Audit and Finance Committee
AUDIT COMMITTEE CHARTER - WEST MARINE, INC.
The Audit Committee of the Board of Directors of West Marine, Inc. serves as the representative of the Board for the general oversight of the company's accounting and financial reporting processes, and the audits of the financial statements of the company, and the internal control environment established by management. Through its activities, the committee seeks to facilitate open communication amongst committee members, the Board, outside auditors, management, and the internal auditor (or any third party engaged to carry out the internal audit function) by holding periodic meetings with these parties.
The committee's primary purpose is to provide oversight as to the integrity of the company's financial statements, the outside auditor's qualifications and independence, and the performance of the company's internal and outside auditors . In carrying out its oversight responsibilities, the committee does not itself prepare financial statements or plan or perform audits, and it is not the duty or responsibility of the committee or its members to serve as auditors or to certify or provide other special or professional assurances with respect to the company's financial statements.
The committee may delegate authority to one or more designated members of the committee, provided that any resulting decisions are presented at the following committee meeting.
DUTIES AND RESPONSIBILITIES
Among other functions the committee will:
- Annually determine the retention or replacement of the company's auditors, subject to stockholder ratification, (including the replacement of the lead and reviewing partners every five (5) years and certain other audit partners after seven (7) years), who will report directly to the committee and who are ultimately accountable to the committee, as representatives of the stockholders of the company.
- Review and approve the proposed scope and timing of each year's audit plan and the proposed audit fee of the outside auditors.
- Review and pre-approve any permitted non-audit services and the fees for such services proposed to be provided by the outside auditors. Pre-approval of audit and non-audit services may be delegated to one or more committee members who will report any resulting decisions at the following committee meeting. In considering whether to pre-approve any non-audit services, the committee will consider whether the provision of such services is compatible with maintaining the independence of the outside auditor.
- Resolve any disagreements between management and the outside auditors.
- Annually review the appointment, responsibilities, functions, performance and compensation of the internal auditor, including audit plans, results and significant reports to management and management's responses.
- Review with the outside auditors, the internal auditor and management, the audited financial statements and related opinion and costs of the audit of that year. In conferring with these parties, the committee will:
a. Review the letter and written disclosures from the auditors consistent with Independence Standards Board Standard No. 1, including a formal written statement delineating all services provided and relationships, if any, between the auditors and the company; actively engage in dialogue with the auditors with respect to its independence and any disclosed services or relationships that may impact the independence and objectivity of the auditors; and take, or recommend that the Board take, appropriate action to oversee the outside auditors' independence;
b. Consider the control environment, including the outside auditors' judgment as to the company's accounting policies and the consistency of their application to the financial statements;
c. Review and discuss with management, the internal auditor and the outside auditors the company's internal controls report and the outside auditors' attestation of the report prior to the filing of the company's Form 10-K; and
d. Review and discuss with management, the internal auditor and the outside auditors any major issues as to the adequacy of the company's internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting.
- Review with management and the outside auditors any material financial or non-financial arrangements that do not appear in the financial statements.
- Review with management and the outside auditors the accounting policies, alternative treatments of financial information that have been discussed, and any material written communications between the outside auditors and management.
- Review with management and the outside auditors, the company's annual financial statements prior to the distribution to the company's stockholders, and the filing with the SEC of the company's related Form 10-K report, and recommend to the Board whether such financial statements should be included in the company's Form 10-K report.
- Review with management and the outside auditors earnings press releases and interim financial results and reports prior to (i) the publication and distribution to the company's stockholders, and (ii) the filing with the SEC of the earnings press releases and the company's related Form 10-Q report.
- Review periodic reports from the chief financial officer on significant accounting developments including emerging issues and the impact of accounting changes, where material, on the effectiveness of, or any deficiencies in, the effectiveness of the company's disclosure controls and procedures, or the design or operation of the company's system of internal control over financial reporting, any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting, and any report issued by the outside auditors regarding their and management's assessment of the company's internal control over financial reporting.
- Provide the committee report required to be included in the company's annual proxy statement.
- Review and discuss with the general counsel, and, as appropriate, outside counsel such matters as may warrant the attention of the committee.
- Review the company's hiring policy of employees or former employees of the outside auditor.
- Review and approve related-party transactions submitted by management after management's evaluation of the terms of such transactions.
- Discuss with management and the outside auditors any correspondence with regulators or government agencies and any published reports which raise material issues regarding the company's financial statements or accounting policies.
- Review and discuss reports from the company's disclosure committee.
- Meet, at least annually, in separate executive session with the internal auditor and the outside auditors.
- Establish procedures, in conjunction with the general counsel and internal auditor, for the receipt, retention and treatment of complaints received by the company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of any concerns regarding questionable accounting or auditing matters.
- Review with the outside auditors any audit problems or difficulties and management's response, including disagreements with management, any adjustments noted by the outside auditor but not taken by management, and any management or internal control letters issued or proposed to be issued.
- Report to the Board any significant matters arising from the committee's work and provide minutes of committee meetings.
- Review and reassess at least annually the adequacy of this charter.
The committee will consist of at least three (3) members appointed by the Board, including one member of the committee as chairperson. Each member of the committee will be an "independent" member of the Board and "financially literate," and at least one committee member will be qualified as an "audit committee financial expert." The existence of such member(s), including his/her name and whether or not he/she is independent, will be disclosed in applicable periodic filings with the SEC.
MEETINGS, INVESTIGATIONS AND OUTSIDE ADVISORS
The committee will convene at least four times each year and, at least one time each year, meet in executive session without members of management. It will endeavor to determine that auditing procedures and controls are adequate to safeguard company assets and to assess compliance with policies. The committee will be given full access to the company's internal auditor, Board Chairman, executives, general counsel, outside auditors and outside counsel. The committee will have the authority to conduct or authorize investigations into any matters within its scope of responsibilities and to retain such outside counsel, accounting and other professionals, experts and advisors as it determines appropriate to assist in the performance of any of its functions, including determining the fees to be paid and the other terms of engagement for such advisors.
- Financial Expert
- Independent Director