CHARTER OF THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS OF ALLEGION PUBLIC LIMITED COMPANY
The Audit and Finance Committee is appointed by the Board of Directors to assist the Board in fulfilling its responsibilities to the shareholders and the investment community with respect to its oversight of the:
- Integrity of the Company’s financial statements, including its accounting policies and financial reporting and disclosure practices.
- Adequacy of the system of internal controls within the Company to support the financial and business environment.
- Management of the Company’s financial resources and major financial strategies and transactions.
- Company’s processes to assure its compliance with all applicable laws, regulations and corporate policy.
- Qualification and independence of the Company’s independent auditors.
- Performance of the Company’s internal audit function and independent auditors.
The Committee shall be comprised of three or more directors, each of whom shall be independent and, as determined by the Board consistent with New York Stock Exchange guidelines, free from any relationship that would interfere with the exercise of his or her independent judgment as a member of the Committee.
Each member of the Committee shall be financially literate as determined by the Board in its business judgment, and at least one member of the Committee shall be an “audit committee financial expert” as defined by the Securities and Exchange Commission.
The Committee shall meet as often as it determines necessary to carry out its responsibilities, but not less frequently than quarterly. The Committee shall meet separately and periodically with management, including the chief financial officer, chief compliance officer, the internal auditors and the independent auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Committee deem appropriate.
The Committee shall have the authority to delegate to the Chair of the Committee or a subcommittee any of its responsibilities in this charter, including, in particular, those set forth in paragraphs 3 and 14 below.
The Committee shall have the authority to retain special legal, accounting or other consultants to advise the Committee. The Company will provide for such funding as the Committee deems appropriate for the payment of compensation to the Company’s independent auditors and any special legal, accounting or other consultants retained by the Committee. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
The Committee shall:
- Meet to review and discuss with management and the independent auditors the Company’s annual audited financial statements and quarterly financial statements prior to their public dissemination, as well as the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company’s critical accounting policies and practices, and alternative treatments within generally accepted accounting principles relating to material items. Such review shall include a discussion of significant issues regarding the accounting and auditing principles and practices (and the resolution of any disagreements between management and the independent auditors), as well as the adequacy of the internal controls and a review of any certifications being issued in respect of such statements by senior executives of the Company.
- Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit or review of the quarterly financial statements as included in the Company’s Forms 10-Q.
- Review and discuss with management and the independent auditors the Company’s earnings press releases as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee Chair will review and discuss in advance each quarterly earnings release or provision of earnings guidance. The other Committee members may participate at their option in these discussions.
- Consider and approve the Company’s annual financing plan, including its projected capital structure and funding requirements.
- Consider and recommend for approval by the Board of Directors the Company’s external dividend policy and dividend payments.
- Consider and recommend for approval by the Board of Directors the repurchase of the Company’s stock.
- Consider and recommend for approval by the Board of Directors a) issuances of equity and/or debt securities; or b) authorizations for other financing transactions, including bank credit facilities.
- Consider and approve, if appropriate, major changes to the Company’s auditing and accounting principles and practices as recommended by the independent auditors, management or the internal auditing department.
- Review significant accounting and reporting issues, including recent professional and regulatory pronouncements.
- Recommend to the Board of Directors the nomination of the independent auditors for shareholder approval in accordance with Irish law.
- Review, at least annually, the qualifications and performance of the independent auditors. In conducting its review and evaluation, the Committee shall obtain and review a report from the independent auditing firm describing (a) the firm’s internal quality control procedures; (b) any material issues raised by the most recent internal quality control or peer review of the firm, or by any inquiry or investigation within the preceding five years by governmental or professional authorities, respecting one or more independent audits carried out by the firm; and (c) any steps taken to deal with any issues raised by such review, inquiry or investigation. Based on such review, and taking into account the opinions of the management and the Company’s senior internal audit executive, the Committee should consider whether there should be a rotation of the lead audit partner or the audit firm itself.
- Review and discuss with the independent auditors, in order to satisfy itself as to their independence, all relationships that would reasonably be thought to bear on the objectivity and independence of the independent auditors. Ensure the receipt of the independent auditors’ annual independent statement.
- Review with the independent auditors and financial management of the Company in advance and approve all auditing services to be performed by the independent auditors, including the scope, staffing and, subject to prior delegation from the shareholders, the fees of the independent auditors to be incurred in connection with the proposed audit for the current year and, at the conclusion of such audit, review such audit including any comments or recommendations of the independent auditors.
- Approve in advance, subject to and in accordance with applicable laws and regulations, non-audit services and related fees to be performed by the independent auditors.
- Set clear hiring policies for employees or former employees of the independent auditing firm.
- Discuss with management and the independent auditors the Company’s policies with respect to risk assessment and risk management and consider and approve the Company’s financial risk management activities, including the areas of foreign exchange, commodities, interest rate exposures, insurance programs and customer financing risks.
- Consider and approve the Company’s policy for investment of excess cash.
- Obtain and review periodic reports of the investment performance of the Company’s pension and savings benefit plans.
- Obtain and review periodic reports, at least annually, from management assessing the effectiveness of the Company’s internal controls and procedures for financial reporting, including reports on (a) all significant deficiencies or material weaknesses in the design or operation of internal controls; and (b) any fraud, whether or not material, that involves management or other employees having a significant role in internal controls.
- Obtain from management annually, as required by law, a report on internal controls, which shall (a) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and (b) contain management’s assessment, as of the end of the most recent fiscal year, of the effectiveness of the internal control structure and financial reporting procedures.
- Obtain from the independent auditors an attestation to (and a report on) the assessment made by management in 20 above.
- Review the Company’s disclosure controls and procedures and management’s assessment of them.
- Review and reassess the adequacy of this Charter and the Audit Services Charter annually or more often as conditions dictate, and recommend proposed changes to the Board.
- Review with the chief compliance officer: (1) the ethics and compliance metrics approved by the committee (2) the chief compliance officer’s annual report on the Company’s overall ethics and compliance program and (3) the Company’s periodic ethics and compliance risk assessment.
- Review procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
- Review with the General Counsel any legal matters, including litigation and regulatory matters, which could have a significant impact on the Company’s financial statements.
- Review periodically (at least annually) with the senior tax executive all tax matters affecting the Company’s financial performance.
- Review periodically (at least annually) the internal audit organization and the objectives and scope of the internal audit function and examinations.
- Review the appointment and replacement of the senior internal auditing executive and establish and maintain a direct reporting relationship with such executive.
- Establish and maintain a direct reporting relationship with the chief compliance officer.
- Cause to be issued the report of the Committee required by the rules of the Securities and Exchange Commission to be included in the Company’s annual general meeting proxy statement.
- Report to the Board all significant issues discussed and make recommendations to be acted upon by the Board.
- Conduct an annual evaluation of the performance of the Committee.
- Perform any other activities consistent with this Charter, the Company’s Articles of Association and governing law, as the Committee or the Board deems necessary or appropriate.
Adopted by Board – December 4, 2014