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I. Purpose

  1. There shall be a committee of the Board of Directors of Alanco Technologies, Inc. (the "Company"), known as the Audit/Corporate Governance Committee (the "Committee").  The primary purpose of the Committee is to assist the Company's Board of Directors (the "Board") in fulfilling its responsibility to oversee reports and other financial information provided by the Company to governmental or regulatory bodies (such as the Securities and Exchange Commission), the public, and other users thereof, the Company's systems of internal accounting and financial controls, and the annual independent audit of the Company's financial statements.

  2. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company.  If necessary, the Committee is authorized to retain outside counsel, auditors, or other experts and professionals for this purpose.  The Board and the Committee are in place to represent the Company’s stockholders; accordingly, the outside auditors are ultimately accountable to the Board and the Committee.

  3. The Committee shall review the adequacy of this Charter on an annual basis.

 

II. Membership

  1. The Committee shall be comprised of not less than three members of the Board, and the Committee’s composition shall meet all requirements of the Audit/Corporate Governance Committee Policy of the NASDAQ Exchange.

  2. Accordingly, all of the members must be independent directors:

    1. who have no relationship to the Company that may interfere with the exercise of their independence from management and the Company, and

    2. who are financially literate or who become financially literate within a reasonable period of time after appointment to the Committee.  In addition, at least one member of the Committee must have accounting or related financial management expertise.

  3. The members of the Committee should be elected by the Board of Directors at its quarterly meeting held on or near the Corporation’s annual meeting or until their successors shall be duly elected and qualified.  Unless a Chair is elected by the full Board of Directors, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

 

III. Key Responsibilities

  1. The Committee’s job is one of oversight and it recognizes that the Company’s management is responsible for preparing the Company’s financial statements. Additionally, the Committee recognizes that financial management, as well as the outside auditors, has more time, knowledge and more detailed information regarding the Company than do the Committee members.  Consequently, in discharging its oversight responsibilities, the Committee is not providing any experts or special assurance as to the Company’s financial statements or any professional certificates as to the outside auditor’s work.

  2. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine accepted accounting principles.  This is the responsibility of management and the independent auditors.  Nor is it the duty of the Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditors or to assure compliance with laws and regulations and the Company’s policies.

  3. The following functions shall be the common recurring activities of the Committee in carrying out its oversight function.  These functions are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate under the circumstances.

    1. The Committee shall review with management and the outside auditors the audited financial statements to be included in the Company’s Annual report on Form 10-K (or the Annual Report to Shareholders if distributed prior to the filing of Form 10-K) and review and consider with the outside auditors the matters required to be discussed by Statement of Auditing Standards (“SAS”) No. 61.

    2. As a whole, or through the Committee chair, the Committee shall review with the outside auditors the Company’s interim financial results to be included in the Company’s Quarterly Reports on Form 10-Q to be filed with the Securities and Exchange Commission and the matters required to be discussed by SAS No. 61.  Such review shall occur prior to the filing of the Company’s Quarterly Reports on Form 10-Q.

  4. The Committee shall discuss with management and the outside auditors the quality and adequacy of the Company’s internal controls.

  5. The Committee shall:
     
    1. request from the outside auditors annually a formal written statement delineating all relationships between the auditors and the Company consistent with Independence Standards Board Standard No. 1;

    2. discuss with the outside auditors any such disclosed relationships and their impact on the outside auditors’ independence; and

    3. recommend that the Board take appropriate action in response to the outside auditors’ report to satisfy the auditors’ independence.

  6. The Committee shall establish procedures for the “receipt, retention, and treatment of complaints” received by the Company regarding accounting, internal controls and auditing.         
        
  7. The Committee, subject to any action that may be taken by the full Board, shall have the ultimate authority and responsibility to select (or nominate for stockholder approval), evaluate and, wherever appropriate, replace the outside auditors.

 

 

 

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