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Investor Relations > Audit Committee Charter
1. Membership
1.1 The committee will comprise at least three of the independent members
of the Board from time to time. Other individuals who are independent
of the company may be co-opted as and when appropriate. For these purposes,
no member of the committee will be considered to be independent of the
company unless he satisfies the requirements for independence laid down
by the US SEC and the New York Stock Exchange from time to time.
1.2 Each member of the committee will qualify as independent provided
the Board has determined that that member has met the independence criteria
set out in the company's Corporate Governance Guidelines. Furthermore,
members of the committee must also satisfy the following additional requirements
in order to be independent:
1.3 All members of the committee must be financially literate. At least one member must have accounting or related financial management expertise. To the extent possible, at least one member of the committee must be an "audit committee financial expert" as that term is defined by the SEC.(a) no committee member or immediate family member of such committee member may be an affiliated person of the company or any of its subsidiaries, as that term is defined by the SEC; and
(b) no committee member shall accept, directly or indirectly, any consulting, advisory, or other compensatory fees from the company or any of its subsidiaries, except for fees for services as a director and member of the audit committee and any other board committee.
1.4 The members of the committee will be nominated by the Nomination and Corporate Governance Committee and appointed by a majority of the Board for one-year terms. The Nomination and Corporate Governance Committee will recommend, and the Board will designate, one member of the committee to serve as chairman.
1.5 The members of the committee shall serve until their resignation, retirement, or removal by the Board and until their successors shall be appointed. No member of the committee shall be removed except by majority vote of the independent directors of the full Board then in office.
1.6 In general, no member of the committee may serve simultaneously on the audit committees of more than three public companies without a specific Board determination that such simultaneous service will not impair the ability of such committee member to serve on the committee
1.7 The company secretary or a nominee will be the secretary of the committee.
2. Purpose
2.1 The committee's purposes will be:
2.2 Although the committee has the powers and responsibilities set out in this charter, the role of the committee is one of oversight. The members of the committee are not full-time employees of the company. They may or may not be accountants or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve in that capacity. Consequently, it is not the duty of the committee to conduct audits, or to verify independently management's representations, or to determine that the company's financial statements are complete and accurate, are prepared in accordance with generally accepted accounting principles ("GAAP"), or fairly present the financial condition, results of operations and cash flows of the company in accordance with GAAP. These are the responsibilities of management and the independent auditors.(a) to assist the Board in its oversight of:
(i) the integrity of the company's financial statements;
(ii) the company's compliance with legal and regulatory requirements; and
(iii) the performance of the company's internal audit function;(b) to interact directly with and evaluate the performance of the independent auditors, including determining whether to engage or dismiss the independent auditors and to monitor the independent auditors' qualifications and independence; and
(c) to prepare the report required by the rules of the United States Securities and Exchange Commission (the "SEC") to be included in the company's proxy statement.
2.3 The committee's considerations and discussions with management and the independent auditors do not ensure that the company's financial statements are presented in accordance with GAAP, that the audit of the company's financial statements has been carried out in accordance with generally accepted auditing standards or that the company's auditors are in fact independent.
3.1 The committee will meet formally at least three times each year.
3.2 A meeting of the committee may be called by any member of the committee or by the secretary.
3.3 Notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed will be forwarded to each member of the committee not fewer than five working days before the date of the meeting.
3.4 The quorum for the committee meetings will be a majority of the members of the committee present in person or by an alternate (who must be independent of the company).
3.5 In the absence of the committee chairman and/or an appointed deputy, the remaining members present will elect one of their number to chair the meeting.
3.6 The committee should meet the senior personnel performing the company's internal audit function and management and the external auditors in separate meetings as often as it deems necessary and appropriate in its judgement.
3.7 The committee may request any director, officer or employee (either of it or of Tsakos Energy Management Limited or of Tsakos Shipping & Trading SA) or other persons whose advice is sought by the committee to attend any meeting and provide such information as the committee requests.
3.8 The committee or its chairman will meet the Board at least once a year to discuss such matters as the annual report, the relationship with the external auditors etc.
3.9 The secretary will keep appropriate records of all meetings of the committee with appropriate minutes of the proceedings and resolutions.
3.10 Copies of the minutes of the meetings will be circulated to all members of the committee and to the chairman of the Board; any director may upon request to the secretary of the committee, as long as there is no conflict of interest, obtain copies of the committee's agenda and minutes.
4.1 Financial Reporting Process:
(a) The committee will review and discuss with management and the independent auditors the annual audited financial statements to be included in the company's annual report on Form 10-K, the quarterly financial statements to be included in the company's Form 10-Qs, the company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and any other financial disclosures to be included in SEC filings prior to their release.
(b) The committee will review major issues regarding accounting principles and financial statement presentations; analyses prepared by management and/or the independent auditors setting out significant financial reporting issues and judgments made in connection with the preparation of financial statements; critical accounting estimates; the effect of regulatory and accounting initiatives, as well as off-balance sheet arrangements, on the financial statements; the use of pro forma or non-GAAP financial information; major issues as to the adequacy of the company's internal controls; and any correspondence with regulators, or published reports that raise material issues with respect to, or that could have a significant effect on, the company's financial statements.
(c) The committee will recommend to the Board whether the audited financial statements should be included in the company's Form 10-K.
(d) The committee shall review earnings press releases prior to their release, as well as the types of financial information and earnings guidance provided to analysts and rating agencies.
(e) The committee will prepare the report required by the rules of the SEC to be included in the company's annual proxy statement.
4.2 Risks and Control Environment
(a) The committee will discuss periodically with management the company's policies and guidelines regarding risk assessment and risk management, as well as the company's major financial risk exposures and the steps that management has taken to monitor and control such exposures. In addition, the committee shall periodically obtain from the personnel performing the company's internal audit function their assessments of the company's risk management process and system of internal control.
(b) The committee will review periodically the company's Code of Business Conduct and Ethics, and will have the sole authority to grant waivers of that Code to the company's directors and executive officers.
(c) The committee will meet periodically with the senior personnel performing the internal audit function, the internal legal function, and the independent auditors to review the company's policies and procedures regarding disclosures that may impact the financial statements and compliance which applicable laws and regulations and the company's Code of Business Conduct and Ethics.
(d) The committee will oversee the company's disclosure controls and procedures, including applicable internal controls and procedures for financial reporting, and internal controls relating to the authorisation of transactions and the safeguarding and control of assets, and, where applicable, will oversee the changes in internal controls intended to address any significant deficiencies in the design or operation of internal controls or material weaknesses in them and any fraud involving management or other employees that are reported to the committee. In addition, the committee will review and discuss the annual internal control report of management and the independent auditors' report on, and attestation of, management's evaluation of internal controls and procedures for financial reporting, when those reports are required by SEC rules.
4.3 Independent Auditors
(a) The committee will have the sole authority to retain, set compensation and retention terms for, terminate, oversee, and evaluate the activities of the company's independent auditors. The independent auditors will report directly to the committee. The company will provide for appropriate funding, as determined by the committee, for payment of compensation to the independent auditors.
(b) The committee will review and approve in advance the retention of the independent auditors for the performance of all audit and non-audit services that are not prohibited and the fees for such services. Pre-approval of non-audit services that are not prohibited may be pursuant to appropriate policies and procedures established by the committee for the pre-approval of such non-audit services. In addition, any non-audit services that are approved pursuant to a delegation of authority to a member of the committee must be reported to the full committee at its next scheduled meeting.
(c) The committee will meet with the independent auditors to discuss the planning and staffing of the audit, including the impact of applicable rotation requirements and other independence rules on the staffing before the initiation of the audit.
(d) The committee will, at least annually, obtain and review a report by the independent auditors describing:(i) the independent auditors' internal quality-control procedures;
(ii) 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 or a private sector regulatory board, within the preceding five years, respecting one or more independent audits performed by the firm, and any steps taken to deal with any such issues; and
(iii) in order to assess the firm's independence, all relationships between the firm and the company, consistent with Independent Standards Board No. 1.(e) The committee will review periodically any reports prepared by the independent auditors and provided to the committee relating to:
(i) significant financial reporting issues and judgments including, among other things, the company's selection, application and disclosure of critical accounting policies and practices;
(ii) all alternative treatments, assumptions, estimates, or methods that have been discussed with management, including the ramifications of such treatments and the treatment preferred by the independent auditors; and
(iii) any other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.(f) The committee will discuss with the independent auditors any audit problems or difficulties, including any restrictions on the scope of the independent auditors' activities or on access to requested information and management's response; and any other matters required to be brought to its attention under auditing standards and will resolve any disagreements between the independent auditors and management.
(g) After reviewing the reports from the independent auditors and the independent auditors' work throughout the audit period, the committee will conduct an annual evaluation of the independent auditors' performance and independence, including considering whether the independent auditors' quality controls are adequate. This evaluation also shall include the review and evaluation of the audit engagement team, including the lead partner. In making its evaluation, the committee shall take into account the opinions of management and the senior personnel performing the company's internal audit function.
(h) The committee will present its conclusions concerning the evaluation of the independent auditors to the Board.(i) The committee will set clear policies for the hiring by the company of employees or former employees of the independent auditors.
4.4 Internal Audit Function
(a) The committee will oversee the activities, organisational structure, and qualifications of the persons performing the internal audit function.
(b) The committee will review and approve the appointment and replacement of the senior personnel performing the internal audit function.
(c) The committee will review and approve the annual internal audit plan of, and any special projects undertaken by, the personnel performing the internal audit function and will discuss with them any changes to, and the implementation of, the internal audit plan and any special projects and discuss the results of the internal audits and special projects.
(d) The committee will review any significant reports to management prepared by the internal audit department and management's responses.
4.5 Evaluations and Reports
(a) The committee will review annually and assess the performance of the committee and each committee member and deliver a report to the board setting out the results of its evaluation. In conducting this review, the committee will address matters that it considers relevant to its performance, including at a minimum, the adequacy, appropriateness, and quality of the information and recommendations presented to the Board, the manner in which they were discussed or debated, and whether the number and length of meetings of the committee were adequate for the committee to complete its work in a thorough and thoughtful manner.
(b) The committee will make regular reports to the Board on its activities, including reviewing any issues that arise respecting the quality and integrity of the company's public reporting; its compliance with legal and regulatory requirements; the performance and independence of its independent auditors; the performance of its internal audit department; and the effectiveness of its disclosure controls and procedures.
4.6 Other Matters
(a) The committee will establish procedures for the approval of all related-party transactions involving executive officers and directors.
(b) The committee will establish procedures for:(i) the receipt, retention, and treatment of complaints received by the company regarding accounting, internal accounting controls, or auditing matters; and
(ii) the confidential, anonymous submission by employees engaged in the affairs of the company of concerns regarding questionable accounting or auditing matters.(c) The committee will review and reassess the adequacy of this charter annually and recommend any proposed changes to the Board for its approval.
(d) The committee will maintain free and open communication with the Board, management, the internal auditor, and the independent auditors.
(e) The committee will perform any other activities consistent with this charter, its constitution and the law of Bermuda, as the committee or the Board may deem necessary or appropriate.
5. Authority
5.1 The committee will:
(a) oversee any investigation of activities which are within its terms of reference and act as a court of last resort;
(b) have the right to seek any necessary information to fulfil the duties listed above; and
(c) have the right to obtain outside external professional or other advice and assistance, at the company's expense, which might be necessary for the fulfilment of its duties without prior Board approval.
