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Audit and Finance Committee Charter
GENERAL FUNCTIONS, AUTHORITY, AND ROLE
The purpose of the Audit and Finance Committee is to oversee the accounting and financial reporting processes of the Company and the audits of its financial statements, and thereby assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) compliance by the Company with ethical policies and legal and regulatory requirements related to financial reporting, (3) the appointment, compensation, qualifications, independence and performance of the Company’s internal and external auditors,(4) the performance of the Company's independent auditors, and (5) performance of the Company's internal controls and financial reporting process.
The Audit and Finance Committee has the power to conduct or authorize investigations into any matters within its scope of responsibilities, with full access to all books, records, facilities and personnel of the Company, its auditors and its legal advisors. In connection with such investigations or otherwise in the course of fulfilling its responsibilities under this charter, the Audit and Finance Committee has the authority to independently retain special legal, accounting, or other consultants to advise it, and may request any officer or employee of the Company, its independent legal counsel or independent auditor to attend a meeting of the Audit and Finance Committee or to meet with any members of, or consultants to, the Audit and Finance Committee. The Audit and Finance Committee has the power to create specific sub-committees with all of the power to conduct or authorize investigations into any matters within the scope of the mandate of the sub-committee, with full access to all books, records, facilities and personnel of the Company, its auditors and its legal advisors.
The Company's independent auditor is ultimately accountable to the Board of Directors and to the Audit and Finance Committee, who, as representatives of the Company's shareholders, have the authority and responsibility to evaluate the independent auditor, appoint and replace the independent auditor, and to determine appropriate compensation for the independent auditor. In the course of fulfilling its specific responsibilities hereunder, the Audit and Finance Committee must maintain free and open communication between the Company's independent auditors, Board of Directors and Company management. The responsibilities of a member of the Audit and Finance Committee are in addition to such member's duties as a member of the Board of Directors.
While the Audit and Finance Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Audit and Finance Committee to plan or conduct audits or to determine that the Company's financial statements are complete, accurate, and in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit and Finance Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations and the Company’s Code of Ethics. Any responsibilities that the Audit and Finance Committee has the power to act upon, may be recommended to the Board to act upon.
MEMBERSHIP
The membership of the Audit and Finance Committee will be as follows:
The Committee shall consist of a minimum of three members of the Board of Directors, appointed from time to time, each of whom is affirmatively confirmed as independent by the Board of Directors, with such affirmation disclosed in the Company's annual Information Circular.
The Board will elect, by a majority vote, one member as chairperson.
The members of the Audit and Finance Committee will meet all independence and financial literacy requirements of The American Stock Exchange, The Toronto Stock Exchange, Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and the requirements of such other securities exchange or quotations system or regulatory agency as may from time to time apply to the Company.
A member of the Audit and Finance Committee may not, other than in his or her capacity as a member of the Audit and Finance Committee, the Board of Directors, or any other Board committee, accept any consulting, advisory, or other compensatory fee from the Company, and may not be an affiliated person of the Company or any subsidiary thereof.
RESPONSIBILITIES
The responsibilities of the Audit and Finance Committee shall be as follows:
Frequency of Meetings
Meet quarterly or more often as may be deemed necessary or appropriate in its judgment, either in person or telephonically.
The Audit and Finance Committee will meet with the independent auditor at least quarterly, either in person or telephonically.
Reporting Responsibilities
Provide to the Board of Directors proper Committee minutes.
Report Committee actions to the Board of Directors with such recommendations as the Committee may deem appropriate.
Charter Evaluation
Annually review and reassess the adequacy of this Charter and recommend any proposed changes to the Board of Directors for approval.
Whistleblower Mechanism
Adopt and review annually a procedure through which employees and others can anonymously inform the Audit and Finance Committee regarding any concerns about the Company's accounting, internal accounting controls or auditing matters. The procedure shall include responding to and the retention of, any such complaints.
Legal Responsibilities
Perform such functions as may be assigned by law, by the Company's certificate of incorporation, memorandum, articles or similar documents, or by the Board of Directors.
INDEPENDENT AUDITOR
Nominations
Nominate annually the independent auditor to be proposed for shareholder approval.
Compensation and Evaluation
Approve the compensation of the independent auditor, evaluate the performance of the independent auditor and, if so determined by the Committee, replace the independent auditor.
Approval in Advance of Related Party Transactions
Pre-approval of all “related party transactions,” which are transactions or loans between the Corporation and a related party involving goods, services, or tangible or intangible assets that are (1) material to the Corporation or the related party, or (2) unusual in their nature or conditions. A related party includes an affiliate, major shareholder, officer, other key management personnel or director of the Corporation, a company controlled by any of those parties or a family member of any of those parties.
Engagement Procedures for Audit and Non-audit Services
Approve in advance all audit services to be provided by the independent auditor. Establish policies and procedures that establish a requirement for approval in advance of the engagement of the independent auditor to provide permitted non-audit services and to prohibit the engagement of the independent auditor for any activities or services not permitted by any of the Canadian provincial securities commissions, the SEC or any securities exchange on which the Company's shares are traded including any of the following ten types of non-audit services:
Bookkeeping or other services related to accounting records or financial statements of the Company;
Financial information systems design and implementation consulting services;
Appraisal or valuation services, fairness opinions, or contributions-in-kind reports;
Actuarial services;
Internal audit outsourcing services;
Any management or human resources function;
Broker, dealer, investment advisor, or investment banking services;
Legal services;
Expert services related to the auditing service; and
Any other service the Board of Directors determines is not permitted.
Hiring Practices
Ensure that no individual who is, or in the past 3 years has been, affiliated with or employed by a present or former auditor of the Company or an affiliate, is hired by the Company as a senior officer until at least 3 years after the end of either the affiliation or the auditing relationship.
Independence Test
Take reasonable steps to confirm the independence of the independent auditor, which shall annually include:
Ensuring receipt from the independent auditor of a formal written statement delineating all relationships between the independent auditor and the Company, consistent with the Independence Standards Board Standard No. 1 and related Canadian regulatory body standards;
Considering and discussing with the independent auditor any relationships or services provided to the Company, including non-audit services, that may impact the objectivity and independence of the independent auditor; and
As necessary, taking, or recommending that the Board of Directors take, appropriate action to oversee the independence of the independent auditor and evaluate whether it is appropriate to rotate the independent auditor on a regular basis.
Audit and Finance Committee Meetings
Notify the independent auditor of every Audit and Finance Committee meeting and permit the independent auditor to appear and speak at those meetings.
At the request of the independent auditor, convene a meeting of the Audit and Finance Committee to consider matters the auditor believes should be brought to the attention of the directors or shareholders.
Keep minutes of its meetings and report to the Board for approval of any actions taken or recommendations made.
Restrictions
Confirm with management and the independent auditor that no restrictions are placed on the scope of the auditors' review and examination of the Company's accounts.
OTHER PROFESSIONAL CONSULTING SERVICES
Engagement Review
As necessary, consider with management the rationale and selection criteria for engaging professional consulting services firms.
Ultimate authority and responsibility to select, evaluate and approve professional consulting services engagements.
AUDIT AND REVIEW PROCESS AND RESULTS
Scope
Consider, in consultation with the independent auditor, the audit scope, staffing and planning of the independent auditor.
Review Process and Results
Consider and review with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, as the same may be modified or supplemented from time to time.
Review and discuss with management and the independent auditor at the completion of annual and quarterly examinations:
The Company's audited and unaudited financial statements and related notes;
The Company's MD&A and news releases related to financial results;
The independent auditor's audit of the financial statements and its report thereon;
Any significant changes required in the independent auditor's audit plan;
The appropriateness of the presentation of any non-GAAP related financial information;
Any serious difficulties or disputes with management encountered during the course of the audit; and
Other matters related to the conduct of the audit, which are to be communicated to the Audit and Finance Committee under generally accepted auditing standards.
Review the management letter delivered by the independent auditor in connection with the audit.
Following such review and discussion, if so determined by the Committee, recommend to the Board that the annual financial statements be included in the Company's annual report.
Review, discuss with management and approve annual and interim quarterly financial statements prior to public disclosure. The chairperson of the Audit and Finance Committee may represent the entire Audit and Finance Committee for purposes of this review.
Review and discuss with management and the independent auditor the adequacy of the Company's internal accounting and financial controls that management and the Board of Directors have established and the effectiveness of those systems, and inquire of management and the independent auditor about significant financial risks or exposures and the steps management has taken to minimize such risks to the Company.
Meet separately with the independent auditor and management, as necessary or appropriate, to discuss any matters that the Audit and Finance Committee or any of these groups believe should be discussed privately with the Audit and Finance Committee.
Review and discuss with management and the independent auditor the accounting policies which may be viewed as critical, including all alternative treatments for financial information within generally accepted accounting principles that have been discussed with management, and review and discuss any significant changes in the accounting policies of the Company and industry accounting and regulatory financial reporting proposals that may have a significant impact on the Company's financial reports.
Review with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures, if any, on the Company's financial statements.
Review with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company's financial statements or accounting policies.
Review with the Company's General Counsel legal matters that may have a material impact on the financial statements, the Company's financial compliance policies and any material reports or inquiries received from regulators or governmental agencies related to financial matters.
SECURITIES REGULATORY FILINGS
Review filings with the Canadian provincial securities commissions and the SEC and other published documents containing the Company's financial statements.
Review, with management and the independent auditor, prior to filing with regulatory bodies, the interim quarterly financial reports (including related notes and MD&A) at the completion of any review engagement or other examination. The chairperson of the Audit and Finance Committee may represent the entire Audit and Finance Committee for purposes of this review.
RISK ASSESSMENT
Meet periodically with management to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.
Assess risk areas and policies to manage risk including, without limitation, environmental risk, insurance coverage and other areas as determined by the Board of Directors from time to time.
Review and discuss with management, and approve changes to, the Company's Corporate Investment Policy.
ADOPTION OF CHARTER
This charter was originally adopted by the Board of Directors on August 23, 2004.
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