Illinois CPA Society
Illinois CPA Foundation
CPAs for the Public Interest
Illinois CPAs for Political Action
This charter governs the operations of the Audit Committee for the Illinois CPA Society, Illinois CPA Foundation, CPAs for the Public Interest, and Illinois CPAs for Political Action (collectively, the “Society”). The Board of Directors shall appoint an Audit Committee (the “Committee”) of at least four members, and as an “ex-officio” member, the Society’s Treasurer, consisting entirely of independent directors of the Board, and shall designate one member as chairperson or delegate the authority to designate a chairperson to the Committee. The Chair of the Illinois CPA Society Board of Directors shall not serve on the Audit Committee. Members should be rotated to bring in new members and to maintain continuity.
The duties as a member of the Audit Committee shall be in addition to other duties as a member of the Board of Directors. For purposes hereof, members shall be considered independent as long as they satisfy all of the independence requirements for Board Members as set forth in Rule 10A-3 of the Exchange Act.
Should a Committee member believe he or she is not independent of the Society, disclosure shall be made to the Board of the Society.
Each member of the Committee shall be financially literate, or become financially literate within a reasonable period of time. It shall be the Board’s goal to appoint at least one member who is an “audit committee financial expert,” as defined by SEC rules.
The Committee shall meet at least two times a year and may meet additional times, as necessary. The Committee may meet separately and periodically with management, and the independent auditor. The Committee shall report regularly to the Board of Directors with respect to its activities.
The purpose of the Committee shall be to provide assistance to the Board of Directors in fulfilling their oversight responsibility to the members and others relating to: (i) the integrity of the Society’s financial statements; and (ii) the independent auditor’s qualifications, performance, and independence.
The Committee shall retain and compensate such outside legal, accounting or other advisors, as it considers necessary in discharging its oversight role.
In fulfilling its purpose, it is the responsibility of the Committee to assure that the independent auditors are able to obtain all information which is necessary or useful in performing the audit and to assure that the Committee, independent auditors and management of the Society are aware of their responsibilities.
Duties and Responsibilities
The Committee has the responsibilities and powers set forth in this Charter. Management is responsible for the preparation, presentation, and integrity of the Society’s financial statements, for the appropriateness of the accounting principles and reporting policies that are used by the Society and for implementing and maintaining internal control over financial reporting. The independent auditors are responsible for auditing the Society’s financial statements.
The Committee, in carrying out its responsibilities, believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. The Committee will take appropriate actions to set the overall “tone” for quality financial reporting, sound business risk practices, and ethical behavior.
The following shall be the principal duties and responsibilities of the Committee. These are set forth as a guide with the understanding that the Committee may supplement them as appropriate.
- The Committee shall be responsible for the appointment, approval of, compensation, retention, and oversight of the work of the independent auditors (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Society, and the independent auditors must report directly to the Committee.
- At least annually, the Committee shall obtain and review a report by the independent auditors describing: (i) any material issues raised by the most recent internal quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (ii) all relationships between the independent auditors and the Society (to assess the auditors’ independence).
- After reviewing the foregoing report and the independent auditors’ work, the Committee shall evaluate the auditors’ qualifications, performance and independence. Such evaluation should include the review and evaluation of the lead partner of the independent auditors and take into account the opinions of Society management.
- The Committee shall pre-approve all audit and non-audit services provided by the independent auditors and shall not engage the independent auditors to perform non-audit services where such arrangement would result in the auditors auditing their own work. The Committee delegates pre-approval authority to the chairperson of the Audit Committee. The decisions of any Committee member to whom pre-approval authority is delegated must be presented to the full Committee at its next scheduled meeting.
- The Committee shall discuss with the independent auditors the overall scope and plans for their respective audits, including the adequacy of staffing and budget or compensation.
- The Committee shall regularly review with the independent auditors any audit problems or difficulties encountered during the course of the audit work, including any restrictions on the scope of the independent auditors’ activities or access to requested information, and management’s response. The Committee should review any accounting adjustments that were noted or proposed by the auditors but were “passed” (as immaterial or otherwise); any communications between the audit team and the audit firm relating to problems or difficulties encountered with respect to significant auditing or accounting issues; and any “management” or “internal control” letter issued, or proposed to be issued, by the audit firm to the Society.
- The Committee shall review and discuss the annual audited financial statements with management and the independent auditors prior to the issuance of the Society’s audited financial statements. The Committee’s review of the financial statements shall include: (i) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Society’s selection or application of accounting principles, and major issues as to the adequacy of the Society’s internal controls and any specific remedial actions adopted in light of material control deficiencies (ii) discussions with management and the independent auditors regarding significant financial reporting issues and judgments made in connection with the preparation of the financial statements and the reasonableness of those judgments; (iii) consideration of the effect of regulatory accounting initiatives, as well as off-balance sheet structures on the financial statements; (iv) consideration of the judgment of both management and the independent auditors about the quality, not just the acceptability of accounting principles; and (v) the clarity of the disclosures in the financial statements. Also, the Committee shall discuss the results of the
annual audit and any other matters required to be communicated to the Committee by the independent auditors under professional standards.
- Prior to the issuance of the Society’s audited financial statements, the Committee shall receive and review a report from the independent auditors on all critical accounting policies and practices of the Society; all material alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the independent auditor; and other material written communications between the independent auditors and management.
- The Committee shall discuss the Society’s policies with respect to risk assessment and risk management, including the risk of fraud. The Committee also shall discuss the Society’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
- The Committee shall establish procedures for the receipt and treatment of whistleblower complaints received by the Society regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of the Society of concerns regarding questionable accounting or auditing matters. Complaints received shall be directed to the Audit Committee Chair.
- The Committee shall be notified prior to the hiring of employees or former employees of the independent auditors.
- The Committee shall determine the appropriate funding needed by the Committee for payment of: (1) compensation to the independent audit firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Society; (2) compensation to any advisers employed by the Committee; and (3) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
- The Committee shall perform an evaluation of its performance at least annually to determine whether it is functioning effectively.
- The Committee shall review and reassess the charter at least annually and obtain the approval of the Board of Directors as to any revisions.
llinois CPA Society Board of Directors
December 8, 2005