Audit Committee Charter

Federal-Mogul LLC
Audit Committee Charter
Updated May 2014

PURPOSE

The purpose of the audit committee (the “Committee”) is to assist the board of directors in fulfilling its oversight responsibilities with respect to Federal-Mogul LLC (the “Company”) for (1) the accounting and financial reporting processes of the Company, (2) the audits of the Company’s financial statements, (3) the external auditor’s qualifications, independence, appointment and performance and (4) the performance of the Company’s internal audit function.  The Committee will also prepare any report that SEC rules require be included in the Company’s annual proxy statement.

AUTHORITY

The Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility.  It is empowered to:

 
  • Appoint, compensate, and oversee the work of the public accounting firm employed by the organization to conduct the annual audit.  This firm will report directly to the Committee.
  • Resolve any disagreements between management and the auditor regarding financial reporting.
  • Pre-approve all auditing and permitted non-audit services performed by the Company’s external audit firm.
  • Retain independent counsel, accountants, or others to advise the Committee or assist in the conduct of an investigation.
  • Seek any information it requires from employees—all of whom are directed to cooperate with the Committee's requests—or external parties.
  • Meet with Company officers, internal auditors, external auditors, or outside counsel, as necessary.
  • The Committee may delegate authority to subcommittees, including the authority to preapprove all auditing and permitted non-audit services, providing that such decisions are presented to the full Committee at its next scheduled meeting.
 
COMPOSITION
 

The Committee will consist of at least three and no more than six members of the board of directors.  The board or its nominating committee will appoint Committee members and the Committee chair, provided that if the board or its nominating committee do not act to appoint a Committee chair, the members of the Committee may act to appoint a chair.

Each Committee member will be both independent and able to understand fundamental financial statements and will otherwise satisfy applicable requirements for audit committee service imposed by applicable law and regulation, including the rules of the Nasdaq Stock Market.  At least one member shall be designated as an “audit committee financial expert,” as defined by the regulations of the Securities and Exchange Commission.

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.

RESPONSIBILITIES

The Committee will carry out the following responsibilities:

Financial Statements

  • Review the annual audited financial statements and quarterly financial statements and discuss with management and the external auditors.  The Committee shall make a recommendation to the Board as to whether the annual audited financial statements should be included in the Company’s Annual Report on Form 10-K.

Internal Control

  • Consider the effectiveness of the Company's internal control system, including information technology security and control.
  • 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.
  • Review disclosures made by the principal executive officer and the principal financial officer regarding their certifying and reporting obligations as required by the Sarbanes-Oxley Act of 2002.

Internal Audit

  • Review with management and the chief audit executive the plans, activities, staffing, and organizational structure of the internal audit function.
  • Review that there are no unjustified restrictions or limitations placed on the internal audit function, and review and concur in the appointment, replacement, or dismissal of the chief audit executive.
  • Review the effectiveness of the internal audit function. 
  • On an as-needed basis, meet separately with the chief audit executive to discuss any matters that the Committee or internal audit believes should be discussed privately.

External Audit

  • Review the external auditors' proposed audit scope and approach, including coordination of audit effort with internal audit.
  • 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:

- Obtain and review, in connection with the external auditor’s annual audit of the Company’s year-end financial statements, a report from the external auditor, describing (a) all critical accounting policies and practices to be used in the annual audit, (b) all alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor, and (c) other material written communications between the external auditor and management, such as any management letter or schedule of unadjusted differences.  Discuss with the external auditor any material issues raised in such report.

- At least annually, review and discuss with the external auditor all significant relationships which the auditor and its affiliates have with the Company and its affiliates in order to determine the external auditor’s independence, including: (i) requesting, receiving and reviewing, on a periodic basis, a formal written statement delineating all relationships between the Company and the external auditor, including the matters set forth in Independence Standards Board No.1; (ii) actively engaging in a dialogue with the external auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditor; and (iii) taking, or recommending that the full board take, appropriate action to oversee the independence of the external auditor.

- Take into account the opinions of management and internal audit.

- Review and evaluate the lead partner of the external auditor.

 
  • Ensure the rotation of the lead audit partner every five years and other audit partners every seven years or as otherwise required by law, and consider whether there should be regular rotation of the audit firm itself, as appropriate.
  • On an as-needed basis, meet separately with the external auditors to discuss any matters that the Committee or auditors believe should be discussed privately.
  • Review with management and the external auditors the results of the audit, including any difficulties encountered.
 
Compliance
 
  • 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.
  • Establish procedures for:  (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters;  and (ii) the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters.
  • Review the findings of any examinations by regulatory agencies, and any auditor observations.
  • Review the process for communicating the code of conduct to Company personnel, and for monitoring compliance therewith.
  • Obtain regular updates from management and Company legal counsel regarding compliance matters.
 
Reporting Responsibilities
  • 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, the Company’s compliance with legal and regulatory requirements, the performance and independence of the Company’s external auditors, and the performance of the internal audit function.
  • Provide an open avenue of communication between internal audit, the external auditors, and the board of directors.
  • Review any other reports the Company issues that relate to Committee responsibilities.
 
Other Responsibilities
 
  • Perform other activities related to this charter as requested by the board of directors.
  • Institute and oversee special investigations as needed.
  • Review and assess the adequacy of the Committee charter annually, requesting board approval for proposed changes, and ensure appropriate disclosure of the Committee charter as may be required by law or regulation.
  • Confirm annually that all responsibilities outlined in this charter have been carried out.
  • Evaluate the Committee's performance on a periodic basis.

 

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