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Principle 3 The Board Shall Have Rigorous Controls for Financial Audit and Reporting, Internal Control, and Compliance With Law

3.1 Audit Committee. The board shall establish an audit committee of at least three members of which the majority should be independent including the Chairman. The committee shall:

•   review the company's accounting and financial practices,
•   review the integrity of the company's financial and internal controls and financial statements,
•   review the company' s compliance with legal requirements, and
•   recommend the appointment, compensation and oversight of the company's outside auditor.
•   Recommend the appointment of the internal auditor .

3.2 Audit Committee Charter. The audit committee shall adopt a written charter which shall, at a minimum, state the above purposes and the other matters in Appendix B.

Recommendation: A majority of the audit committee should have the financial literacy qualifications stated in Appendix B.
Recommendation: The board should adopt a "whistleblower" program under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under the program concerns may be communicated directly to any audit committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.

3.3 CEO and Chief Financial Officer Certification of Financial Statements. To encourage management accountability for the financial statements required by the directors, the company's CEO and chief financial officer shall state in writing to the audit committee and the board as a whole that the company's interim and annual financial statements present a true and fair view, in all material respects, of the company's financial condition and results of operations in accordance with applicable accounting standards.

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