centex Audit Charter_10/08


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centex Audit Charter_10/08

  1. 1. CENTEX CORPORATION Audit Committee Charter GENERAL The Centex Board of Directors created the Audit Committee to assist the Board in its oversight of: • The integrity of the Company’s financial statements; • The Company’s compliance with legal and regulatory requirements; • The independent auditor’s qualifications and independence; and • The performance of the internal audit function and independent auditors. The Committee has the authority of the Board, except as may be prohibited by law, in all matters encompassed by this Charter. The Committee also has all authority required by the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE). In addition to its engagement of the independent auditors, the Committee will serve in a Board-level oversight role, providing counsel and direction to management and the independent auditors through: • The information it receives; • Its discussions with management and the independent auditors; and • The members’ experience in business, financial and accounting matters. MEMBERSHIP • The Committee shall consist of at least three people, all of whom are Board members and whom the Board has determined satisfy the independence requirements set forth in the NYSE listing standards and in the SEC rules adopted under Section 10A(m)(3) of the Securities and Exchange Act of 1934 (Exchange Act). • Each member shall also be: o “Financially literate,” as determined by the Board, within the meaning of the NYSE standards, or shall become “financially literate” within a reasonable period of time after appointment to the Committee. • At least one member of the Committee shall be: o A person with “accounting or related financial management expertise,” as determined by the Board, within the meaning of the NYSE standards; and o An “audit committee financial expert,” as determined by the Board, within the meaning of Item 407 of SEC Regulation S-K. • No member shall serve as an audit committee member of more than two other public companies unless permitted under the NYSE standards and approved by the Board. • If a member serves as an audit committee member of another public company (or companies), such member shall deliver a written statement to the Board and the Committee on an annual basis describing: 1
  2. 2. The time required to serve on the other company’s (or companies’) audit o committee; and o Any expected changes in such time commitment during the next year. • The Board will designate members either at the annual Board meeting or at such other meeting or time as the Board shall determine. The Corporate Governance and Nominating Committee will recommend the members of the Committee to the Board. • Each member will serve until the next time Committee members are designated, unless the member resigns, or is removed or replaced. • The Board may remove or replace any member at any time. • If for any reason the Board does not designate new members of the Committee at the annual Board meeting or at such other meeting or time as the Board shall determine, the current members will continue to serve until the Board names new members. • Filling a vacancy is optional, unless there are fewer than three members remaining on the Committee; then the vacancy must be filled. • To fill a vacancy or to otherwise replace a member, the Board will designate another director who meets the requirements for membership to fill the unexpired term, based on the recommendation of the Corporate Governance and Nominating Committee. INTERNAL GOVERNANCE AND PROCEDURES Criteria for the Chairperson and Committee Rules • The Board will designate one member to act as the Chairperson until the next time Committee members are designated. • The Board can remove or replace the Chairperson at any time. • If the Chairperson resigns or is removed, the Board will name an existing member of the Committee to serve as Chairperson for the unexpired term. • The Chairperson presides over all Committee meetings and reports the Committee’s findings and conclusions to the Board. • The Chairperson shall have authority to execute and deliver all documents requiring signature by the Committee in relation to the Committee’s powers, duties and obligations as set out in this Charter or as decided by the Committee. • The Committee may establish rules for business that include meetings, notices, quorum, voting, agenda preparation, and distribution of materials, as long as they don’t conflict with the By-Laws, securities laws, SEC rules and regulations, NYSE standards or other provisions of the Charter. • If no rules have been set by the Committee, then: o A majority of the Committee constitutes a quorum; o If the Committee has an even number of members, one-half the members will constitute a quorum; and o As long as the Committee meeting has a quorum, the majority opinion can approve Committee action. • The Committee shall review its procedures periodically and make changes. Guidelines for Committee Meetings • The Committee will meet at least four times a year, and more often as needed. • The meetings can be held by phone; any member can call in if needed. • Special guests may be invited to meetings as needed. 2
  3. 3. • The Committee can meet as often as necessary with the Company’s management, consultants or independent auditors and in separate executive sessions if any Committee member feels privacy is needed. • Written minutes of the meeting and records of action must be kept. Guidelines for Subcommittees • The Committee can delegate specified duties and responsibilities to a subcommittee. • The subcommittee can consist of one or more members (unless a specified number is required), who have been designated by a majority of the Committee. • The Committee can also delegate to a subcommittee or to any members the authority to grant pre-approval of audit and permissible non-audit services in accordance with the “Independent Auditors” subsection below. • Any decision by the subcommittee must be reported back to the full Committee at the next scheduled meeting. • The subcommittee must follow any rules or procedures determined by the Committee. DUTIES AND RESPONSIBILITIES Listed below are the principal duties and responsibilities of the Committee. In order to fulfill its general purpose, the Committee may have to take actions under its general power and authority in addition to those described below. General • The Committee will perform the duties and responsibilities of an audit committee described in the Sarbanes-Oxley Act, the NYSE standards and this Charter. • The Committee will also provide the Board any help needed in the general oversight of the Company’s financial reporting, legal and regulatory compliance, internal control and audit functions. Independent Auditors • The Committee shall have sole authority over the appointment, retention and replacement (subject to stockholder ratification if the Board finds ratification necessary) of any registered public accounting firm performing audit, review or attest services for the Company (independent auditors). • The Committee shall also have sole authority over the compensation and oversight of the independent auditors’ work (including resolution of financial reporting disagreements between management and the independent auditors), and the ultimate authority to approve all audit engagement fees and terms. • The independent auditors shall report directly to the Committee and are accountable to the Board and the Committee, not the Company’s management. In order to fulfill its responsibilities, the Committee will at minimum: a. Independent Auditors • Meet with the independent auditors prior to the audit to: o Review the planning and staffing of the audit; and o Ensure that the Committee or its members are available to the Company’s independent auditors when requested. 3
  4. 4. • Obtain and review, at least annually, a report by the independent auditors (Quality Control Report) describing: o The independent auditors’ internal quality-control procedures; o Any material issues raised by the most recent internal quality-control review, peer review, or Public Company Accounting Oversight Board review of the independent auditors, or any governmental or professional authority-led inquiry or investigation, within the last five years, concerning one or more independent audits conducted by the independent auditors and any steps taken to deal with such issues; and o All relationships between the independent auditors and the Company (in order to assess the independent auditor’s independence). • Evaluate the independent auditors’ qualifications and performance and present the conclusions to the Board. Such evaluation may include the opinions of management and the internal auditors, and also includes: o Considering the adequacy of the independent auditors’ quality controls in light of the disclosures made in the Quality Control Report; and o Reviewing the performance of the independent auditor’s lead partner and whether rotation of any of the audit partners is appropriate. • Evaluate the Quality Control Report’s information on the independent auditors’ independence, together with the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 (or other applicable standard), and discuss with the independent auditors any disclosed relationships or services that may impact their objectiveness or independence. In making such evaluations, the Committee shall take into account the opinions of management and the internal auditors and present its conclusions to the Board. • Obtain and review at least annually the independent auditors’ reports regarding: o All critical accounting policies and practices to be used; o All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, including: Ramifications of the use of such alternative treatments; and The treatment preferred by the independent auditors. o Other material written communications between the independent auditors and management, such as any: Management letter provided by the independent auditors and management’s response to that letter; Management representation letter; Reports on observations and recommendations for internal controls; Schedule of unadjusted audit differences and a listing of any unrecorded adjustments and reclassifications; Schedule of material, uncorrected misstatements that were brought to management’s attention through audit procedures; and Engagement or independence letters. • Discuss with the independent auditors matters relating to the conduct of the audit that Statement on Auditing Standards No. 114 (or other applicable standard) requires independent auditors to communicate, including: o Any problems encountered in the course of the audit work; o Any restrictions on the scope of activities or access to requested information; and o Any significant disagreements with management. 4
  5. 5. • Pre-approve all audit, review or attest engagements and all permissible non- audit services, including the services’ fees and terms, that are provided by the independent auditors and must be brought to the Committee’s attention and approved by the Committee prior to completion of the audit. Such services are subject to, and must be in compliance with, Section 10A(i)(1)(b) of the Exchange Act’s de minimis exceptions for certain non-audit services and the rules and regulations adopted under such exceptions. • Confirm the regular rotation of the audit partners and consider whether there should be a regular rotation of the independent auditing firm. • Establish hiring policies for the Company’s employment of the independent auditors’ employees or former employees. • Obtain assurance from the independent auditors that, in completing their audit of the Company’s financial statements, they have met their obligations to identify and report fraud under Section 10A(b) of the Exchange Act. • Consider and review with management, the independent auditors and the Company’s internal auditors in accordance with SEC rules: o Management’s annual assessment of, and report on, the effectiveness of the Company’s internal control over financial reporting and the independent auditor’s attestation report on such assessment, prior to the filing of the Annual Report on Form 10-K; o The adequacy of the Company’s internal controls and disclosure controls and procedures; o Any related significant findings and recommendations of the independent and internal auditors, along with management’s response; and o Any other matters the Committee may determine from time to time. b. Financial Statements and Financial Reporting Processes • Review and discuss with management and the independent auditors: o The Company’s annual audited financial statements, the specific disclosures made in management’s discussion and analysis of financial condition and the results of operations accompanying such financial statements, prior to the filing of the Annual Report on Form 10-K; o The Company’s quarterly financial statements, disclosures made in management’s discussion and analysis of financial condition and results of operations accompanying such financial statements, prior to the filing of the Quarterly Reports on Form 10-Q, including any matters connected to the quarterly financial statements and provided in Statement on Auditing Standards No. 100 (or other applicable standard); o Major issues regarding accounting principles and financial statement presentations, including any: Significant changes in the selection or application of accounting principles; Major issues regarding the adequacy of the Company’s internal controls; and Audit steps adopted to eliminate material control deficiencies. o Other major issues and judgments made concerning the preparation of the Company’s financial statements, including the adequacy of disclosures of changes in internal control over financial reporting; o Communications or consultations between the audit team and the independent auditors’ national office regarding auditing or accounting issues that are presented by the engagement and come to the Committee’s attention, if considered necessary by the Committee; 5
  6. 6. Analyses prepared by management and/or the independent auditors o concerning significant financial reporting issues and judgments made during the preparation of the Company’s financial statements, including analyses of the effects of alternative methods of generally accepted accounting principles on the financial statements; and o The effect of regulatory and accounting initiatives and off-balance sheet structures on the Company’s financial statements. • Recommend whether the Company’s annual audited financial statements and accompanying notes should be included in the Annual Report on Form 10-K. • Prepare and approve the audit committee report that must, under SEC rules and regulations, be included in the proxy statement for the annual meeting (or possibly in the Annual Report on Form 10-K). • Review the chief executive and financial officers’ disclosures made to the Committee and the independent auditors concerning the certification process for the Company’s Form 10-K and 10-Q Reports on any: o Significant deficiencies or weaknesses in the design or operation of internal control over financial reporting; and o Fraud involving management or other employees who have a significant role in the Company’s internal control over financial reporting. • Discuss in advance with management the information to be disclosed and the presentations to be made in the Company’s earnings press releases (including the use, if any, of “pro forma” or “adjusted” non-GAAP financial measures), and the financial information and earnings guidance provided to analysts and rating agencies. Review any relevant items with management prior to the release of any such press releases or earnings guidance. The discussion and review shall be with the Committee Chairperson or the full Committee. • Discuss with management the Company’s major financial risk exposures, what management has done to monitor and control those exposures, and the Company’s risk assessment and risk management policies and guidelines. • Review with management and the independent auditors: o The internal auditors’ function, responsibilities, budget and staffing, including the appointment or replacement of the senior internal auditing executive; and o Any recommended changes in the planned scope of the internal audit. • Review the internal auditing department’s significant reports to management and management’s responses. • Unless delegated to another Committee or pursuant to the Company’s Related Person Transactions Policy, review management’s periodic reports on related party transactions and potential conflict of interest situations. c. Complaints • Establish procedures for: o The receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, including any “whistleblower” complaints; and o The confidential, anonymous employee submission of concerns about questionable accounting or auditing matters. d. Other Responsibilities • Make regular reports and recommendations to the Board. 6
  7. 7. • Review with the Chief Legal Officer matters that may have a material effect on the Company’s financial condition, results of operations or compliance policies, and any material reports received from regulators, governmental agencies or other third parties on matters relating to or affecting the Committee’s duties or responsibilities. • Conduct or authorize investigations into appropriate matters within the Committee’s scope of responsibilities. • Obtain reports from management, the Company’s senior accounting executive and the independent auditors concerning: o The Company’s subsidiaries/foreign affiliated entities’ compliance with applicable legal requirements; and o The Centex Way or any other Company code of conduct. • Advise the Board on the Company’s policies and procedures concerning compliance with applicable laws and regulations and with The Centex Way. The Committee shall determine the manner in which such responsibilities and powers are to be exercised in light of the existing circumstances and conditions. In many cases, the Committee will discharge its responsibilities by evaluating information and reports presented or given to it by the Company’s management, internal auditors and independent auditors. LIMITATIONS The following are the responsibilities of management and the independent auditor and NOT the duty of the Committee: • Plan or conduct audits to determine whether the Company’s financial statements and disclosures are complete and accurate or compliant with generally accepted accounting principles and applicable rules and regulations. • Assure compliance with applicable laws, regulations, The Centex Way, any other Company code of conduct, or other policies and procedures. Also it is not the duty of the Committee to initiate or conduct investigations unless directed to do so by the Board. ENGAGEMENT OF ADVISERS AND FUNDING • The Committee has the authority to get advice and help from independent counsel and other advisors, such as consultants, as necessary. • The Company will pay for the cost of advisers, as well as ordinary administrative expenses necessary for the Committee to carry out its duties. 7
  8. 8. ANNUAL REVIEW OF CHARTER AND EVALUATION OF THE COMMITTEE • The Committee will review and reassess the adequacy of this Charter and recommend changes to the Board as needed, at least annually. • The Committee will review its own performance annually. • The Board will conduct an evaluation of the Committee’s performance annually, and afterward the Board, or a representative, will review it with Committee members. As amended and restated through October 8, 2008 54717v2 8