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Audit Committee Charter

I.  PURPOSE

The Audit Committee of American Bank Incorporated (the “Company”) is established by and amongst the Board of Directors for the primary purpose of assisting the Board in: 

Consistent with this function, the Audit Committee should encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels.  The Audit Committee should also provide an open avenue of communication among the independent auditors, financial and senior management, the internal auditing function, and the Board of Directors.

The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting, or other advisors as deemed appropriate to perform its duties and responsibilities.

The Company shall provide appropriate funding, as determined by the Audit Committee, for compensation to the independent auditor and to any advisers that the audit committee chooses to engage

The Audit Committee will primarily fulfill its responsibilities by carrying out the activities enumerated in Section III of this Charter.  The Audit Committee will report regularly to the Board of Directors regarding the execution of its duties and responsibilities.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with GAAP and applicable rules and regulations.  These are the responsibilities of management and the independent auditor.

II.  COMPOSITION AND MEETINGS

The Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be independent directors (as defined by all applicable rules and regulations, including Section 10A(m)(3) of the Securities Exchange Act of 1934), and 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.  All members of the Committee shall be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement, and one person shall have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience.  The board shall determine whether at least one member of the Committee qualifies as an “audit committee financial expert” in compliance with the criteria established by the SEC and other relevant regulations.  The existence of such member, including his or her name and whether or not he or she is independent, shall be disclosed in periodic filings as required by the SEC. 

The members of the Committee shall be elected by the Board and shall serve until their successors shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.  Audit committee members shall not simultaneously serve on the audit committee of more than two other public companies.

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. Each regularly scheduled meeting shall conclude with an executive session of the Committee absent members of management and on such terms and conditions as the Committee may elect.  As part of its job to foster open communication, the Committee should meet periodically with the Chief Financial Officer, the in-house internal auditor, outsourced internal auditors, and the independent auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. In addition, the Committee should meet annually with the independent auditors and management to discuss the annual audited financial statements, including the Company’s disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.  The Committee shall periodically report to the Board on its actions and shall prepare written minutes of each Committee meeting, which minutes shall be provided to the Board.

III. RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Audit Committee shall:

Documents/Reports/Accounting Information Review

1.  Review this Charter periodically and recommend to the Board of Directors any necessary amendments as conditions dictate.

2.  Review and discuss with management the Company’s annual financial statements, and all internal controls reports (or summaries thereof).

3.  Review the regular internal reports (or summaries thereof) to management prepared by the internal auditor and the outsourced internal auditors and management’s response to those reports.

Independent Auditors

4.  Appoint, compensate, and oversee the work performed by the independent auditor for the purpose of preparing or issuing an audit report or related work. Review the performance of the independent auditors and remove the independent auditors if circumstances warrant. The independent auditors shall report directly to the audit committee and the audit committee shall oversee the resolution of disagreements between management and the independent auditors in the event that they arise. Consider whether the auditor’s performance of permissible non-audit services is compatible with the auditor’s independence.

5.  Review with the independent auditor any problems or difficulties and management’s response, review the independent auditor’s attestation and hold timely discussions with the independent auditors regarding the following:

6.  At least annually, obtain and review a report by the independent auditor describing:

7.  Review and pre-approve both audit and non-audit services to be provided by the independent auditor. This duty may be delegated to one or more designated members of the Audit Committee with any such pre-approval reported to the audit committee at its next regularly scheduled meeting. The committee may also adopt policies and procedures for the pre-approval of audit and permissible non-audit services. 

8.  Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law. Ensure compliance with governing laws or regulations relating to the hiring of employees or former employees of the independent auditor.

Financial Reporting Processes and Accounting Policies

9.  Review with management major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies.

10.  Review analyses prepared by management (and the independent auditor as noted in item 6 above) setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.

11.  Review with management the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.

12.  Review and approve all related party transactions.

13.  Review complaints regarding accounting, internal accounting, or auditing matters.

14.  Ensure the confidentiality of anonymous submissions by employees regarding questionable accounting or auditing matters as provided in the Code of Ethics.

Internal Audit

15.  Review and advise on the selection and removal of the internal auditors.

16.  Review activities, organizational structure, and qualifications of the internal auditors.

17.  Annually, review and recommend changes (if any) to the scope of the internal audit function.

18.  Periodically review with the internal auditors any significant difficulties, disagreements with management, or scope restrictions encountered in the course of the function’s work.

19.  Periodically review with the internal auditors and management, the budget, staffing, and responsibilities of the internal audit function.

Legal Compliance, and Risk Management

20.  Review, with the organization’s counsel, legal compliance matters including corporate securities trading policies.

21.  Review, with the organization’s counsel, any legal matter that could have a significant impact on the organization’s financial statements.

22.  Discuss policies with respect to risk assessment and risk management. Such discussions should include the Company’s major financial and accounting risk exposures and the steps management has undertaken to control them.

Other Responsibilities

23.  Review with the independent auditors, the internal auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.

24.  Approve the report that the applicable law requires being included in the Company’s annual proxy statement.

25.  As appropriate, perform a self-assessment relative to the Audit Committee’s purpose, duties and responsibilities outlined herein.

26.  Periodically review updates on the administration of the Bank’s benefit plans, including the 401K Plan, Stock Options, Employee Stock Ownership Plan, Supplemental Executive Retirement Plan and the Bank-Owned Life Insurance Plan.

27.  Perform any other activities consistent with this Charter, the Company’s by-laws and governing law, as the Committee or the Board deems necessary or appropriate.

Last update: 5/19/20

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