Audit

AUDIT COMMITTEE CHARTER

I. Purposes

The Audit Committee is appointed by the Board of Directors of CAS Medical Systems, Inc. (the “Company”) to assist the Board in fulfilling its oversight responsibilities with respect to:

 

  • the integrity of the Company’s financial statements;
  • the Company’s compliance with legal and regulatory requirements, including monitoring the integrity of the Company’s reporting standards and systems of internal controls regarding finance, accounting and legal matters; and
  • the selection, qualifications, independence, performance and scope of examination of the Company’s independent external auditors


The Company’s independent external auditors should promptly consult with the Chair of the Audit Committee if, at any time, any material concern or matter arises which has not been promptly or appropriately addressed by the management of the Company or which involves any illegal act or conflict of interest or self-dealing on the part of the Company’s senior management.

The Company’s independent external auditors are directly accountable to the Audit Committee. The Audit Committee has the authority to conduct any investigation appropriate to fulfill its responsibilities and has direct access to the independent external auditors as well as anyone in the organization.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’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 external auditors. Nor is it the duty of the Audit Committee to conduct investigations or to assure compliance with laws and regulations. Members of the Audit Committee shall not be deemed to have accepted a duty of care that is greater than the duty of the directors generally.

The Chairman of the Board and the Chief Executive Officer shall provide the Audit Committee with all of the resources, both internal and external, which the Audit Committee deems necessary or advisable to meet its duties and responsibilities and carry out its function. Without limiting the foregoing, the Audit Committee may retain, at the Company’s expense and without seeking approval from the Board of Directors, such special legal, accounting or other consultants or experts as it deems necessary in the performance of its duties. The Audit Committee shall inform an executive officer of the Company promptly of any actions by the Audit Committee, of which an executive officer of the Company is not otherwise aware, that would result in the commitment or payment of Company funds.

II. Composition and Meetings


The Audit Committee shall be comprised of three or more directors as determined by the Board of Directors, each of whom shall meet the independence criteria set forth in Rule 10A-3 of the Securities Exchange Act of 1934 and the independence and understanding of fundamental financial statements requirements of the Nasdaq Stock Market. At least one member of the Audit Committee shall be financially sophisticated as required by the Nasdaq Stock Market. No member of the Audit Committee shall have participated in the preparation of the financial statements of the Company at any time during the prior three years.


Audit Committee members shall be appointed by the Board of Directors, shall serve at the will of the Board of Directors, and may be removed with or without cause by the affirmative vote of a majority of the members of the Board of Directors. No Audit Committee member may simultaneously serve on the audit committees of more than three public companies unless the Board of Directors affirmatively determines that such service would not impair the ability of such member to effectively serve on the Audit Committee. The Board shall appoint one member as the Audit Committee Chair. If the Audit Committee Chair is not present at a meeting, the members of the Audit Committee may designate a Chair for such meeting by majority vote.


The Audit Committee shall meet on at least a quarterly basis, or more frequently as circumstances dictate. The Audit Committee Chair shall prepare and/or approve an agenda in advance of each meeting.


The Chair of the Audit Committee will regularly report the Audit Committee’s findings, conclusions and recommendations to the Board of Directors.


III. Responsibilities and Duties
 

In discharging its duties, the Audit Committee shall:

      Review Procedures

  1. Review and reassess the adequacy of this Charter on at least an annual basis and have the Charter published in accordance with SEC regulations.
     
  2. Review and discuss with management and the independent auditors the Company’s annual audited financial statements and related footnotes, quarterly financial statements, and the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
     
  3. Periodically meet separately with management, with internal auditors (or other personnel responsible for the internal audit function) and with the independent external auditors to discuss any matters that the Audit Committee or each of these groups believe should be discussed.
     
  4. Discuss with management and the independent external auditors any significant issues regarding accounting principles, practices and judgments reflected therein prior to any public release, filing or distribution.
     
  5. In consultation with management and the independent external auditors, consider the integrity of the Company’s financial reporting processes and controls. Review significant findings prepared by the independent external auditors together with management’s responses and the status of management’s response to previous recommendations.
     
  6. Review with management and independent external auditors the Company's quarterly earnings press releases prior to any public release, filing or distribution.
     
  7. Annually review management’s report on its assessment of the effectiveness of internal controls over financial reporting as of the end of the applicable fiscal year.
     
  8. Discuss generally the types of information to be disclosed in earnings press releases, as well as the manner of presentation and the types of financial information and earnings guidance provided to analysts and rating agencies.
     
  9. Review and discuss any significant changes in the Company’s accounting principles and practices and any items required to be communicated by the independent external auditors in accordance with auditing standards issued by the Public Company Accounting Oversight Board (“PCAOB”) from time to time.
     
  10. Review annually the financial and accounting organizational structure.

    Independent Auditors
     
  11. Retain the Company’s independent external auditors, who shall report directly to the Audit Committee, and approve any discharge of independent external auditors when circumstances warrant.
     
  12. Review the qualifications, independence and performance of the independent external auditors and annually recommend to the Board of Directors the appointment of the independent external auditors.
     
  13. Review and evaluate the lead audit partner of the independent auditor and assure that the lead audit partner is rotated as required by applicable law.
     
  14. Pre-approve all audit engagement fees and terms, as well as all non-audit engagements with the independent external auditors. The Audit Committee shall have sole authority to approve such matters.
     
  15. On at least an annual basis, ensure that the independent external auditors submit a formal written statement delineating all of their relationships with the Company consistent with PCAOB Professional Standards Rule 3526. Review and discuss with the independent external auditors all significant relationships they have with the Company that could impair their independence and, when warranted, recommend appropriate action to the Board of Directors.
     
  16. Review and discuss the independent external auditors’ audit plan with regard to its scope, staffing, locations, reliance upon management and general audit approach.
     
  17. Obtain and review, at least annually, a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent 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 independent audits carried out by the firm, and any steps taken to deal with any such issues.
     
  18. Consider and discuss with management the independent external auditors’ judgments about the quality and appropriateness of the Company’s accounting principles and underlying estimates used to prepare the Company’s financial statements, the clarity of the Company’s financial disclosure and whether the Company’s accounting principles are common practices or minority practices.
     
  19. Consider whether, in order to assure continuing auditor independence, there should be regular rotation of the audit firm itself.
     
  20. Monitor hiring practices with respect to employees or former employees of the Company’s independent external auditors.

    Legal Compliance
     
  21. Review corporate policies relating to compliance with laws and regulations, ethics, conflicts of interest and the investigation of misconduct or fraud. Confirm that the Company has appropriate programs to monitor and ensure compliance with these policies and periodically review the effectiveness of these programs with management.
     
  22. 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 employees of the Company of concerns regarding questionable accounting or auditing matters.
     
  23. Review significant cases of employee conflict of interest, misconduct or fraud. Periodically monitor the Company’s response with respect to any material open cases.
     
  24. Review in-house procedures for oversight of officers’ expenses and perquisites.
     
  25. On at least an annual basis, meet with the Company’s management and, if necessary, the Company’s outside counsel, to discuss any legal matters that could have a significant impact on the financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.

    Other Audit Committee Responsibilities
     
  26. Annually prepare a report to shareholders as required by the SEC, to be included in the Company’s annual proxy statement.
     
  27. Monitor the Company’s risk assessment and risk management with respect to financial reporting and compliance. Discuss significant financial and compliance risk exposures and the steps management has taken to monitor, control and report such exposures.
     
  28. Perform any other activities consistent with this Charter, the Company’s by-laws, and governing law, as the Audit Committee or the Board of Directors deems necessary or appropriate.