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EXHIBIT 14.2
SAND TECHNOLOGY INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The Audit Committee (the "Committee") of Sand Technology Inc. (the
"Corporation") is a committee of the Board of Directors which has responsibility
under the governing legislation of the Corporation to review the financial
statements, accounting policies and reporting procedures of the Corporation.
The primary function of the Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing the financial reports
and other financial information provided by the Corporation to any governmental
body or the public, the systems of internal controls of the Corporation
regarding finance, accounting and legal compliance that management and the Board
have established, and the auditing, accounting and financial reporting processes
of the Corporation generally. Consistent with this function, the Committee
should encourage continuous improvement of, and should foster adherence to, the
policies, procedures and practices at all levels of the Corporation.
The primary duties and responsibilities of the Committee are to:
o Serve as an independent and objective party to monitor the financial
reporting process and the system of internal controls of the
Corporation.
o Monitor the independence and performance of the auditor appointed
pursuant to the CANADA BUSINESS CORPORATIONS ACT (the "Auditor") and
the internal audit function of the Corporation.
o Provide an open avenue of communication among the Auditor, financial
and senior management and the Board of Directors.
The Committee will primarily fulfill these responsibilities by carrying out
the activities enumerated in Section IV of this Charter.
II. COMPOSITION
o The Committee shall be comprised of three or more directors, each of
whom shall be independent non-management directors, as determined by
the Board of Directors. The composition of the Committee shall adhere
to all applicable corporate and securities laws and all requirements
of the stock exchanges on which shares of the Corporation are listed.
In particular, the composition of the Committee
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shall be in accordance with (i) the U.S. Securities Exchange Act of
1934, as amended, (ii) the NASDAQ listing standards regarding the
composition of the Committee (including concept of "independence" as
established by NASDAQ) and the required qualifications and experience
of the members of the Committee, subject to any exemptions or other
relief that may be granted from time to time.
o All members of the Committee shall have a working familiarity with
basic finance and accounting practices, and at least one member of the
Committee shall be a "financial expert" in accordance with applicable
laws and all requirements of the stock exchanges on which shares of
the Corporation are listed.
o Members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board (typically held immediately after
the annual meeting of shareholders) or such other times as shall be
determined by the Board and shall serve until the next such meeting or
until their successors shall be duly elected and qualified.
o Any member of the Committee may be removed or replaced at any time by
the Board of Directors and shall cease to be a member of the Committee
as soon as such member ceases to be a director. Subject to the
foregoing, each member of the Committee shall hold such office until
the next annual meeting of shareholders after his or her election as a
member of the Committee.
o The members of the Committee shall be entitled to receive such
remuneration for acting as members of the Committee as the Board of
Directors may from time to time determine.
III. MEETINGS
o The Committee may appoint one of its members to act as Chairman of the
Committee. The Chairman will appoint a secretary who will keep minutes
of all meetings (the "Secretary"). The Secretary does not have to be a
member of the Committee or a director and can be changed by simple
notice from the Chairman.
o No business may be transacted by the Committee except at a meeting at
which a quorum of the Committee is present or by a resolution in
writing signed by all members of the Committee. A majority of the
members of the Committee shall constitute a quorum, provided that if
the number of members of the Committee is an even number, one half of
the number of members plus one shall constitute a quorum.
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o The Committee will meet as many times as is necessary to carry out its
responsibilities but in no event will the Committee meet less than
four times a year. The Committee shall meet at least once annually
with the Auditor, with management not present. As part of its job to
foster open communication, the Committee should meet at least annually
with management, and the Auditor in separate executive sessions to
discuss any matters that the Committee or each of these parties
believe should be discussed privately. In addition, the Committee
shall meet with the Auditor and management at least quarterly to
review the financial statements of the Corporation.
o The time at which, and the place where, the meetings of the Committee
shall be held, the calling of meetings and the procedure in all
respects of such meetings shall be determined by the Chairman, unless
otherwise provided for in the By-Laws of the Corporation or otherwise
determined by resolution of the Board of Directors.
o The Committee may invite to, or require the attendance at, any meeting
of the Committee, such officers and employees of the Corporation,
legal counsel or other persons as it deems necessary in order to
perform its duties and responsibilities. The Auditor and the internal
auditor should also be requested or required to attend meetings of the
Committee and make presentations to the Committee as appropriate.
o Subject to the provisions of the governing legislation of the
Corporation and applicable regulations and stock exchange rules, if
required for expediency or to prevent loss to the Corporation, the
Chairman of the Committee may exercise the powers of the Committee in
between meetings of the Committee. In such event, the Chairman shall
immediately report to the members of the Committee and the actions or
decisions taken in the name of the Committee shall be recorded in the
proceedings of the Committee.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
DOCUMENTS/REPORTS REVIEW
o Review and recommend for approval to the Board of Directors of the
Corporation any revisions or updates to this Charter. This review
should be done periodically, but at least annually, as conditions
dictate.
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o Review the interim unaudited quarterly financial statements and the
annual audited financial statements, and the related press releases of
the Corporation and report on them to the Board of Directors.
o Satisfy itself, on behalf of the Board of Directors, that the
unaudited quarterly financial statements and annual audited financial
statements of the Corporation are fairly presented both in accordance
with generally accepted accounting principles and otherwise, and
recommend to the Board of Directors whether the quarterly and annual
financial statements should be approved.
o Satisfy itself, on behalf of the Board of Directors, that the
information contained in the quarterly financial statements of the
Corporation, annual report to shareholders and other financial
publications, such as Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Annual Report on
Form 20-F and similar documentation required pursuant to the laws of
the United States does not contain any untrue statement of any
material fact or omit to state a material fact that is required or
necessary to make a statement not misleading, in light of the
circumstances under which it was made.
o Review any reports or other financial information of the Corporation
submitted to any governmental body, or the public, including any
certification, report, opinion or review rendered by the Auditor.
o Review, and if deemed advisable, approve all related party
transactions as defined in the governing legislation of the
Corporation and in any applicable regulations and stock exchange
rules including the NASDAQ Corporate Governance Rules.
o Have the right, for the purpose of performing their duties: (i) to
inspect all the books and records of the Corporation and its
subsidiaries; (ii) to discuss such accounts and records and any
matters relating to the financial position of the Corporation with the
officers and auditors of the Corporation and its subsidiaries and the
Auditor; (iii) to commission reports or supplemental information
relating to the financial information; (iv) to require the Auditor to
attend any or every meeting of the Committee; and (v) to engage such
independent counsel and other advisors as are necessary in the
determination of the Committee.
o Permit the Board of Directors to refer to the Committee such matters
and questions relating to the financial position of the Corporation
and its affiliates or the reporting related to it as the Board of
Directors may from time to time see fit.
INDEPENDENT AUDITOR
o Be directly and solely responsible for the appointment, compensation,
and oversight of the work of the Auditor of the Corporation, with such
Auditor being ultimately accountable to the Board and the Committee.
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o Act as the Auditor's channel of direct communication to the
Corporation. In this regard, the Committee shall, among other things,
receive all reports from the Auditor of the Corporation, including
timely reports of:
1. all critical accounting policies and practices to be used;
2. all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with the management of the Corporation, ramifications of the use
of such alternative disclosures and treatments, and the treatment
preferred by the Auditor of the Corporation; and
3. other material written communications between the Auditor and the
management of the Corporation, such as any management letter or
schedule of unadjusted differences.
o Satisfy itself, on behalf of the Board of Directors, that the Auditor
is "independent" of management, within the meaning given to such term
in the rules and pronouncements of the applicable regulatory
authorities and professional governing bodies. In furtherance of the
foregoing, the Committee shall request that the Auditor at least
annually provide a formal written statement delineating all
relationships between the Auditor and the Corporation consistent with
the rules of NASDAQ, and request information from the Auditor and
management to determine the presence or absence of a conflict of
interest. The Committee shall actively engage the Auditor in a
dialogue with respect to any disclosed relationships or services that
may impact the objectivity and independence of the Auditor. The
Committee shall take, or recommend that the full Board take,
appropriate action to oversee the independence of the Auditor.
o Be responsible for preapproving all audit and non-audit services
provided by the Auditor; provided, however, that the Committee shall
have the authority to delegate such responsibility to one or more of
its members to the extent permitted under applicable law and stock
exchange rules.
o Review the performance of the Auditor and make recommendations to the
Board of Directors as to whether or not to continue to engage the
Auditor.
o Determine and review the remuneration of the Auditor and any
independent advisors (including independent counsel) to the Committee.
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o Satisfy itself, on behalf of the Board of Directors, that the internal
audit function has been effectively carried out and that any matter
which the Auditor wishes to bring to the attention of the Board of
Directors has been addressed and that there are no "unresolved
differences" with the Auditor.
FINANCIAL REPORTING PROCESSES AND RISK MANAGEMENT
o Review the audit plan of the Auditor for the current year and review
advice from the Auditor relating to management and internal controls
and the responses of the Corporation to the suggestions made put
forth.
o Monitor the internal accounting controls, informational gathering
systems and management reporting on internal controls of the
Corporation.
o Review with management and the Auditor the relevance and
appropriateness of the accounting policies of the Corporation and
review and approve all significant changes to such policies.
o Satisfy itself, on behalf of the Board of Directors, that the
Corporation has implemented appropriate systems of internal control
over financial reporting and the safeguarding of the assets of the
Corporation and other "risk management" functions (including the
identification of significant risks and the establishment of
appropriate procedures to manage those risks and the monitoring of
corporate performance in light of applicable risks) affecting the
assets of the Corporation, management, financial and business
operations and the health and safety of employees and that these
systems are operating effectively.
o Review and approve the investment and treasury policies of the
Corporation and monitor compliance with such policies.
o Establish procedures for the receipt and treatment of (i) complaints
received by the Corporation regarding accounting, controls, or
auditing matters and (ii) confidential, anonymous submissions by
employees of the Corporation as to concerns regarding questionable
accounting or auditing.
LEGAL AND REGULATORY COMPLIANCE
o Satisfy itself, on behalf of the Board of Directors, that all material
statutory deductions have been withheld by the Corporation and
remitted to the appropriate authorities.
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o Without limiting its rights to engage counsel generally, review, with
the principal legal external counsel of the Corporation, any legal
matter that could have a significant impact on the financial
statements of the Corporation.
o Satisfy itself, on behalf of the Board of Directors, that all
regulatory compliance issues have been identified and addressed.
BUDGETS
o Assist the Board of Directors in the review and approval of
operational, capital and other budgets proposed by management.
GENERAL
o Perform any other activities consistent with this Charter, the By-laws
of the Corporation and governing law and stock exchange rules, as the
Committee or the Board of Directors deem necessary or appropriate.
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