Corporate Governance

IRONCLAD ENCRYPTION CORPORATION AUDIT COMMITTEE CHARTER

Adopted to be Effective October 16, 2017

PURPOSE

IronClad Encryption Corporation (the “Company”) recognizes the importance of independent and objective oversight of our financial accounting, internal control, and financial reporting functions. We consider legal requirements to be only the minimal standards; as such it is our goal to endeavor to implement continuous improvement in the overall quality of our accounting and financial reporting processes. Accordingly, the Company maintains an audit committee (the “Audit Committee”) as a standing committee. The Audit Committee will generally assist the Board of Directors of the Company (the “Board”) in the following tasks:

  • providing independent oversight of our accounting and financial reporting processes;
  • providing independent oversight of our relationship with our independent auditing firm, including appointment and compensation of the auditing firm and evaluation of its qualifications, independence, and performance;
  • providing independent oversight of the performance our Company’s internal audit function; and
  • assuring compliance with legal and regulatory requirements, including, but not limited to, the preparation of the disclosures required by the U.S. Securities and Exchange Commission’s (“SEC”) Item 407(d)(3)(i) of Regulation S-K.

COMPOSITION AND MEETINGS

Membership. Each Audit Committee member shall be a member of the Board in good standing. The Board will elect Audit Committee members to serve yearly terms. Members shall serve until their successors are duly elected and qualified. The Board may remove members from the Audit Committee by majority vote, with or without cause.

Independence. All members of the Audit Committee shall be “independent,” as defined and to the extent required in the applicable listing standards and SEC rules, as they may be amended from time to time.

Number. The Audit Committee shall be comprised of at least two members, the exact number to be determined by the Board.

Financial Literacy. Each Audit Committee member shall be financially literate at the time of his or her appointment: that is, the member can read and understand a company’s basic set of financial statements, which includes the statements of financial condition, statements of operations, statements of cash flow, and related footnotes.

Financial Expert. The committee must annually evaluate, and report to the Company on a timely basis to enable to the Company to disclose under applicable SEC rules, whether or not at least one committee member is an audit committee financial expert as defined in the SEC rules.

Chairman. If the Board does not elect the Audit Committee chairman, the Audit Committee membership may designate a chairman by majority vote.

Meetings. The Audit Committee shall meet at least quarterly. Meetings may be conducted in person, by conference call, or using video conferencing. Additional meetings may be conducted as frequently as the members deem necessary.

The Committee shall meet separately and periodically with management, the personnel responsible for the internal audit function and the independent auditor. The Committee shall report regularly to the Board of Directors about its activities.

Compensation. The Board shall determine the compensation for Audit Committee members. No Audit Committee member may receive, directly or indirectly, compensation other than for director and board committee fees.

OVERSIGHT OF THE ANNUAL AUDIT AND THE INDEPENDENT AUDITOR

Selection. The Audit Committee shall have the sole authority to appoint or to retain the independent auditor and to oversee the auditor’s work on the annual audit and quarterly reviews. The Audit Committee must approve any proposed discharge of the auditor by a majority vote.

Compensation. The Audit Committee shall be directly responsible to set the compensation of and to direct the payment of the independent auditor for audit services.

Pre-approval. The Audit Committee shall pre-approve any non-audit services that the independent auditor may perform.

Independence. The Audit Committee shall evaluate the independent auditor’s independence at least annually and more frequently as the need arises. Such evaluation includes ensuring that it receives from the auditor a written communication outlining all relationships between the auditor and the Company, including the disclosures required by Public Company Accounting Oversight Board (PCAOB) Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence. The Committee must enter into an active dialogue with the auditor regarding any relationships that may impair, or have the appearance of impairing, the auditor’s objectivity or independence.

Oversight. The Audit Committee shall monitor and evaluate the independent auditor’s performance. The auditor shall report directly to the Audit Committee and not to management. In connection with the oversight role, the Committee will, as appropriate, resolve differences that arise between management and the independent auditor.

The Committee shall also obtain and review the reports required to be made by the independent auditor pursuant to paragraph (k) of Section 10A of the Securities Exchange Act of 1934 regarding:

  • critical accounting policies and practices;
  • alternative treatments of financial information within generally accepted accounting principles that have been discussed with Company management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and
  • other material written communications between the independent auditor and Company management.

OVERSIGHT OF ACCOUNTING AND FINANCIAL REPORTING PROCESSES

Discussion of reports. The Audit Committee shall review and discuss the quarterly financial reports and the annual report (the “Reports”), including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and related accounting and auditing principles and practices with the Company’s management and the independent auditor prior to the submission of any Report to the SEC.

Audit Committee Report and Recommendation to File Audited Financial Statements. The Audit Committee shall determine whether to recommend to the Board that the Company’s annual report on Form 10-K to be filed with the SEC include the audited financial statements and timely prepare the audit committee report and other information required to be included in the Company’s annual meeting proxy statement.

Internal controls. The Audit Committee shall initiate regular communication with management, the Board, and the independent auditor regarding the adequacy of the Company’s accounting procedures, internal controls, disclosure controls and controls over the security of its information technology and cyber-security defenses. The Audit Committee shall periodically discuss the adequacy of such controls and the integrity of the financial reporting process separately with each of the independent auditor and with management.

The Audit Committee shall, at least annually, obtain and review a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the 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 firm, and any steps taken to deal with any such issues; and (to assess the auditor’s independence) all relationships between the independent auditor and the Company.

Auditing Standard 18 Review. The Audit Committee shall discuss with the independent auditors the matters required to be disclosed by PCAOB Auditing Standard No. 18 and other related auditing standards, including without limitation information regarding the company’s relationships with related parties, the company's significant unusual transactions and the company's financial relationships and transactions with its executive officers, if any.

Auditing Standard 16 Review. The Audit Committee shall discuss with the independent auditors the matters required to be discussed by PCAOB Auditing Standard No. 16.

Complaints. The Audit Committee shall establish procedures relating to the receipt, consideration, and disposition of complaints regarding accounting, internal controls, or auditing matters and for the retention of records relating to such complaints. The procedures shall include a provision for anonymous reporting from employees relating to accounting, auditing, and/or financial reporting concerns.

Related Party Transactions. The Audit Committee shall review and approve or ratify all related-party transactions.

Advisors. The Audit Committee shall have the authority to engage independent legal counsel and other advisors and consultants it deems necessary to discharge its duties.

SELF-EVALUATION

Budget. The Audit Committee shall prepare an annual budget, which will be funded by the Company, providing for the compensation of the auditor and other advisors, for the costs of administering complaints regarding accounting and auditing matters, and for other costs associated with discharging its duties. The Audit Committee shall authorize the expenditures associated with this budget in its sole discretion.

Charter. The Audit Committee shall review its performance and this Charter annually to consider its continued adequacy.

OTHER

Reports. The Audit Committee shall prepare any other reports required by the Company including reports required for any proxy statement that provides for the election of directors.

Investigations. The Audit Committee may conduct or authorize investigations into any matter within the scope of its responsibilities as it shall deem appropriate. In conjunction with such investigation, the Audit Committee has the authority to request any officer, employee or advisor of the Company to meet with the Audit Committee or any advisors engaged by the Audit Committee.

Risk Assessment. The Audit Committee shall discuss policies with respect to risk assessment and risk management.

Other. The Audit Committee shall perform other functions that may be delegated by the Company’s Bylaws or Board, or that may be required by law.

Reliance on Others. Nothing in this charter is intended to preclude or impair the protection provided in Section 141(e) of the Delaware General Corporation Law for good faith reliance by members of the committee on reports or other information provided by others.

More in this category: « Previous