Investor Relations

 

 

Commercial Bancshares, Inc. and Affiliates

Audit Committee Charter

 

Adopted by the Board of Directors on November, 2011.

 

            The Audit Committee (“Committee”) shall provide assistance to the Board of Directors of Commercial Bancshares, Inc. and its affiliated companies (collectively the “Company”) in fulfilling certain of the Board’s oversight responsibilities. The Board hereby adopts this Charter to establish the governing principles of the Committee.

 

I.          PURPOSE

 

            The primary function of the Committee is to serve as an independent and

objective party to assist the Board in fulfilling its oversight responsibilities, except those that are specifically related to the responsibilities of another committee of the Board, by overseeing and monitoring:

 

            1.         The quality and objectivity of financial reports and other financial

information provided by the Company to any governmental body or the public and the independent audit thereof.

2.         The Company’s system of internal controls regarding finance, accounting and regulatory compliance.

3.         Material aspects of the Company’s accounting and financial reporting process generally.

4.         The independence and performance of the Company’s independent accountants.

            5.         Compliance by the Company with legal and regulatory requirements.

            6.         Performance of the Company’s internal audit function.

 

The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section II of this Charter.

 

II.        RESPONSIBILITIES AND DUTIES

 

A.                General Responsibilities

 

To carry out its purposes, the responsibilities of the Committee shall be as follows:

 

1. Retain, compensate, and oversee any registered public accounting firm engaged

 for the purpose of preparing or issuing an audit report or

 performing any other audit, review, or attestation service for the Company.

 Although Company management will be involved in the selection process, the

 Committee shall have the ultimate authority and responsibility to select, evaluate

 and replace the independent auditor. The Committee shall also establish

 procedures for the pre-approval of all non-audit services provided by the

 Company’s independent auditors.

 

2. In discharging its duties hereunder, the 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 Committee, for payment of compensation to the independent accountants for the purpose of rendering or issuing an audit report and to any advisors employed by the Committee.

 

3. At least annually, review with the independent auditor the auditor’s internal

 control procedures, including any material issues raised in the most recent

 quality control  review, peer review or investigation conducted by any

 governmental or  professional authority.

 

4. The Committee shall review, at least annually, the committee’s charter and

 recommend any proposed changes to the Board for approval. The Committee

 shall conduct, and report to the Board the results of, and annual performance

 evaluation of the Committee, which evaluation shall compare the performance of

 the committee with the requirements of this charter.

 

5. The Committee shall report regularly to the Board, including review of any

 issues that arise with respect to the quality or integrity of the company’s financial

 statements, compliance with legal or regulatory requirements, or the performance

 and independence of the independent registered public accounting firm.

 

6. The Committee shall establish procedures for the receipt, retention, and

 treatment of complaints received by the Company regarding accounting, internal

 accounting controls, or auditing matters. Procedures shall also be developed for

 the confidential, anonymous submission by Company employees of concerns

 regarding questionable accounting or auditing matters.

 

7. Prior to commencement of each annual audit of the Company, meet and review

 with the independent auditor the scope of their audit procedures to be provided to

 the Company. Consider the need for expansion of the audit into areas of

 particular concern to the Board.

 

8. The Committee shall prepare the Audit Committee report required for inclusion

 in the Company’s annual proxy statement.

 

9. Maintain open communications with the independent accountants, management

 and the Board. Resolve any disagreements between Company management and

 the independent auditor regarding financial reporting.

 

10. Require the independent accountant to annually deliver to the Committee a

formal written statement delineating all relationships between the independent accountants and the Company and addressing at least the matters set forth in Independence Standards Board Standard No. 1 to help determine whether such relationships would impact the objectivity and independence of the Company’s independent accountants.

 

11. The Committee shall set clear hiring policies for employees or former

employees of the independent accounting firm and for audit partner rotation in compliance with applicable laws and regulations. The Committee shall consider whether, in order to ensure continuing auditor independence, there should be a regular rotation of the independent accounting firm.

 

12.Take any other actions required of the Committee by law, applicable

regulations, or the Board.

 

B.                 Financial Reporting and Internal Controls

 

1.      Review and discuss with management and the independent accounting firm

the Company’s annual financial statements and the independent accountant’s opinion rendered with respect to such financial statements.

 

2. Review the interim financial information and disclosures before the filing of

 the quarterly reports on Form 10-Q with the Securities and Exchange

 Commission and discuss such with management of the Company and the

 independent accounting firm. The chair of the Committee may represent the

 entire Committee for purposes of this discussion with management and the

 independent accountants.

 

3. Discuss with the independent accounting firm the matters required by SAS 61,

and an explanation from the independent accountant of the factors considered by

the independent accountant in determining the audit’s scope. The independent

accountant should confirm that no limitations have been placed on the scope or

nature of the audit.

 

4. Receive and review any disclosure from the Company’s CEO or CFO made in

connection with the certification of the Company’s quarterly and annual reports

filed with the SEC of (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, and report financial data; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

 

5. Review the audit and management internal control reports rendered by the independent accountant or internal audit with particular concern for any qualifications or significant findings noted in their reports. Ascertain that Company management has replied to issues raised in such reports and obtain satisfaction that corrective action is taken when deemed necessary.

 

6. Request the independent accountants to confirm that they are accountable to the

Committee and that they will provide the Committee with timely analyses of significant financial reporting and internal control issues.

 

7. The Committee shall receive and review communications and presentations on significant operating and control issues in internal audit reports, management letter, and regulatory authorities’ examination reports, and on the initiation and status of significant special investigations; and initiate such other inquiries into the affairs of the Company as it deems necessary or appropriate.

 

8. The Committee shall determine the adequacy and effectiveness of accounting

and financial controls within the Company and elicit any recommendations for any areas in which new or more detailed control procedures are desirable. Particular emphasis should be given to reviewing the adequacy of such controls in the areas of ethical conduct and conflicts of interest, regulatory requirements, and financial reporting procedures.

 

9. The Committee shall discuss with the independent auditor their judgments about the quality of the Company’s accounting principles as applied in its financial reporting, including matters relating to the consistency of application of the Company’s accounting policies and the clarity, consistency, and completeness of the accounting information contained in the financial statements and related disclosures.

 

10. The Committee shall discuss with the independent auditor any significant

difficulties or disputes with management encountered during the course of the

audit.

 

11.  Obtain from the independent accountants assurance that Section 10A(b) of the

Exchange Act has not been implicated.

 

     III.         INTERNAL AUDIT

 

1.      Review and concur in the appointment, replacement, or dismissal of the Director of Internal Audit, or any vendor providing internal audit services.

 

2.      Establish the duties and responsibilities of the Director of Internal Audit and provide oversight for the Internal Audit function.

 

3.      Approve the risk assessment methodology and scope of the annual Internal Audit plan of the Company for the ensuing year and concur with significant changes in planned activities. Consider the need for expansion of audits into areas of particular concern to the directors.

 

4.      Periodically review the adequacy of Internal Audit resources and the performance of the Director of Internal Audit and any vendor performing Internal Audit services.

 

5.      Periodically review Internal Audit reports, including management’s responses, or summaries thereof.

 

6.      Periodically review the follow-up of significant Internal Audit, External Audit, and regulatory findings. To ensure that all such findings are addressed in a sufficient and timely manner, a log shall be maintained that reflects these findings, along with any follow-up efforts and an assignment of responsibility for addressing the finding. This log shall be maintained by employee(s) of the Company, as designated by the Committee.

 

7.      Provide an open avenue of communication between the independent auditor, Internal Audit, and the Board in order to maintain their independence from management of the Company and assist them in performing their respective functions.

 

8.      Periodically review and update the Company’s Internal Audit Policy as necessary.

           

IV.             COMMITTEE MEMBERSHIP AND MEETINGS

 

A. Membership

 

The Committee shall be comprised of three or more directors as determined by the Board, each of whom:

 

1.         Shall be independent directors, and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. It shall be the responsibility of each director to immediately disclose to the Committee chairman any relationship that, either in fact or in appearance, might impact the independent judgment of the director in their service as a member of the Committee.

 

2.         Shall have a basic understanding of finance and accounting practices and

      shall be able to read and understand financial statements. Committee

      members may enhance their familiarity with finance and accounting by

      participating in educational programs conducted by the Company or an

      outside consultant.

 

            At least one member of the Committee shall have past employment

experience in finance or accounting, requisite professional certification in

            accounting, or any other comparable experience or background that results

            in the individual’s financial sophistication.

 

The members of the Committee shall be elected by the Board annually or until their successors shall be duly elected and qualified. Unless a Chairman is elected by the full Board, the members of the Committee may designate a Chairman by majority vote of the full Committee membership.

 

B. MEETINGS

 

The Committee shall meet at least four times each year, or more frequently as circumstances require. The Chairman of the Committee may call a Committee meeting whenever deemed necessary and shall be responsible for meeting with the independent accountants at their request to discuss the interim financial results.