For Further Information Contact:
J. Gerald Bazewicz
President and
Chief Executive Officer
(570) 752-3671
Exhibit 99.1
FIRST KEYSTONE CORPORATION
AUDIT COMMITTEE CHARTER
MISSION STATEMENT
The Audit Committee is appointed by the Board of Directors to
assist the Board in fulfilling its oversight responsibilities.
The Audit Committee's primary duties and responsibilities are to:
* Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, risk management and regulatory compliance.
* Monitor the independence and performance of the Company's
independent auditors and internal auditing department.
* Provide an avenue of communication among the independent
auditors, management, the internal auditing department and
the Board of Directors.
To effectively perform his or her role, each Committee member
will obtain an understanding of the detailed responsibilities of
Audit Committee membership.
COMMITTEE COMPOSITION
The Audit Committee and its members shall meet all applicable
requirements of the National Securities Exchange or National
Securities Association on which the corporation is listed, or
shall have received an exemption therefrom.
The Audit Committee will consist of at least three and no more
than six members of the Board of Directors. The Board nominating
committee will appoint committee members and the committee chair.
Each committee member will be both independent and financially
literate. The Audit Committee shall make every effort to have at
least one member who shall be designated as the "financial
expert," as defined by applicable legislation and regulation. No
committee member shall simultaneously serve on the audit
committees of more than two other public companies.
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MEETINGS
The committee will meet at least four times a year, with
authority to convene additional meetings, as circumstances
require. All committee members are expected to attend each
meeting, in person or via tele- or video-conference. The
committee will invite members of management, auditors or others
to attend meetings and provide pertinent information, as
necessary. It will meet separately, periodically, with
management, with internal auditors and with external auditors.
It will also meet periodically in executive session. Meeting
agendas will be prepared and provided in advance to members,
along with appropriate briefing materials. Minutes will be
prepared.
ROLES AND RESPONSIBILITIES
The committee will carry out the following responsibilities:
Financial Statements
____________________
1. Review significant accounting and reporting issues and
understand their impact on the financial statements. These
issues include:
* Complex or unusual transactions and highly judgmental
areas
* Major issues regarding accounting principles and
financial statement presentations, including any
significant changes in the Company's selection or
application of accounting principles
* The effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the financial
statements of the Company
2. Review analyses prepared by management and/or the
independent auditor 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.
3. Review with management and the external auditors the results
of the audit, including any difficulties encountered. This
review will include any restrictions on the scope of the
independent auditor's activities or on access to requested
information, and any significant disagreements with
management.
4. Discuss the annual audited financial statements and
quarterly financial statements with management and the
external auditors, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations."
5. Review disclosures made by CEO and CFO during the Forms 10-K
and 10-Q certification process about significant
deficiencies in the design or operation of internal controls
or any fraud that involves management or other employees who
have a significant role in the Company's internal controls.
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6. Discuss earnings press releases (particularly use of "pro-forma,"
or "adjusted" non-GAAP, information), as well as
financial information and earnings guidance provided to
analysts and rating agencies. This review may be general
(i.e., the types of information to be disclosed and the type
of presentations to be made). The Audit Committee Chairman
should discuss with the external auditors each release in
advance.
Internal Control
________________
1. Consider the effectiveness of the Company's risk management
program and internal control system, including information
technology security and control.
2. Understand the scope of internal and external auditors'
review of internal control over financial reporting, and
obtain reports on significant findings and recommendations,
together with management's responses.
Internal Audit
______________
1. Review with management and internal audit the committee
charter, audit schedule and approach, recommendation
follow-up matrix, staffing and organizational structure of the
internal audit function.
2. Ensure there are no unjustified restrictions or limitations,
and review and concur in the appointment, replacement or
dismissal of the chief audit executive.
3. Review the effectiveness of the internal audit function,
including the audit risk assessment and compliance with
internal audit policy and procedures manual.
4. On a periodic basis, meet separately with internal audit to
discuss any matters that the committee of internal audit
believes should be discussed privately.
External Audit
______________
1. Review the external auditors' audit scope and approach,
including coordination of audit effort with internal audit.
2. Review the performance of the external auditors, and
exercise final approval on the appointment or discharge of
the auditors. In performing this review, the committee
will:
* At least annually, obtain and review a report 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 any such
issues; and (to assess the auditor's independence) all
relationships between the independent auditor and the
Company.
* Take into account the opinions of management and
internal audit.
* Review and evaluate the lead partner of the independent
auditor.
* Present its conclusions with respect to the external
auditor to the Board.
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3. Ensure the rotation of the lead audit partner and other
audit partners is in accordance with the rules and
regulations issued by the Securities and Exchange
Commission.
4. Present its conclusions with respect to the independent
auditor to the full Board.
5. Set clear hiring policies for employees or former employees
of the independent auditors.
6. On a regular basis, meet separately with the external
auditors to discuss any matters that the committee or
auditors believe should be discussed privately.
7. Review and discuss with the independent accountants, as may
be required by law or regulation:
* All critical accounting policies and practices to be
used;
* All alternative treatments of financial information
within GAAP that have been discussed with management,
ramifications or the use of such alternative
disclosures and treatments, and the treatment preferred
by the independent accountant, and;
* Other material written communications between the
independent accountant and management, such as any
management letter or schedule of unadjusted
differences.
Compliance
__________
1. Review the effectiveness of the system for monitoring
compliance with laws and regulations and the results of
management's investigation and follow-up (including
disciplinary action) of any instances of noncompliance.
2. Establish procedures for:
* The receipt, retention, and treatment of complaints
received by the listed issuer regarding accounting,
internal accounting controls or auditing matters; and
* The confidential, anonymous submission by employees of
the listed issuer of concerns regarding questionable
accounting or auditing matters.
3. Review the findings of any examinations by regulatory
agencies, and any auditor observations.
4. Review the process for communicating the code of conduct to
Company personnel, and for monitoring compliance therewith.
5. Obtain regular updates from management and Bank legal
counsel regarding compliance matters.
Reporting Responsibilities
__________________________
1. Regularly report to the Board of Directors about committee
activities and issues that arise with respect to the quality
or integrity of the Company's financial statements, and
Company's compliance with legal or regulatory requirements,
the performance and independence of the Company's
independent auditors, and the performance of the internal
audit function.
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2. Provide an open avenue of communication between internal
audit, the external auditors, and the Board of Directors.
3. Report annually to the shareholders, describing the
committee's composition, responsibilities and how they were
discharged, and any other information required by rule,
including approval of non-audit services.
4. Review any other reports the Company issues that relate to
committee responsibilities.
Other Responsibilities
______________________
1. Discuss with management the Company's major policies with
respect to risk assessment and risk management.
2. Perform other activities related to this charter as
requested by the Board of Directors.
3. Institute and oversee special investigations as needed.
4. Review and assess the adequacy of the committee charter
annually, requesting Board approval for proposed changes,
and ensure appropriate disclosure as may be required by law
or regulation.
5. Confirm annually that all responsibilities outlined in this
charter have been carried out.
6. Evaluate the committee's and individual members' performance
at least annually.
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