The Audit Committee (the Committee) is established by and amongst the Board of Directors for the primary purpose of assisting the Board in oversight of:
- 1. Integrity of the Company's financial statements,
- 2. Company's compliance with legal and regulatory requirements,
- 3. Independent auditor's qualifications and independence, and
- 4. Performance of the Company's internal audit function and independent auditor.
In fulfilling their responsibilities hereunder, it is recognized that the members of the Committee are not full-time employees of the Company and are not, and do not represent themselves to be, accountants or auditors by profession. As such, it is not the duty of the Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures, and each member of the Committee shall be entitled to rely on (i) the judgment of those persons and organizations within and outside the Company that it receives information from and (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations.
The Committee has the authority to make inquiries and obtain information from the Senior Vice President (SVP) - Office of Internal Governance (OIG), General Counsel, and the Vice President (VP) - Corporate Audit as it deems necessary or appropriate to support the Board's oversight responsibility with respect to the implementation and effectiveness of Boeing's ethics and compliance program.
The Committee has the authority to obtain advice and assistance from outside legal, accounting, or other advisors as deemed necessary to perform its duties and responsibilities. The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor, outside legal, accounting, or other advisers that the Committee chooses to engage.
The Committee shall consist of three or more directors who meet the independence and expertise requirements of the New York Stock Exchange (NYSE) and the rules of the Securities and Exchange Commission (SEC) and are free from any relationship, including disallowed compensatory arrangements, that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. The chairperson and members of the Committee shall be appointed by the Board of Directors and may be removed by the Board at its discretion. At least one member of the Committee shall be a "financial expert," as determined by the Board, in compliance with the criteria established by the SEC.
Committee meetings shall be in conjunction with regular Board of Directors meetings and at such other times as called by or on behalf of the chairperson of the Committee.
A majority of the members of the Committee shall constitute a quorum. The Committee shall act only by (i) the affirmative vote of a majority of members present at a meeting provided that any action under this clause (i) shall require the affirmative vote of at least two members of the Committee, or (ii) unanimous consent. The Committee meets regularly in executive session.
The SVP-OIG and the VP-Corporate Audit shall attend all meetings of the Committee. The Committee may invite to its meetings any other member of management, including the Chief Executive Officer, and such other persons as it deems appropriate in order to carry out its duties and responsibilities. All members of the Committee are to be available to meet with the SVP-OIG, the General Counsel, the VP-Corporate Audit, and the independent auditor outside of regularly scheduled meetings as needed.
The Committee's responsibilities include the following:
- 1. Appoint, retain, compensate, evaluate, and terminate, if necessary the independent auditor. The Committee should present its conclusions with respect to the independent auditor to the Board of Directors. The independent auditor is the registered public accounting firm that will be retained to perform audit services for the Company, any of its subsidiaries, or any related parties, including employee benefit plans sponsored by the Company.
- 2. Review and pre-approve both audit and non-audit services to be provided by the independent auditor.
- 3. Review and advise on the selection and removal of the VP-Corporate Audit. Additionally, the Committee will review, recommend changes to, and approve the Internal Audit Charter.
- 4. Obtain and review, on an annual basis, a formal written report prepared by the independent auditor 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 such issues; and
- All relationships between the independent auditor and the Company (for purposes of assessing the auditor's independence); includes discussion and evaluation of such relationships, and recommending that the Board of Directors take appropriate action in response to the independent auditor's report to satisfy itself of the independent auditor's independence.
- 5. Discuss with management or the independent auditor, as appropriate, the matters required to be discussed under applicable legal, regulatory and NYSE requirements relating to the conduct of the audit or quarterly review. This includes:
- Independent auditor responsibility under generally accepted auditing standards;
- All significant and critical accounting policies and practices;
- Any deficiency in the Company's internal control over financial reporting that have been classified as significant deficiency or material weaknesses; any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal controls;
- Management judgments and accounting estimates;
- All alternative treatments of financial information within accounting principles generally accepted in the United States of America (GAAP) that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures, and the treatment preferred by the independent auditor;
- Material written communications between the independent auditor and management including, but not limited to, the engagement letter, independence letter, management representation letter, management letter, and schedule of audit adjustments;
- Report on Form 10-K and other information in the Annual Report;
- Disagreements with management, including management's response;
- Difficulties or problems encountered in performing the audit, including management's response;
- Consultations with other accountants;
- Major issues discussed with management prior to retention; and
- An analysis of the auditor's judgment about the quality of the Company's accounting principles, setting forth significant reporting issues and judgments made in connection with the preparation of the financial statements.
- 6. Review with the independent auditors, internal auditors, and members of senior management the adequacy and effectiveness of the Company's financial controls and financial reporting processes.
- 7. Meet periodically or at least annually with management, the VP-Corporate Audit, and the independent auditors in separate executive sessions.
- 8. Meet to review and discuss with management and the independent auditors, prior to filing, the Company's quarterly and annual reports filed with the SEC on Forms 10-Q and l0-K, including the Management's Discussion and Analysis of Financial Condition and Results of Operations, any management certifications as required by the Sarbanes-Oxley Act of 2002 and relevant reports rendered by the independent auditors.
- 9. Review and discuss earnings press releases with management as well as financial information and earnings guidance provided to analysts and rating agencies. Discussions of earnings press releases as well as financial information and earnings guidance may be done generally (i.e., discussion of the types of information to be disclosed and the type of presentation to be made). Discussions need not occur in advance of each earnings press release or each instance in which earnings guidance is provided.
- 10. Prepare a report and other additional information required for inclusion in the annual proxy statement.
- 11. Review this charter on an annual basis and recommend to the Board of Directors changes to the charter as appropriate to support an affirmation by the Board of Directors.
- 12. Discuss policies with respect to risk assessment and risk management.
- 13. At least annually receive reporting by the SVP-OIG on the Company's compliance with its risk management processes, and by the VP-Corporate Audit on audit activities and trends. Receive reporting at least semi-annually by the General Counsel on pending Law Department investigations of alleged or potentially significant violations of laws, regulations, or Company policies.
- 14. Review management's assessment of compliance with laws, regulations, and Company policies relative to payments to individuals or organizations retained as foreign sales consultants.
- 15. Meet with the SVP-OIG to review the Company's ethics and business conduct programs and the Company's compliance with the principles of the Defense Industry Initiative on Business Ethics and Conduct.
- 16. Review significant pending and threatened litigation, the status of advancement of expenses to employees involved in company-related legal proceedings, and related indemnification.
- 17. Set clear hiring policies, compliant with governing laws or regulations, for employees or former employees of the independent auditor.
- 18. Establish and maintain procedures for:
- The receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
- The confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters.
- 19. Perform an annual performance evaluation of the Committee.
- 20. Report annually to the Board of Directors regarding the execution of the Committee's duties and responsibilities as well as 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 Company's independent auditors, or the performance of the internal audit function.
- 21. Present to the Board of Directors such comments and recommendations as the Committee deems appropriate, and perform such other duties as may be assigned by the Board or deemed appropriate by the Committee within the context of this charter.
- 22. Report to the Board, no less than annually, with respect to the implementation and effectiveness of the Company's ethics and compliance programs to support the Board's oversight responsibility.
- 23. Periodically assess the adequacy and need for additional continuing director education programs relevant to the Committee's responsibilities.