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Charter (amended and restated as of April 14, 2008)
I. PURPOSE
The Audit Committee (the “Committee”) of IMS Health Incorporated (the “Company”) shall:
(a) provide assistance to the Board of Directors (the “Board”) in overseeing: (i) the integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the independent registered public accounting firm’s qualifications and independence; and (iv) the performance of the independent registered public accounting firm and the Company’s internal audit function; and
(b) prepare the report required to be prepared by the Committee pursuant to the rules of the Securities and Exchange Commission (“SEC”) for inclusion in the Company’s annual proxy statement.
The function of the Committee is oversight. The management of the Company is responsible for the preparation, presentation and integrity of the Company’s financial statements and for the effectiveness of internal control over financial reporting. Management and the internal audit function are responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for planning and carrying out a proper audit of the Company’s annual financial statements, reviews of the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, annually auditing the effectiveness of internal control over financial reporting, and other procedures. In fulfilling their responsibilities hereunder, it is recognized that members of the Committee are not full-time employees of the Company and are not, and do not represent themselves to be, performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards.
The Committee will fulfill its responsibilities primarily by carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined by the Board, each of whom the Board has determined has no material relationship with the Company and each of whom is otherwise “independent” under the rules of the New York Stock Exchange, Inc., and Rule 10A-3 under the Securities Exchange Act of 1934. The Board shall also determine that each member is “financially literate,” and that at least one member of the Committee has “accounting or related financial management expertise,” or shall otherwise satisfy the applicable membership requirements under the rules of the New York Stock Exchange, Inc., as such requirements are interpreted by the Board in its business judgment, and whether any member of the Committee is an “audit committee financial expert,” as defined by rules of the SEC. If the Board has determined that a member of the Committee is an audit committee financial expert, it may presume that such member has accounting or related financial management expertise.
No director may serve as a member of the Committee if such director serves on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Committee, and discloses this determination in the Company’s annual proxy statement. No member of the Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Company other than (i) director’s fees, which may be received in cash, stock, restricted stock, restricted stock units, stock options or other in-kind consideration ordinarily available to directors; (ii) a pension or other deferred compensation for prior service that is not contingent on future service; and (iii) any other regular benefits that other directors receive.
The members of the Committee shall be appointed by the Board based on nominations recommended by the Company’s Nominating and Governance Committee, and shall serve at the pleasure of the Board and for such term or terms as the Board may determine. Unless a Chairperson is designated by the full Board, the members of the Committee may elect a Chairperson by majority vote of the full Committee membership.
The independent registered public accounting firm shall submit to the Committee annually a formal written statement (the “Auditors’ Statement”) describing: the independent registered public accounting firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review or peer review of the independent registered public accounting firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the independent registered public accounting firm, and any steps taken to deal with any such issues; and (to assess the independent registered public accounting firm’s independence) all relationships between the independent registered public accounting firm and the Company, including each non-audit service provided to the Company and the matters set forth in Independence Standards Board No. 1.
The independent registered public accounting firm shall submit to the Committee annually a formal written statement of the fees billed in each of the last two fiscal years for each of the following categories of services rendered by the independent registered public accounting firm: (i) the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q or services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements; (ii) assurance and related services not included in clause (i) that are reasonably related to the performance of the audit or review of the Company’s financial statements, in the aggregate and by each service; (iii) tax compliance, tax advice and tax planning services, in the aggregate and by each service; and (iv) all other products and services rendered by the independent registered public accounting firm, in the aggregate and by each service.
III. MEETINGS
1. The Committee shall meet at least quarterly, or more frequently as circumstances dictate, to discuss with management the annual audited financial statements and quarterly financial statements, as applicable. As part of its job to foster open communication, the Committee should meet periodically with management, the individual in charge of the internal audit function of the Company and the independent auditors separately to discuss any matters that the Committee or any of these groups believes should be discussed privately. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent registered public accounting firm to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. Members of the Committee may participate in a meeting of the Committee via conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.
2. Any two Committee members shall constitute a quorum. The Board may designate one or more directors that satisfy the requirements for independence as alternate members of the Committee, who may replace any absent or disqualified member at any meeting of the Committee. In the absence or disqualification of a member of the Committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members of the Committee present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any absent or disqualified member, provided that such other member satisfies all applicable criteria for membership on the Committee.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
Independent Registered Public Accounting Firm
1. Directly appoint, retain, compensate, evaluate and terminate the independent registered public accounting firm, including sole authority to approve all audit engagement fees and terms, and oversee the resolution of any disagreements between management and the independent registered public accounting firm. The Committee shall also directly appoint, retain, compensate, evaluate and terminate any other registered accounting firm to be engaged by the Company for the purpose of preparing or issuing an audit report or performing audit, review or attest services for the Company, including sole authority to approve all engagement fees and terms;
2. Pre-approve all audit and non-audit engagements of the independent registered public accounting firm and the fees associated therewith. All requests for pre-approval must include a detailed description of the services proposed to be rendered and, whenever possible, shall be presented to the Committee at a regularly scheduled meeting. The Committee shall note the review of such requests in its official minutes, along with its decision. By this Charter, the Committee hereby delegates to each of its members, acting singly, the authority to pre-approve any audit or non-audit services if the need for consideration of a pre-approval request arises between regularly scheduled meetings. Any such approvals by a single member, together with full documentation, shall be presented to the Committee at its next scheduled meeting;
3. Ensure that the independent registered public accounting firm prepares and delivers annually an Auditors’ Statement (it being understood that the independent registered public accounting firm is responsible for the accuracy and completeness of this Statement) and discuss with the independent registered public accounting firm any relationships or services disclosed in this Statement that may impact the quality of audit services or the objectivity and independence of the Company’s independent registered public accounting firm;
4. Obtain from the independent registered public accounting firm in connection with any audit a timely report relating to the Company’s annual audited financial statements describing all critical accounting policies and practices used, all alternative treatments of financial information 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 independent registered public accounting firm, and any material written communications between the independent registered public accounting firm and management, such as any “management” letter or schedule of unadjusted differences;
5. Review and evaluate the qualifications, performance and independence of the lead partner of the independent registered public accounting firm;
6. Discuss with management and the independent registered public accounting firm the timing and process for implementing the rotation of the lead audit partner, the concurring partner and any other active audit engagement team partner and consider whether there should be a regular rotation of the audit firm itself;
7. Take into account the opinions of management and the Company’s internal audit function in assessing the independent registered public accounting firm’s qualifications, performance and independence; and
8. Instruct the independent registered public accounting firm and other registered public accounting firms engaged that they are ultimately accountable to the Board and the Committee, as representatives of the shareholders.
Internal Audit Function
1. Review the appointment and replacement of the provider of the Company’s internal audit function and/or the employee in charge of the internal audit function; and
2. Advise the employee in charge of the internal audit function that he or she is expected to provide to the Committee summaries of and, as appropriate, the significant reports to management prepared by the internal audit function and management’s responses thereto.
3. Review the responsibilities, budget and staffing of the internal audit function.
Financial Reporting Principles and Policies and Internal Audit Controls and Procedures
1. Advise management, the individual in charge of the internal audit function and the independent registered public accounting firm that they are expected to provide to the Committee a timely analysis of significant issues and practices relating to accounting principles and policies, financial reporting and internal control over financial reporting;
2. Consider any reports or communications (and management’s and/or the internal audit function’s responses thereto) submitted to the Committee by the independent registered public accounting firm required by or referred to in Statement on Auditing Standards (“SAS”) No. 61 (as codified by AU Section 380), as it may be modified or supplemented, or other professional standards;
3. Meet with management, the independent registered public accounting firm, and, if appropriate, the individual in charge of the internal audit function:
• to discuss the scope of the annual audit;
• to review the form of opinion the independent registered public accounting firm proposes to render to the Board and shareholders;
• to review and discuss the annual audited financial statements and quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
• to discuss any significant matters arising from any audit, including any audit problems or difficulties, whether raised by management, the internal audit function or the independent registered public accounting firm, relating to the Company’s financial statements;
• to discuss any “management” or “internal control” letter issued, or proposed to be issued, by the independent registered public accounting firm to the Company, the Board or the Committee;
• to discuss, as appropriate: (a) any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; (b) analyses prepared by management and/or the independent registered public accounting firm setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative U.S. GAAP methods on the financial statements; and (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company; and
• to discuss any difficulties the independent registered public accounting firm encountered during the course of the review or audit, including any restrictions on their activities or access to requested information, any significant disagreements with management and any communications between the audit team and the firm’s national office respecting auditing or accounting issues presented by the engagement;
4. Inquire of the Company’s chief executive officer and chief financial officer as to the existence of any significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, and as to the existence of any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting;
5. Discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company assess and manage the Company’s exposure to risk, and to discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures;
6. Obtain from the independent registered public accounting firm assurance that the audit was conducted in a manner consistent with Section 10A of the Securities Exchange Act of 1934, as amended, which sets forth certain procedures to be followed in any audit of financial statements required under the Securities Exchange Act of 1934;
7. Discuss with the Company’s General Counsel any significant legal, compliance or regulatory matters that may have a material effect on the financial statements or the Company’s business, financial condition or compliance policies, including material notices to or inquiries received from governmental agencies;
8. Discuss and review the type and presentation of information to be included in earnings press releases;
9. Discuss the types of financial information and earnings guidance provided, and the types of presentations made, to analysts and rating agencies;
10. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters; and
11. Establish hiring policies for employees or former employees of the independent registered public accounting firm.
Reporting and Recommendations, Etc.
1. Review this Charter at least annually and recommend any changes to the full Board;
2. Report regularly through its Chairperson its activities to the full Board following meetings of the Committee and make such recommendations with respect to the above matters and other matters as the Committee may deem necessary or appropriate including any issues with respect to the audit or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent registered public accounting firm and the performance of the internal audit function;
3. Maintain minutes or other records of meetings and activities of the Committee;
4. Prepare any report or other disclosures, including any recommendation of the Committee, required by the rules of the SEC to be included in the Company’s annual proxy statement; and
5. Prepare and review with the Board an annual performance evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this Charter. The performance evaluation by the Committee shall be conducted in the manner directed by the Nominating and Governance Committee. The report to the Board may take the form of an oral report by the Chairperson of the Committee or any other member designated by the Committee to make this report.
V. DELEGATION TO SUBCOMMITTEE
The Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee.
VI. RESOURCES AND AUTHORITY
The Committee shall have the resources and authority appropriate to discharge its responsibility, including the authority to select, retain, terminate and approve the fees and other retention terms of special or independent counsel, accountants or other experts and advisors, as it deems necessary or appropriate, without seeking approval of the Board or management.
The Company shall provide for appropriate funding, as determined by the Committee, in its capacity as a committee of the Board, of payment of:
1. Compensation to the independent registered public accounting firm and any other public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
2. Compensation of any advisers employed by the Committee; and
3. Ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
