Audit Committee Charter
This Audit Committee Charter has been adopted by the Board of Directors of FNB Bancorp (the "Company"). The Audit Committee of the Board shall review and reassess this charter annually and recommend any proposed changes to the Board for approval.
The audit committee will be composed of not less than three (3) members of the board of directors. They will be selected by the board of directors, taking into account prior experience in matters to be considered by the committee, probable availability at times required for consideration of such matters, and their individual independence and objectivity.
The committee’s membership will meet the requirements of the audit committee policy of Nasdaq. Accordingly, all of the members will be directors independent of management and free from relationships that, in the opinion of the board of directors, would interfere with the exercise of independent judgment as a committee member.
No officers or employees of the Company or its subsidiaries will serve on the committee. A former officer of the Company or any of its subsidiaries may serve on the committee (even though the former officer may by receiving pension or deferred compensation payments from the Company) if, in the opinion of the board of directors, the former officer will exercise independent judgment and will significantly assist the committee to function. However, a majority of the committee will be directors who were not formerly officers of the Company or any of its subsidiaries.
When considering relationships that might affect independence, including possible affiliate status, the board of directors will give appropriate consideration, in addition to its audit committee policy, to guidelines issued by Nasdaq, which are provided to assist boards of directors in observing the spirit of Nasdaq policy.
The board of directors shall appoint one member of the audit committee to serve as the chairman. The chairman shall be responsible for leadership of the committee, including scheduling and presiding over meetings, preparing agendas and making regular reports to the board of directors. The chairman will also maintain regular liaison with the Chief Executive Officer, the Chief Financial Officer, the lead independent audit partner and the outsource internal audit firm.
Actions of the Committee
The committee’s activities will include the following actions:
- Oversight of the financial statements and relations with the independent auditors.
- Instruct the independent auditors that the board of directors is the client in its capacity as the shareholder's representative.
- Expect the independent auditors to meet with the board of directors at least annually so the board has a basis on which to recommend the independent auditors’ appointment to the shareholders or to ratify its selection of the independent auditors.
- Expect financial management and the independent auditors to analyze significant financial report issues and practices on a timely basis.
- Expect financial management and the independent auditors to discuss with the audit committee:
- Qualitative judgments about whether current or proposed accounting principles and disclosures are appropriate, not just acceptable; and
- Aggressiveness or conservatism of accounting principles and financial estimates.
Expect the independent auditors to provide the audit committee with:
- Independent judgments about the appropriateness of the Company’s current or proposed accounting principles and whether current or proposed financial disclosures are clear;
- Views on whether the accounting principles chosen by management are conservative, moderate, or aggressive as they relate to income, asset, and liability recognition, and whether these accounting principles are commonly used;
- Reasons why accounting principles and disclosure practices used for new transactions or events are appropriate;
- Reasons for accepting or questioning significant estimates made by management; and
- Views on how selected accounting principles and disclosure practices affect shareholder and public attitudes about the Company.
Actions taken on the boards behalf that require board notification but not board approval:
- Review and approve the scope of the Company’s audit and that of its subsidiaries as recommended by the independent auditors and the President;
- Review and approve the scope of the Company’s annual profit and pension trust audits;
- Answer questions raised by shareholders during an annual shareholders’ meeting on matters relating to the committee’s activities if asked to do so by the board of directors’ chairperson; and
- Ask the President to have the outsourced internal audit firm study a particular area of interest or concern to the audit committee.
Matters requiring the committee’s review and study before making a recommendation for the board of directors action:
- Appointment of the independent auditors
- Implementation of major accounting policy changes;
- SEC registration statements to be signed by the board of directors; and
- The auditors reports and financial statements prior to publication in the annual report.
Matters requiring the committee’s review and study before providing summary information to the board of directors:
- Accounting policy changes proposed or adopted by organizations such as the Financial Accounting Standards Board (FASB), the Securities and Exchange Commission (SEC), and the American Institute of Certified Public Accountants (AICPA), or by comparable bodies outside the United States;
- The independent auditor's assessment of the strengths and weaknesses of the Company’s financial staff, systems, controls, and other factors that might be relevant to the integrity of the financial statements;
- Quarterly financial statement review before publication;
- Administration of the Company’s "conflict of interest" policies as may be set by the board of directors from time to time;
- The performance of management and operating personnel under the Company’s code of ethics as may be adopted by the board of directors from time to time;
- Gaps and exposures in insurance programs;
- Reports about the Company or its subsidiaries submitted by agencies of governments in countries in which the Company or it subsidiaries may operate; and
- Periodic SEC filings and the adequacy of programs and procedures to assure compliance with SEC rules and regulations and the rules and regulations of Nasdaq.