Audit
Committee Members
Cerner Corporation Audit Committee Charter
I.
PURPOSE
The Audit Committee (the “Committee”) is appointed by the Board to assist the
Board in monitoring: a) the integrity of the financial statements of the
Corporation; b) the independent registered public accounting firm’s
qualifications and independence; c) the performance of the Corporation’s
internal audit function and independent registered public accounting firm; and,
d) the compliance by the Corporation with legal and regulatory
requirements.
The Committee will primarily fulfill these responsibilities by carrying out the
activities enumerated in Section IV of this Charter. These
responsibilities are in addition to those duties set out for a member of the
Board.
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined by
the Board, each of whom shall be independent directors as defined in: (a) NASD
Rules 4200(a)(15) and 4350(d)(2)(A)(i), and, (b) Section 10A(m)(3) of the
Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and
regulations of the Securities and Exchange Commission (the “Commission”)
adopted thereunder, all as may be amended from time to time.
All members of the Committee shall be capable of reading and understanding
fundamental financial statements, including the Corporation's balance sheet,
income statement and cash flow statement. At least one member of the Committee
shall: (a) have past employment experience in accounting or finance, requisite
professional certification in accounting or any comparable experience or
background which results in the individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities, and,
(b) qualify as an “audit committee financial expert” as defined by the
Commission in Item 401(h)(2) of Regulation S-K, as amended from time to time.
Committee members shall not simultaneously serve on the audit committees of
more than two other public companies unless the Board determines that such
simultaneous service would not impair the ability of such director to serve effectively
on the Committee.
The members of the Committee shall be elected by the Board at the annual
organizational meeting upon the recommendation of the Nominating, Governance
& Public Policy Committee. Unless a Chair is recommended by the Nominating,
Governance & Public Policy Committee and elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
Committee membership.
III. MEETINGS
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 shall meet with representatives of the internal auditing group
and the independent registered public accounting firm in separate executive
sessions. The Committee may request any officer or employee of the Corporation
or the Corporation’s outside counsel or independent registered public
accounting firm to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
IV. RESPONSIBILITIES AND DUTIES
A.
Retention and Oversight of Independent Registered Public Accounting Firm.
The Committee has sole authority and direct responsibility to appoint,
compensate, evaluate, retain, replace and oversee the work of the independent registered
public accounting firm for the purpose of rendering or issuing an audit report
or related work or performing other audit, review or attest services for the
Corporation. The independent registered public accounting firm will report
directly to the Committee and will, in all respects, be accountable to the
Committee. Accordingly, the Committee shall have direct responsibility
to:
i)Select, retain, and if necessary, replace the
Corporation’s independent registered public accounting firm, based upon the
Committee’s review of the independence and effectiveness of the independent
registered public accounting firm.
ii)Approve the fees and other compensation to be paid to the
independent registered public accounting firm and the funding therefor. The
Corporation shall provide for appropriate funding, as determined by the
Committee as a committee of the Board, for payment of compensation to the
independent registered public accounting firm for the purpose of rendering or
issuing an audit report or related work or performing other audit, review or
attest services for the Corporation.
iii)Oversee the work of the independent registered public
accounting firm (including resolution of disagreements between management and
the independent registered public accounting firm regarding financial
reporting) for the purposes of preparing or issuing an audit report or related
work or performing other audit, review or attest services for the Corporation.
iv)Evaluate the qualifications, performance and independence
of the independent registered public accounting firm on an ongoing basis,
including the following:
- consider whether
the provision of permitted non-audit services is compatible with
maintaining the independent registered public accounting firm’s
independence.
- obtain and
review a report from the independent registered public accounting firm at
least annually regarding: (a) the independent registered public accounting
firm’s internal quality-control procedures, (b) any material issues raised
by the most recent internal quality-control review, or peer review, of the
firm, or by any inquiry or investigation by governmental or professional
authorities within the preceding five years respecting one or more
independent audits carried out by the audit firm and (c) any steps taken
to deal with any such issues.
- obtain and
review a formal written statement of the independent registered public
accounting firm prior to its initial enagement, and thereafter, at least
annually, prepared in accordance with applicable requirements of the
Public Accounting Oversight Board ("PCAOB") Rule 3526 (as may be
modified or amended), describing all relationships between the independent
registered public accounting firm or its affiliates, on one hand, and the
Corporation or persons in financial reporting oversight roles at the
Corporation, on the other. Prior to such initial engagement, and
thereafter, following receipt of each such report annually, the Committee
will discuss with the independent registered public accounting firm any
disclosed relationships or services that may impact the objectivity and
independence of the independent registered public accounting firm, and if
so determined by the Committee, will recommend that the Board take
appropriate action to satisfy itself of the independence of the
independent registered public accounting firm. The Committee will
also cause the independent registered public accounting firm to affirm, in
writing, to the Committee that it is independent and in compliance with
PCAOB Rule 3520 and to document the substance of its discussion with the
Committee.
- review and
evaluate the qualifications, performance and independence of the lead
audit partner of the independent registered public accounting firm.
- take into
account the opinions of management and the senior internal auditing
executive.
- consider the
timing and process for implementing the rotation of the lead audit
partner, the concurring partner and any other audit partner subject to
rotation and consider whether there should be a regular rotation of the
audit firm itself.
- present its
conclusions with respect to the independent registered public accounting
firm to the Board for its information at least annually.
- consider, at
least annually, in order to assure continuing registered public accounting
firm's independence, whether the Corporation should change the independent
registered accounting firm.
v)Pre-approve all auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Corporation by
its independent registered public accounting firm, subject to the exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act
which must be approved by the Committee prior to the completion of the
audit. In lieu of pre-approving audit and permitted non-audit services,
the Committee may establish policies and procedures for the engagement of
independent registered public accounting firm to perform such services,
provided that the policies and procedures are detailed as to the particular
service, the Committee is informed of such service, and such policies and
procedures do not include delegation of the Committee's responsibilities to
management.
vi)Recommend to the Board policies for the Corporation’s
hiring of employees or former employees of the independent registered public
accounting firm who participated in any capacity in the audit of the
Corporation.
vii)Engage independent counsel and other advisors as the
Committee determines necessary or advisable to carry out its duties. The
Corporation shall provide for appropriate funding, as determined by the
Committee as a committee of the Board, for payment of compensation to any
advisors employed by the Committee.
B. Financial Disclosure.
In fulfilling its duties and responsibilities, the Committee shall:
i)Review and discuss with management and the independent
registered public accounting firm the Corporation's annual audited financial
statements prior to the filing of such financial statements with the
Commission, including the Corporation's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations.” The
Committee shall review any items communicated by the independent registered
public accounting firm to the Committee in accordance with SAS 61, including
any difficulties encountered in the course of the audit work, any restrictions
on the scope of activities or access to requested information, and any
significant disagreements with management. The Committee shall recommend
to the Board whether the audited financial statements should be included in the
Corporation’s Form 10-K.
ii)Review and discuss with management and the independent
registered public accounting firm the Corporation’s quarterly financial
statements prior to the filing of its Form 10-Q, including the Corporation's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations.” The Committee shall review any items
communicated by the independent registered public accounting firm in accordance
with generally accepted auditing standards.
iii)Prior to the filing of the respective audit report with
the Commission, review with the independent registered public accounting firm
the following items as to which the independent registered public accounting
firm is required to report to the Committee: (a) all critical accounting
policies and practices to be used, (b) all alternative treatments of material
items within generally accepted accounting principles that have been discussed
with management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent registered public
accounting firm, and, (c) other material written communications between the
independent registered public accounting firm and management, including any
management letter or schedule of unadjusted differences.
iv)From time to time as determined by the Committee, and
normally on at least an annual basis, discuss with management and the
independent registered public accounting firm significant financial reporting
issues and judgments made in connection with the preparation of the
Corporation’s financial statements, including: (a) any significant changes in
the Corporation’s selection or application of accounting principles, (b)
analyses prepared by management or the independent registered public accounting
firm setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, and, (c) the
effect of regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Corporation.
v)From time to time as determined by the Committee, review
with the independent registered public accounting firm and management all
material transactions involving related persons or entities, with clear
discussion of arrangements that may involve transaction terms or other aspects
that differ from those which would likely be negotiated with clearly
independent parties.
vi)From time to time as determined by the Committee, review
with the independent registered public accounting firm their judgments about
the quality and appropriateness of the Corporation's accounting principles as applied
to its financial reporting.
vii)Discuss generally with management the Corporation’s
earnings press releases, including the use of “pro forma” or “adjusted”
non-GAAP information, as well as financial information and earnings guidance
provided to analysts and rating agencies. It is not expected that the Committee
shall pre-approve each such release or guidance.
viii)Provide an open avenue of communication among the
independent registered public accounting firm, financial and senior management,
the internal auditing group, and the Board.
C. Oversight of the Corporation’s Internal Audit Function.
In conjunction with the Committee's review of financial statements and
reports, the Committee shall:
i)Oversee the Corporation’s internal auditing group, which
shall report functionally to the Committee and administratively to the CFO.
ii)Review periodically with management the appointment and
performance of the senior internal auditing executive.
iii)Review with management and the independent registered
public accounting firm the adequacy and effectiveness of the Corporation's
financial reporting processes and controls, including: (a) internal controls
and procedures for financial reporting (including any significant deficiencies in
the design or operation of internal controls, any material weaknesses in
internal controls and any fraud, whether or not material, that involves
management or other employees who have a significant role in the internal
controls), and, (b) disclosure controls and procedures.
iv)Review all material reports to management prepared by the
internal auditing group and management’s responses.
v)Discuss with the independent registered public accounting
firm and management the internal auditing group responsibilities, budget and
staffing and any recommended changes in the planned scope of the internal
audit.
D. Ethical and Legal Compliance.In fulfilling its duties and responsibilities, the Committee shall from
time to time, as it determines:
i)Establish, review and update periodically the
Corporation’s Code of Conduct and review management’s controls for
establishing a system to enforce this Code.
ii)To the extent required by the applicable rules of the
NASDAQ Stock Market, the Committee shall review and consider approval of all
related-party transactions.
iii)Discuss with management and the independent registered
public accounting firm any correspondence with regulators or governmental
agencies and any published reports which raise material issues regarding the
Corporation’s financial statements or accounting policies.
iv)Review, with the Corporation's counsel, legal compliance
matters including corporate securities trading policies.
v)Review, with the Corporation's counsel, any legal matter
that could have a significant impact on the Corporation's financial statements.
vi)Establish procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding the Corporation’s
accounting, internal accounting controls or auditing matters, including
procedures for the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or auditing matters.
E. Other Responsibilities.
In fulfilling its duties and responsibilities, the Committee shall:
i)Annually prepare a report to shareholders as required by
the Commission. The report should be included in the Corporation’s annual
proxy statement.
ii)To the extent deemed advisable by the Committee,
periodically review with management the Corporation’s major financial risk
exposures and the steps management has taken to monitor and control such
exposures, including the Corporation’s risk assessment and risk management
policies.
iii)Review and reassess the adequacy of this Charter and
recommend any changes to the Board on at least an annual basis.
iv)Conduct an annual performance evaluation of the
Committee, which may be a part of the annual Board evaluation process conducted
by the Nominating, Governance & Public Policy Committee.
v)Report regularly to the Board regarding its actions and
deliberations.
vi)Perform any other activities consistent with this
Charter, the Corporation's by laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
V. ADDITIONAL MATTERS
A.To the extent permitted by applicable law and the rules of
the NASDAQ Stock Market, as amended from time to time, the Committee may
delegate authority to individual Committee members or such subcommittees as the
Committee deems appropriate and shall review the actions of all such
individuals or subcommittees as appropriate. Without limiting the foregoing,
the Committee may delegate to the Chair the authority to: (i) pre-approve any
engagement for audit services or permitted non-audit services, provided that
the delegation is accomplished in accordance with Section IV.A.(v) hereof, and,
(ii) discuss with the independent registered public accounting firm the matters
required to be discussed under generally accepted auditing standards with
respect to interim financial statements.
B.While the Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Committee: (i) to plan or
conduct audits, or, (ii) to determine that the Corporation's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of management and
the independent registered public accounting firm.
C.The Committee may rely in good faith upon the records of
the Corporation and upon the information, opinions, reports or statements
presented to the Committee by management and the independent registered public
accounting firm. The Committee shall not be required to verify any such
information unless in the Committee’s good faith judgment the circumstances
justify such verification.
D.The Committee may conduct or authorize investigations
into any matters within the scope of this Charter.
Adopted
by the Audit Committee and Board on Directors on March 10, 2000,
Revised by the AC and Board on April 11, 2003; May 26 & 27, 2005, May
22 & 23, 2008 and December 9 & 10, 2008