Purpose of the Committee
The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Pine Cliff Energy Ltd. (the “Company”) is to provide an open avenue of communication between Management of the Company (“Management”), the Company’s external auditors and the Board and to assist the Board in its overseeing of:
(a) the integrity, adequacy and timeliness of the Company’s financial reporting and disclosure practices;
(b) the Company’s compliance with legal and regulatory requirements related to financial reporting; and
(c) the independence and performance of the Company’s external auditors.
The Committee shall also perform any other activities consistent with this Charter, the Company’s By-laws and governing laws as the Committee or Board deems necessary or appropriate.
The Committee shall consist of at least three directors. Members of the Committee shall be appointed by the Board and may be removed by the Board at its discretion. The Board will annually appoint a Chairman of the Committee. Each director appointed to the Committee shall be independent as defined in Section 1.4 and 1.5 of National Instrument 52-110 - Audit Committees (“NI 52-110”) as may be amended from time to time.
Each member of the Committee shall be “financially literate”. In order to be financially literate, a member must be able to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
A director appointed by the Board to the Committee shall be a member of the Committee until replaced by the Board or until his or her resignation.
The Committee’s role is one of overseeing the financial reporting process. Management is responsible for preparing the Company’s financial statements and other financial information and for the fair presentation of the information set forth in the financial statements in accordance with International Financial Reporting Standards (“IFRS”). Management is also responsible for establishing internal controls and procedures and for maintaining the appropriate accounting and financial reporting principles and policies designed to assure compliance with accounting standards and all applicable laws and regulations.
The external auditors’ responsibility is to express an opinion on the Company’s financial statements, based on their audit conducted in accordance with generally accepted auditing standards.
The Committee is responsible for recommending to the Board the external auditors to be nominated for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Company, and for reviewing and recommending the compensation of the external auditors. The Committee is also directly responsible for the evaluation of and oversight of the work of the external auditors. The external auditors shall report directly to the Committee.
Meetings of the Committee
The Committee shall convene a minimum of four times each year at such times and places as may be designated by the Chairman of the Committee and whenever a meeting is requested by the Board, a member of the Committee, the auditors, or an executive officer of the Company. Meetings of the Committee shall correspond with the review of the annual and quarterly financial statements and Management’s discussion and analysis.
Notice of each meeting of the Committee shall be given to each member of the Committee and to the auditors, who shall be entitled to attend each meeting of the Committee and shall attend whenever requested to do so by a member of the Committee.
The quorum for a meeting of the Committee is a majority of the members. Every motion at the Committee meeting shall be decided by a majority of votes cast; in the event of a tie vote on any matters, such matters shall be presented to the Board for its consideration and determination.
A member or members of the Committee may participate in a meeting of the Committee by means of such telephonic, electronic or other communication facilities, as permits all persons participating in the meeting to communicate adequately with each other. A member participating in such a meeting by any such means is deemed to be present at the meeting.
In the absence of the Chairman of the Committee, the members of the Committee shall choose one of the members present to be Chairman of the meeting. In addition, members of the Committee shall choose one of the persons present to be the Secretary of the meeting.
The following Management representatives may be invited to attend all meetings, except private Committee sessions:
(i) Executive Chairman of the Board
(ii) President and Chief Executive Officer
(iii) Chief Financial Officer
(iv) Chief Operating Officer
Other Management of the Company and other parties requested to attend by the Committee may attend meetings of the Committee; however the Committee (i) shall meet with the external auditors independent of Management; and (ii) may meet separately with Management.
Minutes shall be kept of all meetings of the Committee.
Authority and Responsibilities
In addition to the foregoing, in performing its oversight responsibilities the Committee shall:
1. Monitor the adequacy of this Charter and recommend any proposed changes to the Board.
2. Review the appointments of the Company’s Chief Financial Officer and any other key financial executives involved in the financial reporting process.
3. Identify and monitor the management of the principal risks that could impact the financial reporting of the Company.
4. Review with Management and the external auditors the adequacy and effectiveness of the Company’s accounting and financial controls and the adequacy and timeliness of its financial reporting processes. The Committee shall review to ensure, to its satisfaction, that adequate procedures are in place for the review of the Company’s disclosure of financial information extracted or derived from the Company’s financial statements and will periodically assess the adequacy of those procedures.
5. Review with Management and the external auditors the audited annual financial statements and related documents and review with Management the unaudited quarterly financial statements and related documents, prior to filing or distribution, including matters required to be reviewed under applicable legal or regulatory requirements, for submission to the Board of Directors for approval.
6. Where appropriate and prior to release, review with Management any news releases that disclose annual or interim financial results or contain other significant financial information that has not previously been released to the public.
7. Review the Company’s financial reporting and accounting standards and principles and significant changes in such standards or principles or in their application, including key accounting decisions affecting the financial statements, alternatives thereto and the rationale for decisions made.
8. Review the quality and appropriateness of the accounting policies and the clarity of financial information and disclosure practices adopted by the Company, including consideration of the external auditors’ judgment about the quality and appropriateness of the Company’s accounting policies. This review may include discussions with the external auditors without the presence of Management.
9. Review with Management and the external auditors, significant related party transactions and potential conflicts of interest.
10. Pre-approve all non-audit services in excess of $20,000 to be provided to the Company by the external auditors and applicable fees.
11. If deemed necessary, inspect any and all of the books and records of the Company, its subsidiaries and affiliates.
12. Discuss with the Management of the Company, its subsidiaries and affiliates and staff of the Company, any affected party, contractors and consultants of the Company and the external auditors, such accounts, records and other matters as any member of the Committee considers necessary and appropriate.
13. At the earliest opportunity after each meeting, report to the Board the results of its activities and any reviews undertaken and make recommendations to the Board as deemed appropriate.
14. When there is to be a change of external auditors, review all issues and provide documentation related to the change, including the information to be included in the Notice of Change of Auditors and documentation required pursuant to National Instrument 51-102 (or any successor legislation) of the Canadian Securities Administrators and the planned steps for an orderly transition.
15. Review all securities offering documents (including the documents incorporated therein by reference) of the Company.
16. Review findings, if any, from examinations performed by regulatory agencies with respect to financial matters.
17. Review Management’s procedure for monitoring the Company’s compliance with laws and regulations.
18. Review current and expected future compliance with covenants under financing agreements.
19. Review the proposed issuance of debt and equity instruments including public and private debt, equity and hybrid securities, credit facilities with banks and others, and other credit arrangements such as material capital and operating leases. When applicable, the Committee shall review the related securities filings.
20. Monitor the independence of the external auditors by reviewing all relationships between the external auditors and the Company and all non-audit work performed for the Company by the external auditors.
21. Establish and review the Company’s procedures for the:
(a) receipt, retention and treatment of complaints regarding accounting, financial disclosure, internal controls or auditing matters; and
(b) confidential, anonymous submission by employees of the Company regarding questionable accounting, auditing and financial reporting and disclosure matters.
22. Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company.
23. Conduct or authorize investigations into any matters that the Committee believes is within the scope of its responsibilities. The Committee has the authority to retain independent counsel, accountants or other advisors to assist it, as it considers necessary, to carry out its duties, and to set and pay the compensation of such advisors at the expense of the Company. If these costs exceed $10,000 per annum for a Committee member, such member will obtain prior approval from the Board for the amount exceeding $10,000 per annum.
24. Perform such other functions and exercise such other powers as are prescribed from time to time for the audit committee of a reporting issuer in Parts 2 and 4 of NI 52-110, all other applicable laws and policies and procedures of all applicable regulatory authorities, the Business Corporations Act (Alberta) and the By-laws of the Company.