers and duties of the
Board, the Committee will perform the following
duties:
1. Financial Statements and Other Financial
Information
The Committee will review and recommend
for approval to the Board, financial
information that will be made publicly
available. This includes:
(a) The Corporation’s annual financial
statements and annual MD&A;
(b) The Corporation’s quarterly
financial statements, quarterly MD&A
and earnings press releases;
(c) The financial content of the Annual
Report and any reports required by government
or regulatory authorities;
(d) The Annual Information Form and any
prospectus/private placement memoranda;
(e) Any management report that accompanies
published financial statements (to the
extent such a report discusses the financial
position or operating results) for consistency
of disclosure with the financial statements
themselves; and
(f) Ensure that adequate procedures
are in place for reviewing the Corporation’s
public disclosure of financial information
extracted or derived from the Corporation’s
financial statements, and periodically
assess the adequacy of these procedures.
2. Financial Reporting
The Committee shall review and discuss:
(a) The appropriateness
of accounting policies and financial
reporting practices used by the Corporation;
(b) Any significant proposed changes
in financial reporting and accounting
policies and practices to be adopted
by the Corporation;
(c) Any new or pending developments in
accounting and reporting standards that
may affect the Corporation;
(d) Management’s key estimates
and judgements that may be material
to financial reporting; and
(e) Establish procedures for (a) the
receipt, retention and treatment of any
complaints received by the Corporation
regarding accounting, internal accounting
controls, or auditing matters; and (b)
the confidential, anonymous submission
by employees of the Corporation of concerns
regarding any questionable accounting
or auditing matters.
3. Financial Risk Management, Internal
Control and Information Systems
The Committee will review and obtain reasonable
assurance that the financial risk management,
internal control and information systems
are operating effectively to produce accurate,
appropriate and timely management and financial
information. This includes:
(a) Reviewing the Corporation's financial
risk management controls and policies;
(b) Obtaining reasonable assurance that
the information systems are reliable
and the systems of internal controls
are properly designed and effectively
The Churchill Corporation Audit Committee
Terms of Reference
implemented through discussions with,
and reports from, management, the Auditor
and, if applicable, the Internal Auditor;
(c) Reviewing management’s plans
to implement and maintain appropriate
internal control procedures including
a review of policies;
(d) Reviewing the adequacy of security
of information, information systems and
recovery plans;
(e) Monitoring compliance with statutory
and regulatory obligations;
(f) Reviewing the appointment of the
CFO; and
(g) Reviewing the adequacy of accounting
and finance resources.
4. Disclosure
In
consultation with the Governance
and Nominating Committee, the
Committee will review the Disclosure
Policy and procedures of the
Corporation and obtain reasonable
assurance that they are effective
in meeting the requirements
of applicable legislation and
regulatory agencies. This includes:
(a) Reviewing the Corporation’s
Disclosure Policy;
(b) Monitoring compliance with the
Disclosure Policy, particularly as
it relates to the disclosure of financial
related matters; and
(c) Receiving and reviewing reports
from the Disclosure Committee related
to financial matters.
5. Internal
Audit
The Committee will recommend to
the Board as to whether the Corporation
requires a formal internal audit function;
and if so, the form and appropriate activity
schedule as well as the Internal Auditor’s
relationship with the external auditor
and with management.
6. External
Audit
The Committee will review the planning
and results of external audit activities
and oversee the work of the Auditor. This
includes:
(a) Requiring the external auditor
to report directly to the Committee;
(b) Reviewing and recommending to the
Board, for shareholder approval, the
Auditor to be nominated for the purpose
of preparing or issuing an auditor’s
report or performing other audit, review
or attest services for the Corporation;
The Churchill Corporation Audit Committee
Terms of Reference
(c) Recommending to the Board the appropriate
compensation of the Auditor;
(d) Reviewing the annual audit plan,
including but not limited to the following:
i. Engagement letter;
ii. Objectives and scope of the audit
work;
iii. Procedures for quarterly review
of financial statements;
iv. Materiality limit;
v. Areas of audit risk;
vi. Staffing;
vii. Timetable; and
viii. Proposed fees.
(e) Meeting with the Auditor to discuss
the Corporation's quarterly and annual
financial statements and the auditor's
report including the appropriateness
of accounting policies and underlying
estimates;
(f) Reviewing any significant disagreement
among management and the Auditor regarding
financial reporting;
(g) Reviewing and advising the Board
with respect to the planning, conduct
and reporting of the annual audit,
including but not limited to:
i. Any difficulties encountered, or
restrictions imposed by management,
during the annual audit;
ii. Any significant accounting or financial
reporting issues;
iii. The Auditor’s evaluation
of the Corporation’s system
of internal controls, procedures
and documentation;
iv. The post audit or management letter
containing any findings or recommendations
of the Auditor, including management's
response thereto and the subsequent
follow-up to any identified internal
control weaknesses; and
v. Any other matters the Auditor
brings to the Committee's attention.
(h) Reviewing the Auditor's Report
on all material subsidiaries;
(i) Reviewing and receiving assurances
on the independence of the Auditor;
(j) Assessing the performance and considering
the annual appointment of the Auditor
for recommendation to the Board;
(k) Reviewing and pre-approving the
non-audit services to be provided by
the Auditor's firm or its affiliates
in accordance with the Audit Committee
Pre-Approval Policy; and
(l) Reviewing and approving the Corporation’s
Hiring Policy Restricting the Hiring
of Certain Employees or Former Employees
of the External Auditors.
7. Other
(a) Review insurance coverage of significant
business risks and uncertainties;
(b) Review material litigation and
its impact on financial reporting;
(c) Review policies and procedures
for the review and approval of officers'
expenses and perquisites; and
(d) Review the terms of reference for
the Committee annually and make recommendations
to the Board as required.
Duties and
Responsibilities
(a) engage independent outside counsel
and other advisors as it determines necessary
to carry out its duties;
(b) set and pay the compensation for any
advisors employed by the Committee; and
(c) communicate directly with the internal
and external auditors.
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