ARCH
MANAGEMENT SERVICES INC.
AUDIT
COMMITTEE CHARTER
I.
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CHARTER;
PURPOSE AND FUNCTION OF
COMMITTEE
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This
document shall be the official Charter of the Audit Committee (the "Committee")
of the Board of Directors (the "Board") of Arch Management Services Inc.,
a
Nevada corporation (the "Company"). The primary function of the Committee
is to
assist the Board in fulfilling its oversight responsibilities by reviewing:
(a)
the financial reports and other financial information provided by the Company
to
any governmental body or the public; (b) the Company’s systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and (c) the Company’s auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Committee should encourage continuous improvement of, and should
foster adherence to, the Company’s policies, procedures and practices at all
levels. The Committee shall be accountable and responsible to the full Board.
The Committee’s primary duties and responsibilities are to:
(i)
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Serve
as independent and objective
party to monitor
the Company’s financial reporting process and internal control
systems;
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(ii)
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Review
and appraise the audit efforts of the Company’s independent accountants
and internal auditing department; and
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(iii)
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Provide
open channels of communication among the Company’s independent
accountants, financial and senior management, the internal auditing
department and the Board.
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The
Committee will primarily fulfill these responsibilities by carrying out the
activities enumerated in Section IV of this Charter.
II.
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COMPOSITION;
QUALIFICATIONS OF COMMITTEE
MEMBERS
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A. Composition: The
Committee shall be comprised of two (2) or more Independent Directors (as
defined below) which number shall be determined by the Board from time to
time
in its discretion.
B. Qualifications:
Each Independent Director serving on the Committee shall have Financial
Knowledge (each such term as defined herein), and shall be free from any
relationship that, in the judgment of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee.
At
least one (1) member of the Committee shall have Financial Experience (as
defined herein).
III.
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ELECTION
AND MEETINGS
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A. Election.
The initial members of the Committee shall be appointed by the Board.
Thereafter, the Board shall appoint the members of the Committee annually,
which
shall otherwise serve until their successors shall be duly elected and
qualified. Unless a Chairman of the Committee is appointed by the Board,
the
members of the Committee may designate a Chairman by majority vote of the
full
Committee.
B. Meetings.
The Committee shall meet at least three times annually, or more frequently
as
circumstances require in the discretion of the Committee and the Board. As
an
element of its duties to encourage and facilitate open communication, the
Committee should meet at least annually with representatives from the Company’s
executive management, internal auditing department and its independent
accountants in separate sessions to discuss any matters that the Committee
or
any of these groups believe should be discussed. In addition, the Committee
or
at least its Chairman (if one exists) should meet with the independent
accountants and a representative(s) of the Company’s management at least
quarterly to review the Company’s financial statements consistent with the
provisions of Section IV - Documents/Reports Review below.
IV.
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RESPONSIBILITIES
AND DUTIES
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To
fulfill its responsibilities and duties, the Committee shall:
A. With
respect to Documents/Reports
Review:
1. Review,
and if it deems necessary or appropriate, update this Charter periodically,
at
least annually.
2. Review
the Company’s annual financial statements and any reports or other financial
information submitted to any governmental body, or to the public, including
any
certification, report, opinion or review rendered by the Company’s independent
accountants.
3. Review
the regular internal reports to management prepared by the Company’s internal
auditing/accounting department and management’s response to such
reports.
4. Review
with the Company’s financial management and its independent accountants, prior
to filing with the Securities and Exchange Commission, all 10-Q Quarterly
Reports, 10-K Annual Reports, 8-K Current Reports and other reports that
contain
financial information and other reports containing financial disclosures.
The
Chairman of the Committee may represent the entire committee for purposes
of
these reviews.
B. With
respect to Independent
Accountants:
5. Recommend
to the Board the Committee’s selection of an independent accounting firm,
considering independence and effectiveness and other factors it deems
appropriate and in the best interests of the Company, and approve the fees
and
other compensation to be paid to such independent accounting firm. On at
least
an annual basis, the Committee should receive from the independent accounting
firm a formal written statement delineating and describing all relationships
between the Company and such firm, consistent with the Independence Standards
Board’s Standard 1. The Committee should review and discuss with the independent
accounting firm all such identified relationships or services to examine
and
determine the independence and objectivity of the accounting firm. The Committee
shall take all appropriate action, or recommend to the Board such appropriate
actions, to oversee the independence of such accounting auditors.
6. Review
and evaluate the performance of the independent accounting firm, and when
appropriate, recommend to the Board or implement a discharge and replacement
of
the accounting firm when circumstances warrant.
7. Periodically
consult with the independent accounting firm out of the presence of the
Company’s management regarding internal controls and the fullness and accuracy
of the Company’s financial statements.
C. With
respect to Financial
Reporting Process:
8. In
consultation with the independent accounting firm and the Company’s internal
accounting personnel/auditors, review the integrity of the Company’s financial
reporting process, both internal and external.
9. Consider
the independent accounting firm’s judgments about the quality and
appropriateness of the Company’s accounting principles as applied to its
financial reporting.
10. Consider
and approve, if appropriate, major changes to the Company’s auditing and
accounting principles and practices as suggested by the independent accounting
firm, management of the Company and/ or its internal accounting
department.
D. With
respect to Process
and Organizational Improvements:
11. Establish
regular and separate systems of reporting to the Committee by each of
management, the independent accounting firm, and the Company’s internal
accounting department regarding any significant judgments made in management’s
preparation of the financial statements and the view of each as to the
appropriateness of such judgments.
12. Following
completion of the annual audit, review separately with each of management,
the
independent accounting firm and the Company’s internal accounting department any
significant difficulties encountered during the course of the audit, including
any restrictions on the scope of work or access to required
information.
13. Review
any significant disagreement among management and the independent accounting
firm or the Company’s internal accounting department in connection with the
preparation of the financial statements.
14. Review
with the independent accounting firm, the Company’s internal accounting
department and management the extent to which changes or improvements in
financial or accounting practices, as approved by the Committee, have been
implemented. This review should be conducted at an appropriate time subsequent
to implementation of changes or improvements, as determined by the
Committee.
15. Review
the organizational structure of the Company’s internal auditing department and
the qualifications of the managers of such department, and recommend any
appropriate changes to the Company’s management.
E. With
respect to Legal
Compliance; General:
16. Review,
with the Company’s outside legal counsel, legal compliance matters, including
corporate securities trading policies.
17. Review,
with the Company’s outside legal counsel, any legal matter that could have a
significant impact on the Company’s financial statements.
18. Perform
any other activities consistent with this Charter, the Company’s Bylaws and
governing law, as the Committee or the Board deems necessary or
appropriate.
"Independent
Director" means a person other than an officer or employee of the Company
or any
of its subsidiaries or any other individual having a relationship which,
in the
opinion of the Company’s Board of Directors, would interfere with the exercise
of independent judgment in carrying out the responsibilities of a director.
The
following persons shall not be considered independent for these
purposes:
(a) a
director who is employed by the Company or any of its affiliates for the
current
year or any of the past three (3) years;
(b) a
director who accepts any compensation from the Company or any of its affiliates
in excess of $60,000 during the previous fiscal year, other than compensation
for Board service, benefits under a tax-qualified retirement plan or other
non-discretionary compensation;
(c) a
director who is a member of the immediate family of an individual who is,
or has
been in any of the past three (3) years, employed by the Company or any of
its
affiliates as an executive officer. Immediate family members include a person’s
spouse, parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law and anyone who
resides in such person’s home;
(d) a
director who is a partner in, or a controlling shareholder or an executive
officer of, any for-profit business organization to which the Company made,
or
from which the Company received, payments (other than those arising solely
from
investments in the Company’s securities) that exceed 5% of the Company’s or
business organization’s consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three (3) years;
(e) a
director who is employed as an executive of another entity where any of the
Company’s executives serve on that entity’s compensation committee.
Pursuant
to Nasdaq Rule 4310 one director who is not an Independent Director as defined
above and who is not a current employee or an immediate family member of
such
employee, may be appointed to the Audit Committee if the full Board of
Directors, under exceptional and limited circumstances, determines that
membership on the Committee by the individual is required in the best interests
of the Company and its stockholders, and the Board of Directors discloses,
in
the next annual proxy statement subsequent to such determination, the nature
of
the relationship and the reasons for that determination.
"Financial
Knowledge" means a working familiarity with basic finance and accounting
practices, including the ability to read and understand fundamental financial
statements, including balance sheets, income statements and cash flow
statements. Persons who will become so qualified within a reasonable period
of
time after his or her appointment to the Audit Committee also comply with
this
provision. Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the Company
or
an outside consultant.
"Financial
Experience" means past employment experience in finance or accounting, requisite
professional certification in accounting, or any other 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.
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