The Audit Committee of Alteva, Inc. (the “Company”) is a standing committee of the Board of Directors.
The Audit Committee shall consist of a minimum of three members, the actual number to be determined and recommended to the Board of Directors each year by the Nominating Committee. Members of the Audit Committee, in the judgment of the Board of Directors, shall be independent in accordance with NYSE MKT listing standards applicable to Audit Committee members and any more stringent standards that law or regulation may require or that the Board of Directors shall determine to apply. In particular, members may not accept, other than in their capacities as members of the Board or its committees, or the Company’s subsidiary boards or committees, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries. Compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company, provided such compensation is not contingent in any way on continued service. Furthermore, members may not be an officer or employee of the Company, directly or indirectly be the beneficial owner of more than 10% of the Company’s Common Shares or the shares of any class of voting stock of any of the Company’s subsidiaries, or be an executive officer of a company that owns more than 10% of the Company’s Common Shares or of the shares of any class of voting stock of any of the Company’s subsidiaries, or a director and employee, general partner or managing member of such a company, except that a member of the Audit Committee may be a director of one or more subsidiaries of the Company and serve on committees of the board of any such subsidiary, provided the director receives only ordinary course compensation for such service. No member of the Audit Committee may serve simultaneously on the audit committee of more than two other companies that are not subsidiaries, as explained above.
Each member shall, in the judgment of the full Board of Directors, have the ability to read and understand fundamental financial statements, including balance sheets, income statements and cash flow statements. No members of the Audit Committee shall have participated in the preparation of the financial statements of the Company or of any of its subsidiaries at any time during the three years prior to the time of the director’s service on the Audit Committee. At least one member of the Audit Committee shall, in the judgment of the Board of Directors, have the level and type of past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background which results in such member’s financial sophistication, as required by NYSE MKT listing standards. The Board of Directors shall also determine whether it has at least one member (who may be the same person as the one described above) who satisfies the definition of “audit committee financial expert” set forth in paragraph (h)(2) of Item 401 of Regulation S-K under the Securities Exchange Act of 1934. The Committee shall assure that the Company properly discloses whether or not it has such a person (along with such person’s name and whether such person is independent) and if not, why not.
The Audit Committee shall, as provided by law, regulation or NYSE MKT listing standards, oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company, and in conjunction therewith shall have the responsibility for overseeing the following:
- The integrity of the Company’s financial statements and internal controls.
- The Company’s compliance with legal and regulatory requirements.
- The independent auditor’s qualifications and independence.
- The performance of the audit of the Company’s financials.
- The performance of the Company’s internal audit function (if and when established) and the independent auditor. It remains the responsibility of the Company’s management and its independent auditors to plan and conduct audits, and to determine that the Company’s financial statements are complete, accurate and in accordance with generally accepted accounting principles.
- The preparation of the report required by the rules of the Securities and Exchange Commission be included in the Company’s annual proxy statement.
Duties and Responsibilities
- Appoint (subject to ratification by the Company’s stockholders, if the Board of Directors so determines), retain and terminate when appropriate, the independent auditor, set the independent auditor’s compensation, if the Board of Directors so determines, and generally review the work of the independent auditor, all for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; pre-approve all audit services to be provided by the independent auditor; receive assurances that the independent auditor has satisfied all requirements relating to the peer review of its system of quality control and the observance of established policies and procedures and applicable auditing standards.
- Pre-approve all permitted internal control related services and non-audit services to be performed by the independent auditor and, if experience suggests that establishing such policies would be useful, establish services.
- Receive and review:
- A report by the independent auditor describing the most independent auditor’s internal quality-control procedures and any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditing 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.
- Other required reports and communications from the independent auditor.
- At least annually, consider the independence of the independent auditor, including whether the provision by the independent auditor of any service to or relationship with the Company is compatible with the independence or objectivity of such auditor, and obtain and review a report from the independent auditor describing all relationships between the auditor and the Company consistent with Independence Standards Board Standard no. 1. If that report or any other information suggests that circumstances or relationships may impact the objectivity and independence of the auditors, the Audit Committee shall immediately discuss and resolve such concerns with the auditor.
- Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.\
- Review with the independent auditor:
- The scope and results of the audit
- Any problems or difficulties that the auditor encountered in the course of the audit work, and management’s response, and
- Any questions, comments or suggestions the auditor may have relating to the internal controls, and accounting practices and procedures, of the Company or its subsidiaries.
- If and when an internal audit function is established, select the Company’s internal auditors and supervise their activities. Review, at least annually, the scope and results of the internal audit, including the current and future programs of the Company’s internal audit program and any significant matters contained in reports from internal auditors. Report such finding to the full Board of Directors.
- Review with the independent auditor and Company Management:
- Results of any Sarbanes-Oxley 404 attestation report regarding the adequacy and the effectiveness of internal controls over financial reporting (including any significant deficiencies and material weaknesses in internal controls reported to the Audit Committee by the independent auditor or management), accounting practices, and disclosure controls and procedures (and management reports thereon), of the Company and its subsidiaries
- Any special steps adopted in light of material control deficiencies and the adequacy of disclosure about changes in internal control over financial reporting.
- Internal control observations resulting from the financial statement audit, and
- Current accounting trends and developments, and take such action with respect thereto as may be deemed appropriate.
- Review with management and the independent auditor the annual and quarterly financial statements of the Company, including:
- the Company’s disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
- any material changes in accounting principles or practices used in preparing the financial statements prior to the filing of a report on Form 10-K or 10-Q with the Securities and Exchange Commission, and
- the items required by Statement of Auditing Standards 61 as in effect at the time in the case of the annual statements and Statement of Auditing Standards 100 as in effect at that time in the case of the quarterly statements.
- Recommend to the board of Directors whether the audited financial statements should be included in the Company’s Form 10-K.
- Resolve promptly any disagreements between the Company’s management and the independent auditor regarding any aspect of financial reporting.
- Establish procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding the Company’s accounting, internal controls and auditing matters, as well as for the confidential, anonymous submission by employees of the Company or its subsidiaries of concerns regarding questionable accounting or auditing matters.
- Conduct an annual performance evaluation of the Audit Committee and annually evaluate the adequacy of this charter.
- Otherwise oversee the accounting and reporting process and the audits of the financial statements of the Company and take any other appropriate action in connection with overseeing the independence of the outside audit.
- Review where appropriate, all proposed related party transactions (as defined in Item 404 of Regulation S-K) on an ongoing basis to determine whether potential or actual conflicts of interest exist and either approve, terminate or restructure such transactions.
- To review and discuss with management and the Company’s independent auditors the Company’s earnings press releases, including the type of information to be included and its presentation and the use of any pro forma or adjusted non-GAAP information, and any financial information and earnings guidance provided to analysts and ratings agencies, including the type of information to be disclosed and the type of presentation to be made.
- Set clear Company hiring policies for employees or former employees of the Company’s independent auditors that participated in any capacity in any Company audit.
The Audit Committee shall have the sole authority to appoint, determine funding for, and oversee the independent auditors (subject, if applicable, to stockholder ratification). The Audit Committee shall have the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties.
The Audit Committee shall meet at least quarterly and at such other times as it deems necessary to fulfill its responsibilities. The Audit Committee shall periodically meet separately with management, the internal auditors, if any, and the independent auditor. The Audit Committee shall report regularly to the Board of Directors with respect to its activities and make recommendations to the Board of Directors as appropriate.
The Audit Committee shall have the authority to determine the funding necessary for the following purposes, and to receive such amounts from the Company:
- Compensating any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
- Compensating any independent counsel and other advisers employed by the Audit Committee; and
- Defraying administrative expenses of the Audit Committee that necessary or appropriate in carrying out its duties.
The Audit Committee shall prepare each year for inclusion in the Company’s annual proxy statement relating to the election of directors such report regarding its activities and recommendations as may from time to time be required by law, regulation or listing provision.
The Audit Committee will maintain a Post Office Box that is accessible only by the Audit Committee Chair or his/her designee. The purpose of this Post Office Box is to receive confidential communications from employees regarding questionable accounting procedures, internal accounting controls, any other auditing matter or any questionable corporate matter.