Exhibit 10.18
WSB FINANCIAL GROUP, INC.
AUDIT COMMITTEE CHARTER
1. ROLE
The Audit Committee of the Board of Directors assists the Board of Directors in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing, and reporting practices of the Company, and such other
duties as directed by the Board. The Committee's purpose is to oversee the
accounting and financial reporting processes of the Company, the audits of the
Company's financial statements, the qualifications of the public accounting firm
engaged as the Company's independent auditor to prepare or issue an audit report
on the financial statements of the Company, and the performance of the Company's
internal audit function and independent auditor. The Committee's role includes
reviewing and assessing the qualitative aspects of financial reporting to
shareholders, the Company's processes to manage business and financial risk, and
compliance with significant applicable legal, ethical, and regulatory
requirements. The Committee is directly responsible for the appointment,
compensation, retention, and oversight of the independent auditor.
2. MEMBERSHIP
The membership of the Committee consists of at least three directors, all of
whom shall meet the independence requirements established by the Board and
applicable laws, regulations, and listing requirements. Each member shall in the
judgment of the Board have the ability to read and understand fundamental
financial statements. At least one member of the Committee shall in the judgment
of the Board be an "audit committee financial expert" as defined by the rules
and regulations of the Securities and Exchange Commission, and at least one
member (who may also serve as the audit committee financial expert) shall in the
judgment of the Board meet the financial sophistication standard as defined by
the requirements of Nasdaq. The Board appoints the members of the Committee and
the chairman. The Board may remove any member from the Committee at any time
with or without cause.
Generally, no member of the Committee may serve on more than three audit
committees of publicly traded companies (including the Audit Committee of the
Company) at the same time. For this purpose, service on the audit committees of
a parent and its substantially owned subsidiaries counts as service on a single
audit committee.
3. OPERATIONS
The Committee meets at least six times a year. Additional meetings may occur as
the Committee or its chair deems advisable. The Committee will cause to be kept
adequate minutes of all its proceedings and will report on its actions and
activities at the next quarterly meeting of the Board. Committee members will be
furnished with copies of the minutes of each meeting and any action taken by
unanimous consent. The Committee is governed by the same rules regarding
meetings (including meetings by conference telephone or similar communications
equipment), action without meetings, notice, waiver of notice, and quorum and
voting requirements as are
applicable to the Board. The Committee is authorized and empowered to adopt its
own rules of procedure not inconsistent with (a) any provision of this Charter,
(b) any provision of the Bylaws of the Company, or (c) the laws of the state of
Washington.
4. COMMUNICATIONS
The independent auditor reports directly to the Committee. The Committee is
expected to maintain free and open communication with the independent auditor,
the internal auditors, and management. This communication will include periodic
private executive sessions with each of these parties.
5. EDUCATION
The Company is responsible for providing new members with appropriate
orientation briefings and educational opportunities, and the full Committee with
educational resources related to accounting principles and procedures, current
accounting topics pertinent to the Company, and other material as may be
requested by the Committee. The Company will assist the Committee in maintaining
appropriate financial literacy.
6. AUTHORITY
The Committee will have the resources and authority necessary to discharge its
duties and responsibilities. The Committee has sole authority to retain and
terminate outside counsel or other experts or consultants, as it deems
appropriate, including sole authority to approve the firms' fees and other
retention terms. The Committee will be provided with appropriate funding by the
Company, as the Committee determines, for the payment of compensation to the
Company's independent auditor, outside counsel, and other advisors as it deems
appropriate, and ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties. In discharging its
oversight role, the Committee is empowered to investigate any matter brought to
its attention. 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.
The Committee may form and delegate authority to subcommittees and may delegate
authority to one or more designated members of the Committee.
7. RESPONSIBILITIES
The Committee's specific responsibilities in carrying out its oversight role are
delineated below. The responsibilities will be updated annually to reflect
changes in regulatory requirements, authoritative guidance, and evolving
oversight practices. As the compendium of Committee responsibilities, the most
recently updated list of responsibilities will be considered to be an addendum
to this Charter.
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The Committee relies on the expertise and knowledge of management, the internal
auditors, and the independent auditor in carrying out its oversight
responsibilities. Management of the Company is responsible for determining 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, to conduct investigations, or to assure
compliance with laws and regulations or the Company's standards of business
conduct, codes of ethics, internal policies, procedures, and controls.
LIST OF RESPONSIBILITIES:
- The agenda for Committee meetings will be prepared in consultation
between the Committee chair (with input from the Committee members),
management, and the independent auditor.
- Review and update the Audit Committee Charter and List of
Responsibilities annually.
- Complete an annual evaluation of the Committee's performance.
- Provide a report in the annual proxy that includes the Committee's
review and discussion of matters with management and the independent
auditor.
- Include a copy of the Committee charter as an appendix to the proxy
statement at least once every three (3) years.
- Appoint or replace the independent auditor and approve the terms on
which the independent auditor is engaged for the ensuing fiscal year.
- At least annually, evaluate the independent auditor's qualifications,
performance, and independence, including that of the lead partner. The
evaluation will include obtaining a written report from the
independent auditor describing the firm's internal quality control
procedures; any material issues raised by the most recent internal
quality control review, or PCAOB review, of the firm or by any inquiry
or investigation by governmental or professional authorities within
the past five (5) years, concerning an independent audit or audits
carried out by the firm, and any steps taken to deal with those
issues; and all relationships between the independent auditor and the
Company.
- Resolve any disagreements between management and the independent
auditor about financial reporting.
- Establish and oversee a policy designating permissible services that
the independent auditor may perform for the Company, providing for
preapproval of those services by the Committee subject to the de
minimis exceptions permitted under applicable rules, and
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quarterly review of any services approved by the designated auditor
under the policy and the firm's non-audit services and related fees.
- Review the responsibilities, functions, and performance of the
Company's internal audit department.
- Ensure receipt from the independent auditor of a formal written
statement delineating all relationships between the auditor and the
Company, consistent with Independence Standards Board Standard No. 1,
and actively engage in a dialogue with the auditor about any disclosed
relationships or services that may impact the objectivity and
independence of the auditor, and take appropriate action to oversee
the independence of the independent auditor.
- Advise the Board about the Committee's determination whether the
Committee consists of three or more members who are financially
literate, including at least one member who has financial
sophistication and is a financial expert.
- Inquire of management and the independent auditor about:
a. Significant risks or exposures. Review the Company's policies for
risk assessment and risk management, and assess the steps management has taken
to control such risk to the Company.
b. The Company's business continuity and disaster recovery planning.
- Review with management and the independent auditor, the audit scope
and plan, and coordination of audit efforts to ensure completeness of
coverage, reduction of redundant efforts, the effective use of audit
resources, and the use of independent public accountants other than
the appointed auditors of the Company.
- Consider and review with management and the independent auditor:
a. The Company's annual assessment of the effectiveness of its
internal controls and the independent auditor's attestation and report about the
Company's assessment.
b. The adequacy of the Company's internal controls, including
computerized information system controls and security.
c. Any related significant findings and recommendations of the
independent auditor and internal audit together with management's responses.
- Review with management any significant changes to GAAP policies or
standards.
- Review with management and the independent auditor at the completion
of the annual audit:
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a. The Company's annual financial statements and related footnotes.
b. The independent auditor's audit of the financial statements and its
report thereon.
c. Any significant changes required in the independent auditor's audit
plan.
d. Any serious difficulties or disputes with management encountered
during the course of the audit, and management's response.
\ e. Other matters related to the conduct of the audit, which are to be
communicated to the Committee under generally accepted auditing standards.
- Review with management and the independent auditor at least annually
the Company's critical accounting policies.
- Consider and review with management:
a. Significant findings by the independent auditor during the year and
management's responses.
b. Any difficulties encountered in the course of their audit work,
including any restrictions on the scope of their work or access to required
information.
c. Any changes required in the planned scope of their audit plan.
- Participate in a telephonic meeting among management and the
independent auditor before each earnings release to discuss the
earnings release, financial information, and any earnings guidance.
- Review and discuss with management and the independent auditor the
Company's quarterly financial statements.
- Review the periodic reports of the Company with management and the
independent auditor prior to filing of the reports with the SEC,
including the disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
- In connection with each periodic report of the Company, review:
a. Management's disclosure to the Committee and the independent
auditor under Section 302 of the Sarbanes-Oxley Act, including identified
changes in internal control over financial reporting.
b. The contents of the Chief Executive Officer and the Chief Financial
Officer certificates to be filed under Sections 302 and 906 of the
Sarbanes-Oxley Act.
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- Monitor the appropriate standards adopted as a code of conduct for the
Company.
- Review with the designated "Compliance Officer" legal and regulatory
matters that may have a material impact on the financial statements,
related Company compliance policies and programs, and reports received
from regulators.
- Develop, review, and oversee procedures for (i) the receipt,
retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, and auditing
matters and (ii) the confidential, anonymous submission of employee
concerns regarding accounting or auditing matters.
- 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 Audit Committee.
- Meet with management in executive sessions to discuss any matters the
Committee or management believes should be discussed privately with
the Audit Committee.
- Set clear hiring policies for the Company's hiring of employees or
former employees of the independent auditor who were engaged in the
Company's account, and ensure the policies comply with any regulations
applicable to the Company.
- Review and approve all related party transactions described in Item
404 of the SEC Regulation S-K, including:
- Transactions to which the Company or a subsidiary will be a party
that involve over $60,000 and in which any director or nominee,
executive officer, 5% or more shareholder, or any family member
of the foregoing has or will have a direct or indirect material
interest;
- Specified business relationships between the Company and a
director or nominee that have existed within the past fiscal
year; and
- Indebtedness to the Company or a subsidiary exceeding $60,000 by
a director, nominee or any family member, related entities, or
specified estates of those persons.
It is WSB Financial Group's intention that this Audit Committee Charter be its
Audit Committee Charter complying with the standards set forth by Securities and
Exchange Commission and Nasdaq.
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