Audit Committee Charter
YADKIN VALLEY FINANCIAL CORPORATION
AUDIT COMMITTEE CHARTER
As required by law, the Board of Directors hereby delegates to the Audit Committee (the “Committee”), in its capacity as a committee of the Board of Directors of Yadkin Valley Financial Corporation (the “Board”), the sole authority to engage, terminate, determine the compensation of, and provide oversight to the independent registered public accounting firm (“independent auditor” or “independent auditors”) engaged to prepare and issue an audit report (and related work) for Yadkin Valley Financial Corporation (the “Company”). The Committee shall also assist the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, internal control and financial reporting practices of the Company. The Committee’s role includes a particular focus on the qualitative aspects of financial reporting to shareholders and on Company processes for the management of business/financial risk and for compliance with significant applicable legal and regulatory requirements. It shall also have such other duties as may be assigned to it from time to time by the Board. The independent auditor shall report directly to the Committee.
The Committee shall be comprised of three or more members of the Board, each of whom shall satisfy the independence and financial literacy requirements of The Nasdaq Stock Market, Inc. (“Nasdaq”) and the Securities and Exchange Commission (the “SEC”). Nasdaq requirements for audit committee members require, among other matters, that members of the Committee (1) not accept any consulting fees, advisory fees or other compensation from the Company other than usual and customary Board Fees, and (2) not be an affiliated person of the Company or any subsidiary thereof. At least one member of the Committee shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight experience which results in the member’s financial sophistication, as set forth in Rule 5605© (2) (A) of the Nasdaq Marketplace Rules, and, unless the Board shall otherwise determine, shall also be an “Audit Committee Financial Expert”, as defined by SEC regulations. Each member shall be free from any relationship that, in the opinion of the Board, would interfere with his or her exercise of independent judgment.
The Committee shall maintain free and open communication (including private executive sessions at least annually) with the Company’s independent auditor, internal auditor, and senior management. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention, with full authority to retain outside counsel or other experts for this purpose.
One member of the Committee shall be elected as Chairperson by the Committee annually at the first meeting of the Committee following the Company’s annual shareholders’ meeting. The Chair shall be responsible for leadership of the Committee, including scheduling and presiding over meetings, preparing agendas and making regular reports to the Board. The Chair will also maintain regular liaison with the Company’s Chief Executive Officer, Chief Financial Officer, the lead independent audit partner and the director of internal audit.
The Committee shall meet at least quarterly. Additional meetings may be held as the Committee or its Chair deems advisable.
Although the Committee has the responsibilities and authority set forth in this Charter, it relies on the expertise and knowledge of management, the internal auditor, and the independent auditor in carrying out its oversight responsibilities. Management is responsible for determining that the Company’s financial statements are complete, accurate and in accordance with generally accepted accounting principles and for establishing satisfactory internal control over financial reporting. The independent auditor is responsible for auditing the Company’s financial statements and the effectiveness of the Company’s internal control over financial reporting. It is not the duty of the Committee to plan or conduct audits, to determine that the financial statements are complete and accurate and in accordance with generally accepted accounting principles, or to assure compliance with laws and regulations or the Company’s standards of business conduct, codes of ethics, internal procedures and controls. Therefore, the Committee’s oversight role does not provide any expert or special assurance as to the financial statements and other financial information provided by the Company to its shareholders and others.
The Committee’s role, authority, and recurring oversight responsibilities include:
- Sole authority to select, retain, compensate, and directly supervise and evaluate the performance of the independent registered public accounting firm that prepares and issues the audited financial statements of the Company or performs other audit, review or attest services for the Company. In so doing, the Committee will discuss and consider the auditor’s written affirmation that the auditor is in fact independent, discuss the nature and rigor of the audit process, receive and review all reports, and provide to the independent auditor full access to the Committee and the Board to report on any and all appropriate matters.
- Obtain annually from the independent auditors a formal written statement describing all relationships between the independent auditors and the Company, consistent with Independence Standards Board Standard Number 1. The Committee shall actively engage in a dialogue with the independent auditors with respect to any relationships that may impact the objectivity and independence of the independent auditors and shall take, or recommend that the Board take, appropriate actions to satisfy itself as to the auditors’ independence.
- Provide guidance and oversight to the internal audit function of the Company including review of the organization, plans, and results of such activity. Oversee internal audit activities including discussing with senior management and the internal auditor, the internal audit function’s organization, objectivity, responsibilities, planned results, budget and staffing. The Committee shall review and concur in the appointment, compensation, replacement, reassignment or dismissal of the director of internal audit and confirm and assure the objectivity of internal audit.
- Approve in advance any permissible non-audit services provided by the independent auditors. The Committee may delegate to one or more designated members of the Committee the authority to grant preapprovals of permissible non-audit services, in which case the decision of such member or members shall be presented to the Committee at its next regularly scheduled meeting.
- Resolve disagreements, if any, between management and the independent auditors.
- Oversee all material aspects of the Company’s financial reporting and auditing functions except those specifically related to the responsibilities of another standing committee of the Board.
- Review with senior management, the independent auditor and the internal auditor (I) the Company’s annual assessment of the effectiveness of its internal controls and the independent auditors’ attestation, (ii) the adequacy of the Company’s internal controls, including computerized information system controls and security, (iii) any “material weakness” or “significant deficiency” in the design or operation of internal control over financial reporting, and any steps taken to resolve the issue.
- Meet with the independent auditor in executive session to discuss any matters the Committee or the independent auditor believes should be discussed privately with the Committee.
- Meet with the internal auditor in executive session to discuss any matters the Committee or the internal auditor believes should be discussed privately with the Committee.
- Meet with the Chief Financial Officer in executive session to discuss any matters the Committee or the Chief Financial Officer believes should be discussed privately with the Committee.
- Review the annual management letter with the independent auditors.
- Approve in advance all auditing services (including comfort letters and statutory audits) performed by the independent auditor.
- Oversee the relationship with the independent auditors, including discussing with the independent auditors the nature and rigor of the auditing process, receiving and reviewing audit reports, reviewing and approving audit fees, and providing the auditors full access to the Committee to report on any and all appropriate matters.
- Discuss with senior management and/or the Company’s general counsel, any legal matters (including the status of pending litigation) that may have a material impact on the Company’s financial statements, and any material reports or inquires from regulatory or governmental agencies.
- The Committee shall annually discuss with the independent auditors all relationships the independent auditors have with the Company in order to evaluate their continued independence. In this regard, the Committee shall review on an annual basis the written disclosures and letters from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Committee concerning independence.
- The Committee shall annually obtain and review a report from the independent auditors describing : (i) the independent auditors’ internal quality-control procedures; and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the audit firm, and any steps taken to deal with such issues.
- The Committee shall confirm compliance by the independent auditors with laws and regulations relating to audit partner rotation.
- The Committee shall review and discuss with senior management, and to the extent the Committee deems necessary or appropriate, the independent auditors, the Company’s disclosure controls and procedures that are designed to insure that the reports the Company files with the SEC comply with the SEC’s rules and forms.
- Review audited financial statements and discuss them with senior management and the independent auditors. These discussions shall include the matters required to be discussed under Statement of Auditing Standards No. 114 and consideration of the quality of the Company’s accounting principles as applied in its financial reporting, including a review of accounting estimates, reserves, accruals, judgmental areas, audit adjustments (whether or not recorded), and other such inquires as the Committee or the independent auditors shall deem appropriate. Based on such review, the Committee shall make its recommendation to the Board as to the inclusion of the Company’s audited financial statements in the Company’s Annual Report of Form 10-K (or the Annual Report to Shareholders, if distributed prior to the filing of the Form 10-K).
- Issue annually a report to be included in the Company’s proxy statement as required by the rules of the Securities and Exchange Commission.
- Discuss with senior management and the independent auditors: (1) interim financial information contained in the Company’s Quarterly Report on Form 10-Q prior to its filing (if practical) or as soon as possible thereafter; (2) earnings announcements prior to their release (if practicable) or as soon as possible thereafter; and (3) the results of the review of such information by the independent auditors. These discussions may be held with the Committee as a whole or with the Committee Chair in person or by telephone.
- Discuss with senior management, the internal auditor and the independent auditors, the quality and adequacy of the Company’s internal controls over financial reporting.
- Discuss with senior management the status of pending litigation, taxation matters and other areas of oversight related to the legal and compliance area as may be appropriate.
- Report on Committee activities to the full Board and issue annually a summary report (including appropriate oversight conclusions) suitable for submission to the shareholders.
- Authority to pay ordinary administrative expenses of the Committee that are necessary or appropriate to carry out its duties.
- Authority to engage and compensate independent counsel and other advisors as it determines necessary or appropriate to carry out its duties.
- Establish and oversee procedures for (i) receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, and auditing matters; (ii) the confidential, anonymous submission by employees of concerns regarding accounting or auditing matters; and (iii) investigation of any matter brought to its attention within the scope of its duties.
- The Committee shall cause to be kept adequate minutes of its meetings, and report to the Board on its actions and activities at the first Board meeting following any Committee meeting.
- In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention. The Committee will have access to the Company’s books, records, facilities, and personnel. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company, and the Committee will take all necessary steps to preserve the privileged nature of those communications.
- Oversee risk management activities in the areas of financial reporting and regulatory and legal compliance to ensure that risk management evaluation functions are independent. Review risk management reports and information; communicate risk management concerns, if any, to the Board.
- The Audit Committee shall review and reassess this Charter annually. Any proposed changes shall be submitted to the Board for approval and shall become effective on the date specified in the Board’s approval.
- This Audit Committee Charter was approved by the Board on March 15, 2012.