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Exhibit 10.2
HPSC, Inc.
Audit Committee Charter
Adopted by the Board of Directors on 4/20/00
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PURPOSE AND OBJECTIVES
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the financial reporting process. This will include, but
is not limited to, oversight of the Company's systems of internal accounting and
financial controls, the Company's process for monitoring compliance with
applicable law and ethics programs, and the annual independent audit of the
Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention, with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee
represent the Company's shareholders; accordingly, the outside auditor is
ultimately accountable to the Board and the Committee.
MEMBERSHIP
The Committee, which is appointed by the Board, shall comprise not fewer than
three members of the Board, and the Committee's composition will meet the
requirements of the Audit Policy Committee of the NASD.
Accordingly all members of the Committee will be directors -
- - who have no relationship to the Company that may interfere with their
independence from management; and
- - who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In addition,
at least one member of the Committee will have accounting or related
financial management expertise and sophistication.
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DUTIES AND RESPONSIBILITIES
The Committee's job is one of oversight. The Company's management is responsible
for preparing the Company's financial statements, and the outside auditors are
responsible for auditing those financial statements. The Committee does not plan
or conduct audits or determine whether the Company's financial statements are
complete and accurate and in accordance with generally accepted accounting
principles. The Company's financial managers and the outside auditor, have more
time, knowledge and detailed information on the Company than do Committee
members. Consequently, in carrying out its oversight responsibilities, the
Committee is not providing any expert or special assurance as to the Company's
financial statements or any professional certification to the auditor's work. It
is also not the duty of the Committee to resolve disagreements, if any, between
management and the outside auditor.
The Committee shall have the following duties and responsibilities:
(1) Review with management and the outside auditor the audited financial
statements to be included in the Company's Annual Report on Form 10-K
(or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K) and review and consider with the outside auditor
the matters required to be discussed by the Statement of Auditing
Standards (`SAS') No. 61.
(2) As a whole, or through the Committee chair, review with the outside
auditor the Company's interim financial results to be included in the
Company's quarterly reports to be filed with the Securities and
Exchange Commission and the matters required to be discussed by SAS
No. 61. This review will occur prior to the Company's filing of Form
10-Q.
(3) Review the analysis prepared by management and the outside auditor of
significant financial reporting issues and judgements made in
connection with the preparation of the Company's financial statements.
(4) Review the annual audit plan of the outside auditor. Ensure receipt
from the outside auditor of a formal written statement delineating all
relationships between the auditor and the Company, consistent with
Independence Standards Board Standard 1; actively engage in a dialogue
with the auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
auditor; and take, or recommend that the full Board take, appropriate
action to ensure the independence of the outside auditor.
(5) Review and discuss with management and the outside auditor the
Company's internal control procedures and practices for accomplishing
proper financial management, safeguarding assets, authorizing and
recording transactions and complying with Company policies and ethical
practices and any comments of the outside auditor with respect to such
policies and practices.
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(6) Review with management and the outside auditor any significant changes
in the Company's accounting principles or financial reporting
practices.
(7) Consider the outside auditor's ultimate accountability to the Board
and the Committee, as representatives of the shareholders, when
evaluating, and, where appropriate, replacing the outside auditor (and
in nominating the outside auditor to be proposed for shareholder
approval in any proxy statement).
(8) Review with the outside auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
cover any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
(9) Review compliance with applicable regulatory and financial reporting
requirements.
(10) Conduct such other reviews as are necessary or advisable to discharge
the foregoing responsibilities.
(11) Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
(12) Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
(13) Meet as a Committee four times per year, or more frequently as needed,
to carry out the foregoing duties and responsibilities.
(14) Report to the Board at its next meeting after each Committee meeting.