The purpose of the Audit Committee (the "Committee")
of the Board of Directors (the "Board") of Vector
Group Ltd. (the "Company") is provide assistance to
the Board in fulfilling its responsibility relating to oversight
of corporate accounting, reporting practices of the Company,
the quality and integrity of the financial reports of the Company,
the Company's compliance with legal and regulatory requirements,
the qualifications and independence of the Company's independent
auditors and the performance of the Company's independent auditors
and internal audit function. In so doing, the Committee shall
maintain free and open means of communication between the directors,
the independent auditors, the internal auditor and the financial
management of the Company.
The Committee shall be composed of at least three directors
who are independent of the management of the Company and are
free of any relationship that, in the opinion of the Board,
would interfere with their exercise of independent judgment
as Committee members.
All members of the Committee shall have a working familiarity
with basic finance and accounting practices and shall meet the
independence, experience and expertise requirements of the New
York Stock Exchange and other applicable laws and regulations
(including SEC Rule 10A-3). At least one member of the Committee
shall have accounting or related financial management expertise
as defined by the Securities and Exchange Commission (the "SEC")
or, in the business judgment of the Board, be capable of serving
the functions expected of such an audit committee financial
expert.
Members of the Committee shall be appointed by the Board, and
shall serve at the pleasure of the Board and for such term or
terms as the Board may determine.
The 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 on the Committee,
and discloses this determination in the Company's annual proxy
statement.
The Board shall designate one member of the Committee as its
Chair. The Committee shall meet in person or telephonically
with management at least four times a year at a time and place
determined by the Committee Chair, with further meetings to
occur, or actions to be taken by written consent, when deemed
necessary or desirable by the Committee or its Chair.
As part of its objective to foster open communication, the
entire Committee shall meet at least annually with management,
the internal auditor and the independent auditors at the conclusion
of the annual audit in separate executive sessions. Among the
items to be discussed with the independent auditors is their
evaluation of the Company's financial, accounting and auditing
personnel and the cooperation that the independent auditors
received during the course of the audit.
The Committee shall meet with the independent auditors and
management quarterly, prior to the release of earnings and the
filing of the Form 10-K and Form 10-Q.
The Committee shall have the ultimate authority and responsibility
to directly appoint, retain, compensate, evaluate and terminate
the independent auditors (subject, if applicable, to stockholder
ratification). The Committee shall approve in advance all audit
engagement fees and terms and all non-audit engagements of the
independent auditors. The Committee shall consult with management,
but shall not delegate these responsibilities. The independent
auditors shall report directly to the Committee.
In carrying out its responsibilities, the Committee believes
its policies and procedures should remain flexible, in order
to best react to changing conditions and to help ensure to the
directors and stockholders that the corporate accounting and
reporting practices of the Company are in accordance with all
requirements and are of high quality.
The Committee, to the extent it deems appropriate, shall:
Financial Statement and Disclosure Matters
- Review and discuss the annual audited financial statements,
including disclosures made in management's discussion and
analysis of financial condition and results of operations,
with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure
and content of the financial statements and management's discussion
and analysis to be presented to the stockholders. Any significant
changes in the Company's selection or application of accounting
principles should be reviewed. The Committee shall then recommend
to the Board whether the audited financial statements should
be included in the Company's Form 10-K
- Review and discuss with management and the independent
auditors the Company's quarterly financial statements prior
to the filing of its Form 10-Q, including the results of the
independent auditors' review of the quarterly financial statements.
- Discuss with management and the independent auditors prior
to the filing of the Form 10-K and Form 10-Q significant financial
reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including
analyses of the effects of alternative methods within generally
accepted accounting principles on the financial statements.
- Discuss with management and the independent auditors all
significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability
to record, process, summarize and report financial data, and
any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls.
- Discuss with management and the independent auditors the
Company's significant financial risks or exposures and consider
the steps management has taken to monitor and control such
risks to the Company.
- Review, with the Company's counsel, any legal matters that
would reasonably be expected to have a significant impact
on the Company's financial statements.
- Review, with management and the independent auditors, the
effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements
of the Company.
- Discuss generally the Company's earnings press releases,
including the type and presentation of information to be included,
as well as the financial information and any earnings guidance
provided to analysts in quarterly conference calls and to
rating agencies.
Internal Controls
- Consider with the independent auditors and financial and
accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and elicit
any recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed
controls or procedures are desirable. These controls shall
provide reasonable assurance of the integrity of financial
information and assurance that the Company's reported financial
results are presented fairly in conformity with generally
accepted accounting principles. Particular emphasis should
be given to the adequacy of such internal controls to expose
any payments, transactions or procedures that are illegal
or otherwise improper. The Committee should consider and review
any related significant findings and recommendations of the
independent auditors and management's responses thereto.
Independent Auditors
- Arrange to have the independent auditors report directly
to the Committee.
- Review the independent auditors' proposed audit scope and
approach.
- Obtain a formal written statement on a periodic basis from
the independent auditors delineating all relationships the
independent auditors have with the Company. The Committee
shall review and discuss with the independent auditors any
disclosed relationships or services that would reasonably
be expected to impact the objectivity and independence of
the independent auditors and take appropriate action to satisfy
itself of the independence of the independent auditors.
- Obtain assurance from the independent auditors that if they
detect or become aware of any illegal action that the Committee
is adequately informed and obtain a report if the independent
auditors have reached specific conclusions with respect to
such illegal acts.
- Review with the independent auditors any difficulties the
auditors encountered in the course of their audit work.
- Resolve any disagreements between management and the independent
auditors including any restrictions on the scope of activities
or access to requested information.
- Discuss written communications between the independent auditors
and management, such as any management letter or schedule
of unadjusted differences.
- Review annually the qualifications, performance and independence
of the independent auditors, particularly the lead partner
of the independent auditors' team.
- Obtain and review annually a report by the independent auditors
describing the firm's internal quality control procedures,
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 in respect to one or more independent audits by
the firm and any steps taken to deal with any such issues,
and all relationships between the independent auditors and
the Company.
- Ensure the rotation of the audit partners as required by
law and consider whether there should be a regular rotation
of the audit firm itself.
- Establish hiring policies for employees or former employees
of the independent auditors.
Internal Audit
- Review and consult with management regarding the appointment
and replacement of the internal auditor. The Company may outsource
the internal audit function to a firm other than the independent
auditors approved by the Committee.
- Review annually internal audit objectives, resources and
effectiveness, its objectivity and status within the Company,
and its annual audit plan, including its coordination with
the examination performed by the independent auditors. Determine
that no unjustified restrictions or limitations which impact
or impair the scope of the internal auditor or the internal
auditor's access to required information.
- Review significant internal audit findings reported during
the year and their respective impact on internal controls,
the control environment and the overall efficiency and effectiveness
of the Company's operations.
Other
- Establish procedures for the receipt, retention and treatment
of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and the
confidential, anonymous submission by the Company's employees
of concerns regarding questionable accounting or auditing
matters.
- Review and reassess the adequacy of the Committee's charter
annually.
- Submit the minutes of all meetings of the Committee to,
or discuss the matters discussed at each Committee meeting
with, the Board.
- Prepare a report for inclusion in the Company's annual proxy
statement that describes the Committee's composition and responsibilities
and how they were discharged as required by the rules of the
SEC.
The Committee may, in its discretion, delegate all or a portion
of its responsibilities to a subcommittee of the Committee.
The Committee may, in its discretion, delegate to one or more
of its members the authority to pre-approve any audit or non-audit
services to be performed by the independent auditors, provided
that any such approvals are presented to the Committee at its
next scheduled meeting.
The Committee shall prepare and review with the Board an annual
performance evaluation of the Committee, which evaluation shall
compare the performance of the Committee with the requirements
of this charter. The performance evaluation shall also recommend
to the Board any improvements to the Committee's charter deemed
necessary or desirable by the Committee. The performance evaluation
by the Committee shall be conducted in such manner as the Committee
deems appropriate. The report to the Board may take the form
of an oral report by the Chair of the Committee or any other
member of the Committee designated by the Committee to make
this report.
The Audit Committee shall have the resources and authority
appropriate to discharge its responsibilities, including the
authority to select, retain, terminate and approve the fees
and other retention terms of special or independent counsel,
accountants or other experts and advisors, as it deems necessary
or appropriate to carry out its duties, without seeking approval
of the Board or management. The Company shall provide appropriate
funding, as determined by the Committee, for payment of compensation
to the independent auditors and to any advisors employed by
the Committee and for payment of the administrative expenses
of the Committee.
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 that the Company's financial
statements and disclosures are complete and accurate and are
in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities
of management and the independent auditors.
