Purpose
The purpose of the Audit Committee is to assist the Board
of Directors (the “Board”) of Swift Energy Company (“Swift Energy” or the
“Company”) in fulfilling its responsibilities with respect to oversight in
monitoring (i) the integrity of the financial statements of the Company;
(ii) Swift Energy’s compliance with legal and regulatory requirements; (iii)
the independent auditors’ selection, qualifications and independence; and
(iv) the performance of Swift Energy’s internal audit function and
independent auditors.
The Committee shall also be responsible for producing the
report required by the rules of the Securities and Exchange Commission (the
“SEC”) to be included in the Company’s annual proxy statement.
Membership, Structure and Operations
The Committee shall be comprised of three or more
non-employee directors, each of whom is determined by the Board to be
“independent” under the rules promulgated by the SEC under the Securities
Exchange Act of 1934, and meet the financial literacy and experience
requirements under the rules or listing standards established by the New
York Stock Exchange, Inc. (“NYSE”), all as may be amended from time to time.
In addition, at least one member of the Committee must satisfy the
definition of audit committee financial expert as such term may be defined
from time to time under the rules promulgated by the SEC. The members of the
Committee shall be appointed by the Board, upon recommendation of the
Corporate Governance Committee, for one-year terms, or until their
successors are duly appointed and qualified.
The Board shall designate the Chairman of the Committee;
provided that if the Board does not designate a Chairman, the members
of the Committee, by majority vote, may designate one of the members of the
Committee to serve as Chairman until the Board designates a Chairman, upon
recommendation by the Corporate Governance Committee. All actions of the
Committee will require the vote of a majority of its members present at a
meeting of the Committee at which a quorum is present. The presence in
person or by telephone of a majority of the Committee’s members shall
constitute a quorum for any meeting of the Committee. The Board may remove
any Committee member at any time.
The Committee shall meet at least quarterly or more
frequently as it deems necessary, advisable or as circumstances dictate, and
shall report regularly to the Board.
The Committee shall periodically meet separately with the
Company’s management, internal auditors and with the independent auditors to
discuss any matters that the Committee or each of these groups believe
should be discussed privately. In addition, the Committee shall meet
quarterly with the independent auditors and management to review the
Corporation’s financial statements in a manner consistent with the
Committee’s responsibilities and duties set forth in this Charter. Meetings
may be called by the Chairman of the Committee, Chairman of the Board or
Chief Executive Officer of the Company. The Committee may delegate its
authority to subcommittees constituted by a member or members of the
Committee, provided that a report on any activities or actions is presented
to the full committee at its next scheduled meeting.
Special Limitation
If a Committee member simultaneously serves on the audit
committee of more than three public companies, including the Company’s, the
Board must determine that such simultaneous service would not impair such
member’s ability to serve effectively on this Committee and such
determination must be disclosed in the Company’s annual proxy statement.
Responsibilities and Duties
The Committee’s job is one of oversight and monitoring.
The Committee is not responsible for certifying the Company’s financial
statements or guaranteeing the independent auditor’s report. Fundamentally,
Swift Energy’s management is responsible for preparing the Company’s
consolidated financial statements and the Company’s independent auditors are
responsible for auditing those financial statements. The independent
auditors of Swift Energy must report directly to the Committee. The internal
auditors of Swift Energy report administratively to the management of the
Company and functionally to the Committee.
In discharging its oversight role, the Committee is
empowered to study or investigate any matter of concern that the Committee
deems appropriate and shall have the sole authority to retain outside legal,
accounting or other advisors for this purpose, including the authority to
approve the fees payable to such advisors. The Committee shall advise
management of the Company of appropriate finding levels required for payment
of compensation to any advisors retained by the Committee.
In carrying out its responsibilities and duties, the
Committee should design its policies and procedures to be flexible, so that
it may be in a position to react or respond appropriately to changing
circumstances or conditions and to ensure that the corporate accounting and
financial reporting practices of the Company, as well as the auditing
process, are in accordance with all applicable requirements, and also are
appropriately tailored for the Company’s specific business and financial
risks. In carrying out its duties and responsibilities, the following
functions are within the authority of the Committee:
Financial Reporting
1. Review and discuss with the Company’s management and its
independent auditors the audited consolidated financial statements,
including the disclosures in Management’s Discussion and Analysis,
in the Company’s Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of the Form 10-K)
and the interim financial results as well as the disclosures in
Management’s Discussion and Analysis in the Company’s quarterly
reports on Form 10-Q prior to filing with the SEC, and review with
the Company’s independent auditors the results of the annual audit
and the quarterly review and the matters required to be discussed by
Statement of Auditing Standards (“SAS”) No. 61, as amended.
2. Review in conjunction with the review of all financial
statements the quality of accounting principles and/or critical
accounting policies adopted by the Company, and discuss with the
Company’s independent auditors how the Company’s accounting
principles and/or critical accounting policies compare with those
used by the Company’s peers or leaders in its industry and whether
appropriate alternative accounting treatments of financial
information within generally accepted accounting principles have
been discussed with management, including the ramifications of use
of such alternative disclosures, along with consideration of the
treatment preferred by the Company’s independent auditors.
3. Review and discuss with the Company’s management and its
independent auditors, the quality and adequacy of the Company’s
internal controls and internal auditing procedures, as of the end of
the most recent fiscal year, including any significant deficiencies
in the design or operation of those controls which could adversely
affect the Company’s ability to record, process, summarize and
report financial data and any fraud that involves management or
other employees who have a significant role in the Company’s
internal controls, and discuss with the Company’s independent
auditors how the Company’s financial systems and controls compare
with practices of the Company’s peers in its industry.
4. On at least an annual basis, the Committee shall review and
discuss the adequacy and performance of the Company’s finance
function including, but not limited to:
(a) the finance organization;
(b) financial reporting policies and
practices including those regarding earnings press releases
and financial guidance policies;
(c) management information systems,
internal accounting and financial controls; and
(d) asset management policies, including
a review of investment policies, performance of short term
investments, and cash position.
5. Review prior to filing each annual report on Form 10-K and
quarterly report on Form 10-Q, all material off-balance sheet
transactions, arrangements, obligations, and other relationships of
the Company.
6. The Committee shall periodically discuss with the Company’s
independent auditors whether, in accordance with generally accepted
accounting principles and the rules of the SEC, all material
correcting adjustments identified by Company’s independent auditors
are reflected in the Company’s financial statements.
7. Review and timely discuss with the Company’s management and
independent auditors the effect of regulatory and accounting
initiatives.
8. Review disclosures made to the Audit Committee by the
Company’s Chief Executive Officer and Chief Financial Officer during
their certification process for each annual report on Form 10-K and
quarterly report on Form 10-Q about any significant deficiencies in
the design or operation of internal controls or material weaknesses
therein.
External Audit
9. The Committee shall be responsible for overseeing the
independence of the Company’s independent auditors.
10. In its discretion the Committee may request from the
Company’s independent auditors quarterly, and the Committee shall
require annually, a formal written statement delineating all
relationships between the auditors and the Company consistent with
the PCAOB’s applicable requirements.
11. Discuss with the Company’s independent auditors any such
disclosed relationships and their impact on the independent
auditors’ independence.
12. Set policies regarding the hiring by the Company of current
or former employees of the Company’s independent auditors.
13. The Committee shall have the ultimate authority and
responsibility for the appointment, termination, compensation and
oversight of the work of the Company’s independent auditors in
preparing or issuing an audit report or related work, including
resolving any disagreements between the Company’s management and its
independent auditors regarding financial reporting. The Committee
shall approve, in its sole discretion, any professional services to
be provided by the Company’s independent auditors, including audit
services and significant non-audit services (significant being
defined for these purposes as non-audit services for which fees in
the aggregate equal 5% or more of the base annual audit fee
paid by the Company to its independent auditors) before such
services are rendered, and consider the possible effect of the
performance of such latter services on the independence of the
auditors. The Committee may delegate preapproval authority to a
member of the Committee. The decisions of any Committee member to
whom pre-approval authority is delegated must be presented to the Ml
Committee at its next scheduled meeting. The Committee shall ensure
that approval of non-audit services are disclosed to investors in
periodic reports required by Section 13(a) of the Securities
Exchange Act of 1934. The Committee shall advise management of
appropriate funding levels required for payment of compensation to
the outside auditors for the purpose of preparing or issuing an
audit report or performing other audit, review or pre-approved
non-audit services.
14. At least annually, the Committee shall obtain and review a
report from the Company’s independent auditors describing: the
firm’s internal quality control procedures, any material issues
raised by the most recent internal 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 one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues.
15. The Committee shall meet with the Company’s independent
auditors without the presence of management at some point during all
quarterly meetings of the Committee, meet separately with the
internal auditors periodically and meet with management periodically
without the presence of the Company’s independent auditors.
16. The Committee shall periodically review and discuss the
adequacy and effectiveness of the Company’s disclosure controls and
management reports thereon.
17. The Committee shall evaluate whether it is appropriate to
adopt a policy of rotating the Company’s independent auditors on a
regular basis.
18. The Committee shall require the Company’s independent
auditors to perform timely reviews of the Company’s interim
financial reports.
19. The Committee shall review each annual audit with the
Company’s independent auditors. Such review should include:
(a) any difficulties encountered in the
course of the audit work, including any restrictions on the
scope of activities or access to required information, and
any disagreements with management;
(b) any changes in the planned scope of
the audit;
(c) any changes in the scope of
activities of the internal auditors and evaluations of the
impact of such changes on the conduct of the Company’s
independent auditors’ audit and/or any other implications of
such changes;
(d) the responsibilities, budget and
staffing of the internal audit function; and
(e) obtaining assurance from the
independent auditors that its obligations under Section 1OA
of the Securities Exchange Act of 1934 have not been
implicated.
Internal Audit
20. The Committee shall review the internal audit plan and
significant changes in planned activities; and review significant
findings resulting from internal audits and management’s
responsiveness to the findings.
21. The Committee shall review the internal auditors’ assessment
of the effectiveness of or weaknesses in, internal control systems.
22. The Committee shall evaluate the performance and independence
of the internal auditors on at least an annual basis.
External Reserve Engineers
23. The Committee shall review and confirm the appropriateness of
the process of selection of the Company’s independent reserve
engineers, in consultation with those members of management that the
Board deems knowledgeable in such area and focused upon confirmation
of the independence of such reserve engineering firm.
Compliance with Laws and Regulations
24. The Committee shall review, with the Company’s management and
its independent auditors, the Company’s procedures established to:
(a) prevent unlawful political
contributions, bribes, unexplained and unaccounted for
payments to intermediaries (foreign or US);
(b) ascertain whether there are any
unaccounted or off-book transactions; and
(c) identify payments in violation of
applicable laws and standards of business which are intended
to influence employees of potential customers to purchase
their products (commercial bribes, kickbacks, etc).
Other
25. The Committee shall establish procedures for (i) the receipt,
retention and treatment of complaints from employees of the Company
on financial reporting, accounting, internal accounting controls or
auditing matters, and (ii) anonymous and confidential submissions by
employees of the Company of concerns regarding questionable
financial reporting, accounting or auditing matters.
26. On an annual basis, the Committee shall review with the
Company’s independent auditors and/or internal auditors, if
applicable, audits of the employee benefit plans to determine that
there are proper Company procedures to ensure compliance with all
relevant laws and regulations.
27. On an annual basis, the Committee shall review the adequacy
of the Company’s and officers’ and directors’ liability insurance
coverage and review the Company’s insurance policies with respect to
risk assessment and risk management.
28. The Committee shall recommend whether each year’s audited
financial statements should be included in the Company’s Annual
Report.
29. The Committee shall conduct a self-evaluation of its
performance not less frequently than annually and report its
findings to the Board.
30. The Committee shall review and reassess the adequacy of this
Committee’s Charter on an annual basis and recommend any proposed
changes to the Board for approval, as well as periodically review
actions taken by the Committee so as to comply with the NYSE listing
standards or other applicable listing standards and the
Sarbanes-Oxley Act of 2002 or other applicable securities laws or
regulations.
31. Maintain minutes or other records of meetings and activities
of the Committee.
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