CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF WINLAND ELECTRONICS, INC.
I. PURPOSE
The primary function of the Audit Committee
of Winland Electronics, Inc. (the “Company”) is
to provide oversight by reviewing the financial reports and
other financial information provided by the Company to any
governmental body or the public; the Company’s systems
of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established;
and the Company’s auditing, accounting and financial
reporting processes generally. Consistent with this function,
the Committee should encourage continuous improvement of,
and should foster adherence to, the Company’s policies,
procedures and practices at all levels. The Committee’s
primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor
the Company’s financial reporting process and internal
control system.
- Coordinate, review and appraise the audit efforts of
the Company’s independent accountants.
- Communicate directly with the independent accountants,
the financial and senior management, and the Board of Directors
regarding the matters related to the Committee’s responsibilities
and duties.
The Committee will primarily fulfill these responsibilities
by carrying out the activities enumerated in Section III of
this Charter.
II. MEMBERSHIP
The Committee shall be comprised of three or
more directors elected by the Board, each of whom shall be
independent (as such term is defined by applicable laws and
regulations or the Company’s corporate governance policies,
if any). Committee members shall serve until the next annual
organizational meeting of the Board, or until their successors
are duly elected and qualified. The Chair of the Committee
shall be elected by the Board. In the absence of the election
of a Chair by the Board, the members of the Committee shall
elect a Chair by majority vote of the Committee membership.
In addition, no member of the Audit Committee shall receive
any compensation whatsoever from the Company other than compensation
paid to such member as a director of the Company and member
of one or more committee of the Company’s Board of Directors.
All Committee members shall have a working familiarity
with basic finance and accounting practices and shall be able
to read and understand financial statements at the time of
their appointment to the Committee. At least one member of
the Committee shall be a “financial expert,” as
such term is defined in applicable securities laws and regulations.
III. RESPONSIBILITIES AND DUTIES
Documents/Reports Review
- Review and update this Charter periodically,
at least annually, as conditions and applicable laws and
regulations dictate.
- Review the Company’s annual financial
statements and any reports or other financial information
submitted to any governmental body, or the public, including
any certification, report, opinion or review rendered by
the independent accountants or management.
- Review with financial management and the
independent accountants any release of earnings prior to
its issuance and any Form 10-QSB or 10-KSB prior to its
filing.
Independent Accountants
- Appoint, compensate and oversee the Company’s
independent auditors. The Company’s independent auditors
shall report directly to the Committee. On an annual basis,
the Committee should review and discuss with the accountants
all significant relationships the accountants have with
the Company to determine the accountants’ independence.
- Review the performance of the independent
accountants and discharge the independent accountants when
circumstances warrant.
- Periodically consult with the independent
accountants out of the presence of management regarding
the adequacy of internal controls and the fullness and accuracy
of the Company’s financial statements.
- Pre-approve all audit services and non-audit
services to be performed by the Company’s independent
auditors.
- Discuss with the independent auditors the
matters required to be discussed by SAS 61, as may be modified
or supplemented.
- Obtain and review the written disclosures and the letter
from the independent accountants required by Independence
Standards Board Standard No. 1 (Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees),
as may be modified or supplemented.
Audit Committee Report
- The Audit Committee shall prepare the annual
Audit Committee Report required by Item 306 of Regulation
S-B of the Exchange Act of 1934 (or any successor provision)
to be included in the Company’s annual proxy statement.
Related-Party Transactions
- Review and approve all related-party transactions to which
the Company may be a party prior to their implementation
to assess whether such transactions meet applicable legal
requirements.
- Review on at least an annual basis the expense reimbursements
of officers and directors.
Financial Reporting Processes
- In consultation with the independent accountants
and management, review the integrity of the Company’s
financial reporting processes, both internal and external.
- Consider and revise, if appropriate, the
Company’s auditing and accounting principles and practices.
- Consider the adequacy of the financial and
accounting staff.
Ethical and Legal Compliance
- Review periodically the Company’s Code
of Ethical Conduct applicable to senior financial officers
and management’s enforcement of the Code as it relates
to the Company’s financial reporting process and internal
control system.
- Ensure that management has the proper review
system in place to ensure that the Company’s financial
statements, reports and other financial information disseminated
to governmental organizations and the public satisfy legal
requirements.
- Review, with the Company’s counsel,
any legal matter that could have a significant impact on
the Company’s financial statements.
- Establish and maintain procedures for efficiently
responding to complaints received by the Committee regarding
accounting, internal accounting controls and auditing. At
a minimum, these procedures shall allow employees to submit
concerns regarding questionable accounting and auditing
matters on a confidential, anonymous basis.
- Perform any other activities consistent
with this Charter, the Company’s Bylaws and governing
law, as the Committee or the Board deems necessary or appropriate.
IV. AUTHORITY
The Audit Committee shall
have the authority as and when it shall determine to be necessary
or appropriate to the functions of the Audit Committee, to:
- At the expense of the Company, to consult
with the Company’s outside legal counsel and other
advisors or to engage independent consultants and advisors,
including legal and financial advisors, to assist it with
its functions;
- To request from the Chief Executive Officer,
the Chief Financial Officer and such other members of Company
management as the Committee shall deem appropriate advice
and information, orally or in writing, concerning the Company’s
business operations and financial condition relevant to
the functions of the Committee.
V. MEETINGS AND MINUTES
The Committee shall meet at least four times
annually, or more frequently as circumstances dictate. As
part of its job to foster open communication, the Committee
should meet periodically with management and the independent
accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups believe
should be discussed privately.
The Audit Committee will maintain written minutes
of its meeting. Such minutes will be provided to the Board
of Directors, and filed with the minutes of the meetings of
the Board of Directors.
VI. MANAGEMENT COOPERATION
Management of the Company is requested to cooperate
with the Audit Committee, and to render assistance to the
Audit Committee as it shall request in carrying out its functions.
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