Leggett & Platt Governance
Audit Committee Charter
I. PURPOSE AND AUTHORITY
The Audit Committee will assist the Board of Directors in the oversight of: (i) the independent auditor’s qualifications, independence, appointment, compensation, retention and performance; (ii) the Company’s internal control over financial reporting; (iii) the guidelines and policies to govern risk assessment and management; (iv) the performance of the Company’s internal audit function; (v) the integrity of the Company’s financial statements and its external financial reporting; (vi) the Company’s legal and regulatory compliance; and (vii) the preparation of the audit committee report required by Securities & Exchange Commission (“SEC”) rules to be included in the Company’s annual proxy statement.
The Committee has the authority to engage independent counsel, independent auditors and other advisors to assist it in carrying out its activities. The Company shall provide appropriate funding, as determined by the Committee, to support the Committee's activities, including compensation of the Committee's counsel, independent auditor and other advisors, as well as ordinary administrative expenses that are necessary or appropriate in carrying out its duties. The Committee shall have the sole authority to retain, compensate, direct, oversee and terminate counsel, the independent auditor, and other advisors hired to assist it, who shall report directly to and be accountable ultimately to the Committee.
The Committee shall consist of at least three members of the Board, each of whom the Board has selected and determined to be "independent" in accordance with applicable rules of the SEC and the New York Stock Exchange ("NYSE"). All members of the Committee must meet the financial literacy requirements of the NYSE and at least one member shall be an "audit committee financial expert" as defined under applicable SEC rules. No Committee member may serve on the audit committee of more than three public companies, including the Company, unless the Board of Directors has determined that such simultaneous service would not impair the ability of such member to effectively serve on the Committee.
The Board will appoint Committee members annually upon the recommendation of the Nominating & Corporate Governance Committee. The Board may remove Committee members at any time, with or without cause, by a majority vote. The Board may fill any vacancy on the Committee. During a vacancy, the remaining members will have full power to act as the Committee. The Board will appoint a Committee Chair annually. If the Chair is absent from a meeting, the Committee may, by majority vote of those members present, designate one of its members to serve as acting Chair for the meeting. To the extent permitted by applicable law, the Committee may delegate duties and responsibilities to one or more members or subcommittees as it deems appropriate, provided that decisions of such members or subcommittees shall be presented to the Audit Committee at its next scheduled meeting.
The Committee will meet each quarter prior to the filing of each Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as applicable, and at such other times as it deems appropriate. Meetings may be conducted by teleconference. The Committee will meet periodically in separate sessions with management (including the Chief Financial Officer and the Chief Accounting Officer), with internal auditors and with the independent auditor. The Committee will meet in executive session periodically, with only the Committee members present.
A majority of members present at a meeting will constitute a quorum. If a quorum is present, the majority vote of those Committee members present at the meeting will be sufficient to adopt a resolution or otherwise take action.
The Company’s independent auditor and internal auditors will attend at least four of the Committee’s meetings each year. The Committee may request members of management or others to attend meetings and provide such information as the Committee deems appropriate.
The Secretary or Assistant Secretary of the Company will attend and keep written minutes of Committee meetings, unless matters to be discussed at the meeting make it appropriate to excuse him or her. If the Secretary or Assistant Secretary is excused, a member of the Committee will provide to the Secretary or Assistant Secretary minutes of the meeting or information sufficient to prepare minutes.
IV. DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Committee include the following:
- The Company's Relationship with the Independent Auditor
- The appointment, compensation, retention, oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services, and, if appropriate, the replacement of the independent auditor. The Committee will consider the opinions of management and the internal auditors when appointing the independent auditor and, if appointed, will recommend the Board seek shareholder ratification of the appointment. The Chair of the Committee will execute the engagement letter with the independent auditor establishing the terms of the audit engagement, the objective of the audit, and the responsibilities of the independent auditor and of management. The independent auditor shall report directly to the Audit Committee.
- The review and pre-approval (in accordance with its pre-approval policies and procedures) of all audit, audit-related, and permissible non-audit services to be provided by the independent auditor.
- On an annual basis:
- the review and discussion with the independent auditor of the report submitted by the independent auditor describing:
- the firm's internal quality-control procedures;
- any material issues raised by the most recent internal quality-control or peer review of the firm, or by any inquiry or investigation by governmental or professional authorities (including the Public Company Accounting Oversight Board, the "PCAOB"), within the preceding five years, respecting any independent audit carried out by the firm, and any steps taken to deal with such issues; and
- any relationships between the independent auditor (or any affiliates of the independent auditor) and the Company or Company personnel in financial reporting oversight roles to address the matters set forth in PCAOB Rule 3526 (as modified or supplemented). The Committee will engage in a dialogue with the independent auditor with respect to any disclosed relationship or service that may impact the independence of the auditor and take appropriate action, if necessary, in response to the auditor's report to satisfy itself of the auditor's independence.
- the confirmation that:
- neither the lead audit partner nor the concurring audit partner of the independent auditor has performed in those respective roles for the Company for more than five consecutive years and, subject to applicable regulatory exceptions, no other audit partner has performed audit, review or attest services for the Company for more than seven consecutive years;
- none of the Company's CEO, CFO, Chief Accounting Officer or other persons who are in a financial reporting oversight role were employed by the independent auditor and participated in any capacity of the audit of the Company during the one-year period preceding the initiation of the audit; and
- excluding the Company’s independent Board members, none of the Company’s CEO, CFO, Chief Accounting Officer or other persons who are in a financial reporting oversight role with the Company (including their immediate family members) has received any tax services from the independent auditor or its affiliates.
- the consideration of whether, in order to assure continuing auditor independence, there should be a regular rotation of the independent auditor; and
- the setting of clear hiring policies for employees or former employees of the independent auditor.
- the review and discussion with the independent auditor of the report submitted by the independent auditor describing:
- The review and discussion with management, the independent auditor and the internal auditors of: (i) any audit problems or difficulties and management's responses; and (ii) any restrictions on the scope of activities or access to requested information.
- The review and resolution of any disagreements between management and the independent auditor relating to financial reporting, or relating to any audit report or other audit, review or attest services provided by the independent auditor.
- Oversight of Internal Controls, Risk Management and Internal Audit Department
- Each quarter the review, discussion and evaluation with management and the independent auditor of: (i) any change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting; (ii) any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; (iii) any fraud, whether or not material, involving management or other employees who have a significant role in the Company's internal control over financial reporting; (iv) any special audit steps adopted in light of material control deficiencies; and (v) the adequacy of disclosures about changes in internal control over financial reporting.
- On an annual basis the review and discussion with management and the independent auditor of: (i) management's report on internal control over financial reporting contained in the Company's Annual Report on Form 10-K; and (ii) the independent auditor's attestation report on internal control over financial reporting.
- The review and discussion with management and the independent auditor of: (i) the Company's guidelines and policies to govern the process by which risk assessment and management is undertaken; and (ii) major financial risk exposures and the steps management has taken to monitor and control such exposures.
- The review and evaluation of: (i) the Company's internal audit department, including its audit scope, significant audit results and reports, responsibilities, budget, staffing and performance; and (ii) the performance of the Vice President- Internal Audit.
- Oversight of External Financial Reporting
- The review of the Company's financial statements, including: (i) prior to public release the review and discussion with management and the independent auditor of the Company's annual and quarterly financial statements to be filed with the SEC (including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations") and any certifications regarding the financial statements or the Company's internal control over financial reporting and disclosure controls and procedures filed with the SEC by the Company's principal executive and financial officer; and (ii) recommending to the Board whether to include the audited annual financial statements in the Company's Annual Report on Form 10-K to be filed with the SEC.
- The review and discussion with management and the independent auditor of: (i) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles; (ii) the analysis prepared by management or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including all alternative treatments of financial information within GAAP for policies and practices related to material items that have been discussed with management, the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and (iii) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
- The review and discussion with the independent auditor of the matters required to be discussed by (A) the PCAOB Auditing, Standard 1301, including but not limited to: (i) the terms of the audit engagement; (ii) the critical accounting estimates used by the Company, the process used in developing them, any significant changes to the process or significant assumptions and the resulting effect on the financial statements; (iii) the basis for the independent auditor's conclusion regarding the reasonableness of those critical accounting estimates; (iv) the independent auditor's evaluation of, and conclusion about, significant accounting policies and practices and assessment of disclosures related to critical accounting policies and practices; (v) the business purpose of significant unusual transactions; (vi) the independent auditor's responsibility for other information in documents containing audited financial statements; (vii) any management consultation regarding significant accounting or auditing matters with other accountants in which the independent auditor has concern; (viii) any significant issues discussed with management prior to the independent auditor's appointment or retention; and (ix) any significant difficulties encountered in performing the audit; and (B) the PCAOB Auditing Standard 4105, including the review of interim financial information of the Company and any material modifications that should be made to the interim financial information for it to conform with GAAP.
- The review and discussion with the independent auditor of: (i) any accounting adjustments that were noted or proposed by the auditors but were "passed" (as immaterial or otherwise); (ii) any communications between the audit team and the audit firm's national office respecting auditing or accounting issues presented by the engagement; and (iii) any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditor to the Company.
- The review and discussion with management and the independent auditor of: (i) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company; and (ii) the type and presentation of information in earnings press releases (paying particular attention to any use of "pro-forma" or "adjusted" non-GAAP information), as well as any financial information and earnings guidance provided to analysts and rating agencies.
The Committee's responsibility to discuss earnings releases, as well as financial information and earnings guidance, may be done generally (i.e. discussion of the types of information and the type of presentation). However, the full Board of Directors will review each earnings release in advance of its publication.
- The review and discussion with management and the independent auditor of any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company's financial statements or accounting policies.
- The review and discussion with management and the independent auditor of any critical audit matter (“CAM”) to be included in the independent auditor’s unqualified report relating to the current financial statements and prior period financial statements, if appropriate. The review and discussion will include (i) the identity of the CAM; (ii) the principal consideration that led the independent auditor to determine that the matter is a CAM; (iii) a description of how the CAM was addressed in the audit; and (iv) a reference to the relevant financial statement accounts or disclosures that relate to the CAM.
- Oversight of Legal & Regulatory Compliance
- At least annually the review, with the Company’s Chief Compliance Officer, all: (i) legal and regulatory matters that may have a material impact on the Company’s financial statements; and (ii) the scope and effectiveness of compliance policies and programs.
- Obtain from the independent auditor assurance that Section 10A(b) of the Securities Exchange Act has not been violated (dealing with the commission of illegal acts that have been detected or have otherwise come to the attention of the auditor in the course of the audit).
- The establishment and oversight of procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters.
- At least annually review, with the Chief Compliance Officer, compliance with and the adequacy of the Company’s Code of Business Conduct and Ethics and Financial Code of Ethics. The Committee shall review any requests for waivers by any director or executive officer under these codes.
- The review and approval of the Company’s policies (on its behalf or on behalf of its subsidiaries) governing, and decision to enter into, swaps that are exempt from the requirements of Section 2(h)(1) and 2(h)(8) of the Commodity Exchange Act under the “end-user exception” regulations established by the Commodity Futures Trading Commission. The Committee may approve such decisions on a general basis rather than on a swap-by-swap basis.
- Reports & Self-Evaluation
- The oversight and preparation and approval of all reports required by the Committee, including the report for inclusion in the Company's annual proxy statement, stating whether the Committee: (i) has reviewed and discussed the audited financial statements with management; (ii) has discussed with the independent auditors the matters required to be discussed by the PCAOB Auditing Standard 1301; (iii) has received the written disclosure and letter from the independent auditors (describing their relationships with the Company) required by applicable requirements of the PCAOB, and has discussed with them their independence; and (iv) based on the review and discussions referred to above, the members of the Committee recommended to the Board that the audited financials be included in the Company's Annual Report on Form 10-K for filing with the SEC.
- The self-evaluation of the performance of the Committee, including its effectiveness and compliance with this Charter.
- The review and reassessment of the adequacy of this Charter annually, and the recommendation to the Board amendments as the Committee deems appropriate. This Charter shall be posted to the Company website.
- The reporting to the Board, on a regular basis, Committee findings and recommendations (including any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the independent auditor and the performance of the internal audit function) and any other matters the Committee deems appropriate or the Board requests, and maintain minutes or other records of Committee meetings and activities.
V. LIMITATION OF AUDIT COMMITTEE ROLE
While the Committee has the authority, duties and responsibilities set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to make determinations that the Company's financial statements and disclosures: (i) are complete and accurate; (ii) are prepared in accordance with GAAP; or (iii) fairly present the financial condition, results of operations and cash flows of the Company. These are responsibilities of management and the independent auditor. Further, management is responsible for implementing effective internal control over financial reporting and disclosure controls and procedures, and for preparing the Company's financial statements.