| PURPOSE
The Audit Committee of the Board of
Directors (the "Board") of Dresser-Rand Group Inc. (the
"Company") is organized for the purposes of assisting
the Board in oversight of (1) the integrity of the financial
statements of the Company, (2) the independent auditor’s
qualifications and independence, (3) the performance of the
Company’s internal audit function and independent auditors and
(4) the compliance by the Company with legal and regulatory
requirements.
The Audit Committee shall prepare a
report as required by the rules of the Securities and Exchange
Commission (the "SEC") to be included in the Company’s
annual proxy statement.
COMPOSITION AND QUALIFICATIONS
The Audit Committee shall consist
of no fewer than three members as determined by the Board, each of
whom shall be a non-employee director of the Company. Subject to
the phase-in rules of the New York Stock Exchange
("NYSE") in connection with the Company’s initial
public offering, and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and
regulations of the SEC, each of the members of the Audit Committee
shall be determined by the Board to be independent under the rules
of the NYSE, the Sarbanes – Oxley Act of 2002 (the "Sarbanes
– Oxley Act") and the Exchange Act. All members of the
Audit Committee shall have a working familiarity with basic
finance and accounting practices (or acquire such familiarity
within a reasonable period after his or her appointment), and at
least one member of the Audit Committee shall be a financial
expert as defined by the SEC.
Audit Committee members who simultaneously serve on the audit
committees of two or more other public companies shall promptly
disclose such fact to the Board. In the event that any members of
the Committee sit simultaneously on the audit committee of two or
more other public companies, the Board will determine if their
duties on such audit committees impair their ability to serve
effectively on the Audit Committee of the Company, and such
determinations will be disclosed in the Company’s annual proxy
statement.
A Chairperson of the Committee will be selected by the full
Board from among the Committee members. The Committee members
shall serve for such term or terms, as the full Board shall
determine. The Board shall have the power at any time to change
the membership of the Audit Committee and to fill vacancies on it,
subject to such new member(s) satisfying applicable independence
and experience requirements. Except as expressly provided in this
Charter or the by-laws or any Corporate Governance Guidelines of
the Company, the Audit Committee shall fix its own rules of
procedure.
MEETINGS
The Audit Committee shall meet not less frequently than four
times per year, or more frequently as circumstances may dictate.
The Chairman of the Board or any member of the Audit Committee may
call meetings of the Committee, in each case on at least
twenty-four hours’ notice to each Audit Committee member. The
Audit Committee shall meet periodically with management, those
responsible for the internal audit function and the independent
auditor in separate executive sessions. In addition, the Committee
should meet with the independent auditors and management quarterly
to review the Company’s financial statements. The Audit
Committee may have such other direct and independent interaction
with such other persons from time to time, as the members of the
Audit Committee deem appropriate. The Audit Committee may request
any officer or employee of the Company or the Company’s outside
counsel or independent auditor to attend a meeting of the
Committee or to meet with any members of, or consultants to, the
Committee. The Committee may meet by telephone or videoconference
and may take action by written consent.
A majority of the members of the Audit Committee shall
constitute a quorum for any meeting. Any action of a majority of
the members of the Audit Committee present at any meeting at which
a quorum is present shall be an action of the Audit Committee. The
Committee shall keep a record of its meetings and report on them
to the Board.
FUNCTIONS AND RESPONSIBILITIES
The Audit Committee shall have the
sole authority to appoint, compensate, retain, evaluate and
terminate the independent auditor. The Audit Committee shall be
directly responsible for the compensation and oversight of the
work of the independent auditor (including resolution of
disagreements between management and the independent auditor
regarding financial reporting) in preparing or issuing an audit
report or performing other audit, review, attest or similar
services. The independent auditor shall report directly to the
Audit Committee.
The Audit Committee shall pre-approve all auditing services,
internal control-related services and permitted non-audit services
(including the fees and terms thereof), other than prohibited
non-auditing services as set forth in Sarbanes – Oxley Act
Section 201, to be performed for the Company by its independent
auditor, subject to any de minimus exceptions for non-audit
services described in the Exchange Act which are approved by the
Audit Committee prior to the completion of the audit. The Audit
Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant
pre-approvals shall be presented to the full Audit Committee at
its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to retain independent legal,
accounting or other advisors. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for
payment of compensation to the independent auditor for the purpose
of rendering or issuing an audit report and to any advisors
employed by the Audit Committee, and for payment of ordinary
administrative expenses of the Audit Committee that are necessary
or appropriate in carrying out its duties.
The Audit Committee shall make regular reports to the full
Board. The Audit Committee should review with the Board any issues
that arise with respect to the quality or integrity of the Company’s
financial statements, the Company’s compliance with legal or
regulatory requirements, the performance and independence of the
Company’s independent auditors, or the performance of the
internal audit function. The Audit Committee shall review
and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Audit
Committee shall annually review the Audit Committee’s own
performance.
The Audit Committee, to the extent it deems necessary or
appropriate in meeting its responsibilities, shall:
Financial Statement and Disclosure Matters. Meeting
separately, periodically, with management, internal auditors and
the independent auditor:
- Review and discuss with management and the independent
auditor the Company’s annual audited financial statements,
including disclosures made in "Management’s Discussion
and Analysis of Financial Condition and Results of
Operations," and recommend to the Board whether the
audited financial statements should be included in the Company’s
Form 10-K.
- Review and discuss with management and the independent
auditor the Company’s quarterly financial statements prior
to the filing of the Company’s Form 10-Q, including the
results of the independent auditor’s review of the quarterly
financial statements and disclosures made in "Management’s
Discussion and Analysis of Financial Condition and Results of
Operations."
- Review and discuss with management (including the senior
internal audit executive) and the independent auditor the
Company’s internal controls report and the independent
auditor’s attestation of the report prior to the filing of
the Company’s Form 10-K.
- Review and consider quarterly reports from the independent
auditor on:
- All critical accounting policies and practices to be used.
- Analyses prepared by management and/or the independent
auditor setting forth significant financial reporting issues
and judgments made in connection with the preparation of the
financial statements, including analyses of the effects of
all alternative treatments of financial information within
generally accepted accounting principles ("GAAP")
that have been discussed with management, ramifications of
the use of such alternative treatments, and the treatment
preferred by the independent auditor.
- 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.
- Major issues regarding accounting principles and financial
statement presentations, including any significant changes
in the Company’s selection or application of accounting
principles.
- Other material written communications between the
independent auditor and management, such as any management
letter or schedule of unadjusted differences.
- Discuss with management the Company’s earnings press
releases (paying particular attention to any use of "pro
forma" or "adjusted" non GAAP information), as
well as financial information and earnings guidance provided
to analysts and rating agencies. Such discussion may be done
generally, consisting of discussing the types of information
to be disclosed and the types of presentations to be made.
- Discuss with management and the independent auditor the
effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company’s financial
statements.
- Discuss with management the Company’s major financial risk
exposures and the steps management has taken to monitor and
control such exposures, including the Company’s risk
assessment and risk management policies, and any legal matters
that may have a material effect on the Company.
- Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any problems
or difficulties encountered in the course of the audit work
and management’s response, any restrictions on the scope of
activities or access to requested information, and any
significant disagreements with management.
- Consider reviewing with the independent auditor any
accounting adjustments that were noted or proposed by the
auditor but were "passed" (as immaterial or
otherwise).
- Review disclosures made to the Audit Committee by the
Company’s CEO and CFO during their certification process for
the Form 10-K and Form 10-Q about any significant deficiencies
in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company’s
internal controls.
Oversight of the Company’s
Relationship with the Independent Auditor.
- Review and evaluate the lead partner of the independent
auditor team.
- When evaluating the lead audit partner, the Committee should
take into account the opinions of management and the Company’s
internal auditors (or other personnel responsible for the
internal audit function).
- Obtain and review a report from the independent auditor at
least annually describing (a) the independent auditor’s
internal quality-control procedures, (b) 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, (c) any steps taken to deal with any
such issues, and (d) all relationships between the independent
auditor and the Company. Evaluate the qualifications,
performance and independence of the independent auditor,
including considering whether the auditor’s quality controls
are adequate and the provision of permitted non-audit services
is compatible with maintaining the auditor’s independence,
taking into account the opinions of management and internal
auditors. The Audit Committee shall present its conclusions
with respect to the independent auditor to the Board.
- Ensure the rotation of the lead audit partner having primary
responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law and consider
whether there should be a regular rotation of the audit firm
itself.
- Recommend to the Board policies for the Company’s hiring
of employees or former employees of the independent auditor.
- Discuss with the independent auditor material issues on
which the national office of the independent auditor was
consulted by the Company’s audit team.
- Meet with the independent auditor prior to the audit to
discuss the scope, planning and staffing of the audit.
Oversight of the Company’s
Internal Audit Function(s).
- Review with management and those responsible for the
internal audit function (in separate meetings, as appropriate)
the operation of the internal audit function including the
quality and adequacy of internal controls that could
significantly affect the Company’s financial statements and
any difficulties encountered in the course of conducting the
internal audits, including any restrictions on scope of work
or access to required information.
- Review the significant reports to management prepared by the
internal auditing function and management’s responses.
- Discuss with the independent auditor and management the
internal audit function’s responsibilities, budget and
staffing and any recommended changes in the planned scope of
the internal audit.
- Review and concur in the appointment, replacement,
reassignment or dismissal of the Director of Internal Audit.
Compliance Oversight
Responsibilities.
- Obtain from the independent auditor assurance that Section
10A(b) of the Exchange Act has not been implicated.
- Obtain reports from management, the Company’s senior
internal auditing executive and the independent auditor that the
Company and its subsidiaries entities are in conformity with
applicable legal requirements and the Company’s Code of
Business Conduct and Ethics. Review reports and disclosures of
insider and affiliated party transactions. Advise the Board with
respect to the Company’s policies and procedures regarding
compliance with applicable laws and regulations and with the
Company’s Code of Business Conduct and Ethics.
- Establish procedures 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 the Company’s employees
of concerns regarding questionable accounting or auditing
matters.
- Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports that raise material issues regarding the
Company’s financial statements or accounting policies.
- Annually review the adequacy of the Audit Committee’s
written charter and the performance of the Audit Committee.
- Report regularly to the full Board.
AUDIT COMMITTEE’S ROLE
While the Audit Committee has the
responsibilities and functions set forth in this Charter, it
serves in an oversight capacity and, as such, it is not the duty
of the Audit Committee to plan or conduct audits, administer legal
matters or to determine that the Company’s financial statements
and disclosures are complete and accurate and are in accordance
with generally accepted accounting principles and applicable rules
and regulations. These are the responsibilities of management and
the independent auditor. Accordingly, the Audit Committee’s role
does not provide any special assurance regarding matters that are
outside the Committee’s area of expertise or that are the
responsibility of management.
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