AUDIT COMMITTEE CHARTER
(v 3.6.08)
Purpose
The Audit Committee (the “Committee”) is part of the Board of Directors (the “Board”) of Rand Capital Corporation (the “Corporation”). The Committee’s primary function is to assist the Board in fulfilling its oversight responsibility with respect to the quality and integrity of the Corporation’s published financial information, internal controls, audit processes and other matters as deemed necessary by the Committee or directed by the Board. The Committee serves as a communication channel among independent accountants, financial management and the Board on such matters.
Authority
In discharging its oversight role, the Committee is empowered to investigate any matter relating to the Corporation’s accounting, auditing, internal control or financial reporting practices brought to its attention with full access to the Corporation’s books, records, facilities and personnel. The Committee may retain outside counsel, independent accountants or advisors in achieving such purpose, whose funding will be determined by the Audit Committee, and provided for by the Corporation.
Membership
The size of the Committee shall be determined and appointed by the Board with a minimum size and independence requirements to maintain membership on the Committee which meets or exceeds the NASDAQ and SEC Regulations.
NASDAQ Marketplace Rule 4350 (d) provides that members should be financially knowledgeable, and at least one member with financial expertise as defined in the Regulations. The Committee must consist of a minimum of three directors, all of whom are independent, as defined in Marketplace Rule 4200 (15).
One member of the Committee shall be appointed as Chair and will maintain communication with the President, CFO and the Corporation’s audit partner.
Compensation for the Committee is established by the Board as permitted by Regulations. An Audit Committee member may not receive any compensation from the Corporation except for Board or Committee service.
Meetings
The Committee shall meet formally at least three times per year, or more frequently as the Committee considers necessary. In addition or combined with the aforementioned meetings, the Committee or its Chair, will communicate with the independent accountants regarding quarterly/interim financial information.
The Committee shall meet separately and periodically with management and the independent accountants in Executive Session. The Committee shall report to the Board on the proceedings of each Committee meeting and make recommendations to the Board when appropriate.
Oversight Areas
Although the Committee may wish to consider additional duties from time to time, the general recurring responsibilities of the Committee in carrying out its oversight role are described below:
- The independent accountants’ ultimate accountability shall be to the Board and the Audit Committee, as representatives of the shareholders. The Committee has the authority to interact directly with and evaluate the performance of the independent accountants, to monitor the independent accountants’ qualifications and independence, to oversee the performance of the accountants, and to make determinations concerning the engagement, dismissal, and compensation of the accountants. In accordance with any regulatory requirements, the Committee may appoint the independent accountants or nominate the independent accountants to be submitted for approval in the Corporation’s proxy statement.
- Oversee the relationships with the independent accountants, the audit process/plan, receive and review audit reports, and provide full access to the Committee by accountants. Discuss the independent accountant’s performance and effectiveness. The Committee must pre-approve all non-audit and audit services provided by the audit firm. The independent accountant shall report directly to the Audit Committee.
- Discuss with management and the independent accountants financial information and earnings report contained in annual reports and other shareholder filings, prior to their release if practicable. The review of interim/quarterly financial data may be discussed with the independent accountants by the Committee or its Chairman, as necessary, in conjunction with the Board’s review of the financial information.
- Obtain an annual written confirmation from independent accountants consistent with Independence Standards Requirements regarding their independence. The Committee shall discuss the contents of the confirmation with the accountants and take necessary action with respect to relationships identified, which could impair such independence.
- Review audited financial statements and discuss with management and independent accountants. Such discussions shall include matters required by Statement of Auditing Standards, No. 61 and updated amendments. Following such review, the Committee shall make a recommendation to the Board regarding the inclusion of such audit report in the Corporation’s Annual Report filed with the SEC.
- Discuss with management and/or legal counsel any legal matters, including pending litigation and/or inquiries from regulatory or governmental agencies that may have a material impact on the Corporation’s financial statements.
- Review at least annually, the Charter of the Committee and the Committee’s effectiveness.
- Include in the proxy statement required reports from the Committee for submission to shareholders, as required by NASDAQ regulations. These may include the Committee’s Charter and Committee Report.
- Review and recommend to the Board of Directors the Audited Financial Statements be included in the Corporation’s annual report on Form 10-K.
- Discuss with management and the independent accountants the quality of and compliance with the Corporation’s internal control and effect of significant changes in accounting policy and procedures.
- Review all related-party transactions (defined as those required to be disclosed pursuant to Item 404 of Regulation S-K) for potential conflicts of interest on an ongoing basis and approve all such transactions, In addition, make inquiries regarding compliance with established codes of conduct of directors, officers and employees.
- Review and discuss with Management and independent accountants the Corporation’s critical accounting policies and practices; alternative treatments and/or disclosures of financial information within accounting principles that may have been considered by Management, or that the Independent Accountants recommend; and audit problems or difficulties identified, including written communications to Management, and their response.
- Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls, and auditing matters, including procedures for employees’ confidential anonymous submission of concerns regarding questionable accounting or auditing matters.
- The Committee will be empowered with all Sarbanes-Oxley (SOX) specified authority.
The Committee’s job is one of oversight. Management is responsible for the preparation of the Corporation’s financial statements and the independent accountants are responsible for auditing those financial statements. The Committee is not responsible to plan, direct or conduct audits, nor for resolving disagreements between Management and the independent accountants. The Committee and the Board recognize that Management and the independent accountants have more resources, time, detailed knowledge, and information regarding the Corporation’s accounting, auditing, internal control and financial reporting practices than does the Committee. Accordingly, the Committee is not responsible to determine whether the Corporation’s financial statements are complete and accurate in accordance with generally accepted accounting principles, nor is it the Committee’s responsibility to ensure compliance with laws and regulations.
