AUDIT AND RISK COMMITTEE CHARTER
The Audit and Risk Committee (Committee) is established by the Board of Directors (Board) of AirXpanders, Inc. (AirXpanders). This Charter governs the operations of the Committee and sets out the membership, operation and responsibilities of the Committee.
The purpose of the Committee is to assist the Board in fulfilling its responsibilities in relation to AirXpanders’:
- financial reports;
- financial reporting processes;
- audit processes;
- risk management systems (financial and non-financial); and
- compliance framework.
However, the Board retains ultimate responsibility for each of these matters, despite the delegations to the Committee.
2 Membership of the Committee
The Committee should ideally consist of:
- only non-executive directors;
- a majority of independent directors;
- an independent chair, who is not Chairman of the Board; and
- a minimum of three members.
Subject to the qualifications in ASX Listing Rule 12.7, if AirXpanders is included in the S&P/ASX 300 index at the beginning of AirXpanders’ financial year, the composition of the Committee must satisfy the requirements above. However, as a relatively small company (amongst those listed on the ASX), AirXpanders may face particular issues in ensuring that the ideal composition for the Committee (as set out above) is met. While AirXpanders will aim for the Committee to meet that ideal composition, this may not always be possible, particularly while the operations of the AirXpanders group are at the development and early commercialisation stage.
The Committee will appoint the Committee Chairman from one of its number.It is intended that all members of the Committee must have familiarity with financial management and be able to read and understand financial statements. At least one Committee member must be a qualified accountant or otherwise have expertise in financial accounting and reporting. Some (ideally all) members of the Committee should have an understanding of the industry in which the AirXpanders group operates.
2.2 Appointment and term
The members of the Committee will be determined by the Board having regard to section 2.1 of this Charter. There is no prescribed term for membership. Membership of the Committee ceases when a member ceases to be a director of AirXpanders.
The Board may appoint additional directors to the Committee or remove and replace members of the Committee by resolution. Members may withdraw from membership by written notification to the Board.
3 Administrative matters
The Committee will meet as often as necessary to undertake its role effectively, but must meet at least quarterly. The quorum necessary for a meeting of the Committee will be two members.
The Company Secretary must, on request from any Committee member, convene a meeting of the Committee. Notice must be given to every Committee member of every Committee meeting but there is no minimum notice period. Acknowledgment of receipt of notice by all members is not required before the meeting may be validly held. Members of management may attend meetings of the Committee at the invitation of the Committee Chairman, but other than executive directors, must not be appointed members of the Committee.
3.2 Access and external engagement
The Committee has rights of access to management and to auditors without management present and rights to seek explanations and additional information.
The Committee may, upon notifying the Chairman of the Board, seek the advice of AirXpanders’ auditors or solicitors (at the cost of AirXpanders) as to any matter pertaining to the powers or duties of the Committee.
The Committee may, with the prior approval of the Chairman, instruct the Chief Executive Officer to engage such other independent advisers in relation to any matter pertaining to the responsibilities of the Committee, as the Committee may require.
3.3 Agenda and minutes
The Company Secretary will:
- attend all Committee meetings as minute secretary;
- in conjunction with the Chairman of the Committee, prepare an agenda to be circulated to each Committee member before each meeting of the Committee;and
- prepare minutes of each Committee meeting.
Normally, a Committee meeting will be held immediately before a Board meeting. There will be included in the Board papers for the Board meeting following a meeting of the Committee, the minutes of the previous Committee meeting (except to the extent that there is a conflict of interest affected by doing so) . The Committee Chairman will provide a brief oral report at the Board meeting as to any material matters arising out of the immediately preceding Committee meeting, including all material audit, financial reporting, internal control, risk management and compliance matters. All directors will be permitted, within the Board meeting, to request information of the Committee Chairman or members of the Committee.
5.1 Financial reporting
The Committee is responsible for:
- reviewing the annual and half yearly financial stateme nts and any accompanying reports with management and the external auditor and if considered appropriate, to recommend their approval to the Board;
- assisting the Board in determining the reliability and integrity of accounting policies and financial reporting and disclosure practices;
- monitoring compliance with applicable accounting standards and other requirements relating to the preparation and presentation of financial results;
- reviewing the appropriateness of the accounting principles adopted by management in the preparation of financial reports and to make recommendations to the Board regarding any changes in the accounting principles to be applied in preparing AirXpanders’ financial reports;
- reviewing with management any significant accounting and financial reporting issues raised by the external auditor; and
- discussing with management any significant movements in the financial statements between periods and from budget.
5.2 External auditing
The Committee is responsible for:
- making recommendations to the Board in relation to:
- The appointment, reappointment or replacement of the external auditor and the managing partner of the external auditor;
- the remuneration and other contractual terms of the external auditor; and
- The effectiveness and independence of the external auditor;
- discussing with the external auditor the overall scope of the external audit, including materiality levels and identified risk areas and making recommendations to the Board in connection with those matters;
- resolving disagreements between management and the external auditor regarding financial reporting;
- ensuring that any significant findings and recommendations made by the external auditor are received and discussed by the Committee on a timely basis;
- reviewing, agreeing and approving the annual audit plan for the AirXpanders group (including a review of the risk management and internal compliance and control systems);
- setting the policy on the provision of non-audit services and ensuring compliance with that policy;
- providing advice to the Board as to whether the Committee is satisfied that the provision of non-audit services is compatible with the general standard of independence, and if applicable, an explanation of why those non-audit services do not compromise audit independence, in order for the Board to assess whether it is in a position to make the statements required to be included in the financial statements and annual report of the AirXpanders group; and
- establishing procedures for the consideration of any complaints received from within the AirXpanders group regarding accounting, internal control and auditing matters.
5.3 Risk management
The Committee is responsible for:
- overseeing the establishment, methodology and implementation of the AirXpanders group’s risk management system and its resourcing, including processes to ensure that there is:
- an adequate system of internal control, containment and management of business risks and safeguard of assets; and
- a review of internal control systems and the operational effectiveness of the policies and procedures related to risk and control;
- reviewing trends in AirXpanders group’s risk profile;
- evaluating the adequacy and effectiveness of the management reporting and control systems used to monitor adherence to policies and limits approved by the Board for management of balance sheet risks;
- evaluating the adequacy and effectiveness of the AirXpanders group’s financial and operational risk management control systems by reviewing reports from management and external auditors;
- evaluating the structure and adequacy of the AirXpanders group’s insurance policies on an annual basis;
- evaluating the AirXpanders group’s exposure to fraud and overseeing investigations of allegations of fraud or other breakdowns in internal controls;
- reviewing the risk management framework at least annually to assess whether it continues to be sound;
- reviewing and approving all transactions in which AirXpanders is a participant and in which parties related to AirXpanders, including executive officers, directors, and certain other persons whom the board determines may be considered related parties of AirXpanders (for the purposes of Chapter 2E of the Corporations Act), have or will have a material direct or indirect interest; and
- reporting to the Board on the matters above, including specific material risks identified.
The Committee’s specific function with respect to compliance is to review and report to the Board regarding the appropriateness of the AirXpanders group’s compliance procedures, including:
- reviewing the procedures the AirXpanders group has in place to ensure compliance with laws and regulations that are material to the AirXpanders group, including any specific compliance requirements under the terms of any regulatory approvals granted in connection with the business of AirXpanders;
- reviewing compliance reports prepared by management in relation to the AirXpanders group’s compliance with legal or regulatory requirements;
- obtaining regular updates from management regarding any material litigation involving any member of the AirXpanders group; and
- reviewing any material recommendations by regulatory agencies in relation to compliance with laws or regulations applying to any member of the AirXpanders group.
5.5 Other Areas of Responsibility
The Committee is also responsible for:
- Periodically reviewing matters pertaining to AirXpander’s investment practices for cash management, foreign exchange, investments, and derivatives, including reviewing and approving the Investment Policy related to cash management.
6 Review of performance
The Committee will periodically undertake an evaluation of its performance. The Board may evaluate the performance of the Committee as appropriate.
7 Review of this charter
The Board will periodically review this Charter to determine its adequacy. Approved by the Board of Directors of AirXpanders, Inc.