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Audit Committee Charter
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STATEMENT OF POLICY |
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The Audit Committee (the
"Committee") of the Board of Directors (the "Board")
of La Jolla Pharmaceutical Company (the "Company") oversees
the accounting and financial reporting processes of the Company
and the audits of the financial statements of the Company. In addition,
the Committee assists the Board in its oversight of the Company's
compliance with legal and regulatory requirements. Although the
Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct
audits (this is the responsibility of the independent accountants)
or to determine that the Company's financial statements are complete
and accurate (this is the responsibility of management). |
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ORGANIZATION |
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The Board shall
appoint the members of the Committee, including its chairperson.
At all times: |
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the Committee shall be comprised of at
least three directors who are "independent," as determined
by the Board, within the meaning of the Sarbanes-Oxley Act of 2002
and the rules and regulations of the Securities and Exchange Commission
(the "SEC") promulgated thereunder and applicable NASD
listing standards; |
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each member of the Committee, at the time of his or
her appointment, must be able to read and understand fundamental
financial statements, including the Company's balance sheet, income
statement, and cash flow statement; and |
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at least one member of the Committee
shall have had past employment experience in finance or accounting,
requisite professional certification in accounting, or some other
comparable experience or background (including being or having been
a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities) that results
in such member being financially sophisticated. |
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REPORTS |
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The outside auditor engaged by the Committee
shall report directly to the Committee. The Committee is expected
to maintain free and open communication with the outside auditor
and the management of the Company. To this end, the Committee shall
periodically meet separately with each of the foregoing parties.
The Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board.
The Committee shall regularly report the activities of the Committee
to the full Board and convey such recommendations to the Board as
the Committee may deem appropriate. The Committee may present its
recommendations to the Board in written or oral form. |
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AUTHORITY |
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By order of the Board: |
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the Committee has the authority, at the Company's
expense and without further approval of the Board, to engage, consult
with and determine funding for independent counsel, accountants
and other advisors as it determines necessary or appropriate to
assist the Committee to carry out its duties; |
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the Company shall provide the Committee with all
funding that the Committee deems necessary or appropriate to enable
the Committee to carry out its duties, including without limitation,
funding for the payment of compensation to any (i) outside auditor
engaged for the purpose of preparing or issuing an audit report
or performing other audit, review or attestation services for the
Company and (ii) advisors engaged by the Committee; |
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the Committee has the authority to request, and to
rely upon, advice, oral or in writing, from the Chief Executive
Officer and the Chief Financial Officer and/or Controller of the
Company and from any representative of the independent accountants
to the Company participating in such independent accountants' engagement
by the Company, concerning aspects of the operation or financial
condition of the Company relevant to the functions of the Committee;
and |
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the Committee has the authority to conduct or authorize
investigations into any matter within the Committee's scope of responsibilities. |
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RESPONSIBILITIES |
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To carry out the duties of the Committee,
the Committee shall: |
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1. |
Be directly
and solely responsible for the appointment, compensation, retention
and oversight of the outside auditor; |
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2. |
Adopt policies regarding
Committee pre-approval of audit and permitted non-audit services
to be rendered by the Company's outside auditor;
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3. |
Pre-approve all audit and
permissible non-audit services to be rendered by the Company's outside
auditor in accordance with the Committee's policies; |
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4. |
Prepare and issue annually
a report of the Committee to be included in the Company's proxy
statement in conformity with the applicable rules of the SEC; |
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5. |
Establish procedures for
the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls, or auditing matters, including procedures
for the confidential anonymous submission by employees of the Company
of concerns regarding questionable accounting or auditing matters;
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6. |
Review Company
earnings press releases (the Committee may delegate this responsibility
to one member to represent the entire Committee for purposes of
this review) and financial information and earnings guidance provided
to analysts and rating agencies; |
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7. |
Review and discuss with
management and the outside auditor the Company's annual audited
and quarterly financial statements, including: |
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(a) |
analyses prepared by management
and/or the outside auditor setting forth significant financial reporting
issues and judgments made in connection with the preparation of
the financial statements; |
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(b) |
the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
including the development, selection and reporting of accounting
policies and practices that may be regarded as critical; |
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(c) |
significant issues regarding
the Company's accounting principles and financial statement presentations,
including any significant changes in the Company's selection or
application of accounting policies, practices or financial statement
presentations; and |
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(d)
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in addition, the Committee
shall receive any other reports, including those required by the
SEC rules implementing Section 204 of the Sarbanes-Oxley Act, from
the outside auditor; |
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8. |
Review and approve all related
party transactions; |
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9. |
Review changes in accounting and financial reporting
rules that could have a material impact on the Company's financial
reports; |
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10. |
Periodically
review with the CEO and CFO (or principal financial officer): |
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(a) |
how they are meeting their
obligations under the certification requirements of Sections 302
and 906 under the Sarbanes-Oxley Act and discuss the most recent
evaluation of the Company's disclosure controls and procedures; |
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(b) |
any significant deficiencies
or material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely
affect the Company's ability to record, process, summarize and report
financial information; |
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(c) |
how management proposes to
correct any weaknesses identified by management or the outside auditor
in accounting procedures and internal controls that may have a material
impact on the Company's financial reports, financial position or
assets; |
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(d) |
any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Company's internal control over financial
reporting; |
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(e) |
any significant changes
in the Company's internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting; |
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11. |
Receive reports from the outside auditor describing
(i) the audit firm's internal quality control procedures and (ii)
any material issues raised by the most recent internal quality control
review or peer review of the auditor, or by any investigation by
governmental or professional authorities within the last five years,
regarding any independent audit carried out by the firm, and any
steps taken to address these issues; |
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Consider, at least annually, the independence of the
outside auditor, including whether the outside auditor's performance
of permissible non-audit services is compatible with the auditor's
independence; on an annual basis, obtain a formal written statement
from the auditor delineating all relationships between the auditor
and the Company consistent with Independence Standards Board Standard
No. 1; and review and discuss with the outside auditor any disclosed
relationships or services that may impact the objectivity and independence
of the auditor; |
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13. |
Review and discuss with management and the outside
auditor the scope and results of the annual audit and recommendations
of the outside auditor, including a discussion of the auditor's
judgment as to the quality of the Company's accounting principles; |
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14. |
Following the completion of each annual audit, review
separately with the outside auditor and management any difficulties
encountered in the course of the audit (including any restrictions
on the scope of the auditor's activities or on access to information,
and any significant disagreements with management) and management's
response; |
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15. |
Inquire of management and, to the extent necessary
or appropriate, the outside accountants about significant risks
or exposures and assess the steps management has taken to address
such risks to the Company; |
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16. |
Receive presentations from management personnel on
key functional activities of the Company, including information
technology, taxes, treasury, environmental and legal matters and
contingent liabilities; |
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17. |
Establish policies for the hiring of employees and
former employees of the outside auditing firm; |
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18. |
Review the Company's code of conduct and its ability
to monitor compliance with such code; |
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19. |
Review, in conjunction with counsel, legal and regulatory
matters that may have a material impact on the financial statements,
Company compliance policies and programs, and reports received from
regulators; |
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20. |
Review and assess the adequacy of this charter at
least annually and recommend changes to the Board as appropriate;
and |
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21. |
Perform such other functions as may be delegated to
the Committee by the Board or as may be required of it by law or
the Company's certificate of incorporation or bylaws. |
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MEETINGS |
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The Committee shall meet, either in person or telephonically,
as often as may be deemed necessary or appropriate in its judgment,
generally four times each year. The Committee is authorized, by
majority vote or unanimous written consent of its members, to adopt
its own rules of procedure, including the formalities of calling,
noticing and holding meetings and for the taking of action of the
Committee by vote at any such meeting or by unanimous written consent
of the members thereof. The majority of the members of the Committee
shall constitute a quorum. The Committee may delegate any of the
foregoing powers, duties and responsibilities to a subcommittee
of the Committee consisting of not less than two members of the
Committee; provided that the Committee may delegate the authority
to pre-approve audit and permissible non-audit services to one member
of the Committee if such member (i) pre-approves the services in
accordance with the pre-approval policies adopted by the Committee
and (ii) reports any actions taken by him or her to the full Committee
at its next scheduled meeting. |
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| Last Updated: February
25, 2004 |