DownloadCHARTER OF THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS OF ALLEGION PUBLIC LIMITED COMPANY
The Audit and Finance Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) to assist the Board in fulfilling its responsibilities to the shareholders and the investment community with respect to its oversight of the:
- Integrity of the Company’s financial statements, including its accounting policies and financial reporting and disclosure practices.
- Adequacy of the system of internal controls within the Company to support the financial and business environment.
- Management of the Company’s financial resources and major financial strategies and transactions.
- Company’s processes to assure its compliance with all applicable laws, regulations and corporate policy.
- Qualification and independence of the Company’s independent registered public accounting firm.
- Performance of the Company’s internal audit function and independent registered public accounting firm.
The Committee shall be comprised of three or more directors, each of whom shall be independent under the requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended, the rules of the New York Stock Exchange (the “NYSE”) applicable for Board and Committee independence and, as determined by the Board consistent with NYSE rules, free from any relationship that would interfere with the exercise of his or her independent judgment in carrying out his or her responsibilities as a member of the Committee.
Each member of the Committee shall be financially literate as determined by the Board in its business judgment, and at least one member of the Committee shall be an “audit committee financial expert” as defined by the Securities and Exchange Commission (“SEC”).
Unless a Chair of the Committee is elected by the full Board, the members of the Committee shall designate a Chair by the majority vote of the full Committee membership. The Chair of the Committee will chair all regular sessions of the Committee and is responsible to set the agendas for Committee meetings. In the absence of the Chair of the Committee, the Committee shall select another member to preside.
The Committee shall meet as often as it determines necessary to carry out its responsibilities, but at least five times annually. The Committee shall meet separately and periodically with management, including the chief financial officer, chief accounting officer, chief compliance officer, the internal auditors and the independent auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Committee deem appropriate. The Committee may meet in person, by telephone or video conference, and may take action by unanimous written consent. The Company Secretary, Assistant Secretary or an individual designated by the Company Secretary shall maintain written minutes of its meetings and shall file such minutes with the books and records of the Company. The Chair shall report to the Board regarding the meeting of the Committee and as otherwise requested by the Board.
The Committee may form subcommittees composed of two or more of its members for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate.
A majority of the Committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee.
The Committee shall have the authority to select, retain and/or replace special legal, accounting or other consultants to advise the Committee. The Company will provide for such funding as the Committee deems appropriate for the payment of compensation to the Company’s independent auditors and any special legal, accounting or other consultants retained by the Committee as well as funding for the payment of ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
The Committee has broad responsibility including oversight of financial reporting, financing, accounting, risk oversight, internal controls and various other duties. Specifically, the Committee shall:
Financial Reporting
1. Meet to review and discuss with management and the independent auditors the Company’s annual audited financial statements and quarterly financial statements prior to their public dissemination, as well as the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company’s critical accounting policies and practices, and alternative treatments within generally accepted accounting principles relating to material items. Such review shall include a discussion of significant issues regarding the accounting and auditing principles and practices (and the resolution of any disagreements between management and the independent auditors), any audit problems or difficulties encountered by the Company's independent auditors during their audit work (such as restrictions on the scope of their activities or their access to information), management's response to problems, difficulties or disagreements, the resolution of any disagreements between the Company's auditors and management, as well as the adequacy of the internal controls and a review of any certifications being issued in respect of such statements by senior executives of the Company.
2. Discuss with the independent auditors the matters required to be discussed by the applicable auditing standards adopted by the Public Company Auditing Oversight Board (“PCAOB”) and approved by the SEC from time to time.
3. Review and discuss with management and the independent auditors the Company’s earnings press releases as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee Chair will review and discuss in advance of each quarterly earnings release or provision of earnings guidance. The other Committee members may participate at their option in these discussions.
4. To recommend to the Board whether the audited financial statements should be included in the Company's annual report on Form 10-K for filing with the SEC; and to produce the audit committee report required to be included in the Company's proxy statement.
Financing
5. Consider and approve the Company’s annual financing plan, including its projected capital structure and funding requirements.
6. Consider and recommend for approval by the Board the Company’s external dividend policy and dividend payments.
7. Consider and recommend for approval by the Board the repurchase of the Company’s stock.
8. Consider and recommend for approval by the Board a) issuances of equity and/or debt securities; or b) authorizations for other financing transactions, including bank credit facilities.
Accounting
9. Consider and approve, if appropriate, major changes to the Company’s auditing and accounting principles and practices as recommended by the independent registered public accounting firm, management or the internal auditing department.
10. Review significant accounting and reporting issues, including recent professional and regulatory pronouncements.
Independent Registered Public Accounting Firm
11. To select, retain, compensate, oversee, replace, and terminate, if necessary, any other independent registered 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 and to approve all audit engagement fees and terms subject to the requirements of Irish company law.
12. Review, at least annually, the qualifications and performance of the independent registered public accounting firm. In conducting its review and evaluation, the Committee shall obtain and review a report from the independent auditing firm describing (a) the firm’s internal quality control procedures; (b) any material issues raised by the most recent internal quality control or peer review of the firm, or by any inquiry or investigation within the preceding five years by governmental or professional authoritieswith respect to one or more independent audits carried out by the firm; and (c) any steps taken to deal with any issues raised by such review, inquiry or investigation. Based on such review, and taking into account the opinions of the management and the Company’s senior internal audit executive, the Committee should consider whether there should be a rotation of the lead audit partner or the audit firm itself.
13. Review and discuss with the independent registered public accounting firm, in order to satisfy itself as to their independence, all relationships that would reasonably be thought to bear on the objectivity and independence of the independent registered public accounting firm. Ensure the receipt of the independent registered public accounting firms’ annual independent statement.
14. Review with the independent registered public accounting firm and financial management of the Company in advance and approve all auditing services to be performed by the independent registered public accounting firm, including the scope, staffing and, subject to prior delegation from the shareholders, the fees of the independent registered public accounting firm to be incurred in connection with the proposed audit for the current year and, at the conclusion of such audit, review such audit including any comments or recommendations of the independent registered public accounting firm.
15. Approve in advance, subject to and in accordance with applicable laws and regulations, non-audit services and related fees to be performed by the independent registered public accounting firm.
16. Set clear hiring policies for employees or former employees of the independent auditing firm.
Risk Oversight
17. Discuss with management and the independent registered public accounting firm the Company’s policies with respect to risk assessment and risk management and consider and approve the Company’s financial risk management activities, including the areas of foreign exchange, commodities, interest rate exposures, insurance programs and customer financing risks.
18. Consider and approve the Company’s policy for investment of excess cash.
19. Obtain and review periodic reports of the investment performance of the Company’s pension and savings benefit plans.
Internal Controls
20. Obtain and review periodic reports, at least annually, from management assessing the effectiveness of the Company’s internal controls and procedures for financial reporting, including reports on (a) all significant deficiencies or material weaknesses in the design or operation of internal controls; (b) any fraud, whether or not material, that involves management or other employees having a significant role in internal controls; and (c) results of internal control reviews of information technology, cybersecurity and privacy controls and procedures.
21. Obtain from management annually, as required by law, a report on internal controls, which shall (a) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and (b) contain management’s assessment, as of the end of the most recent fiscal year, of the effectiveness of the internal control structure and financial reporting procedures.
22. Obtain from the independent registered public accounting firm an attestation to (and a report on) the assessment made by management in 20 above.
23. Review the Company’s disclosure controls and procedures and management’s assessment of them.
Other Duties
24. Review and reassess the adequacy of this Charter and the Audit Services Charter annually or more often as conditions dictate, and recommend proposed changes to the Board.
25. Review with the chief compliance officer: (1) the ethics and compliance metrics approved by the Committee and (2) the chief compliance officer’s annual report on the Company’s overall ethics and compliance program and (3) the Company’s periodic ethics and compliance risk assessment.
26. Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
27. Review with the General Counsel any legal matters, including litigation and regulatory matters, which could have a significant impact on the Company’s financial statements.
28. Review periodically (at least annually) with the senior tax executive all tax matters affecting the Company’s financial performance.
29. Review periodically (at least annually) the objectives, activities, organizational structure, budget, staffing and qualifications of the internal audit function.
30. Review the appointment and replacement of the senior internal auditing executive and establish and maintain a direct reporting relationship with such executive.
31. Establish and maintain a direct reporting relationship with the chief compliance officer.
32. Prepare and issue the Audit and Finance Committee Report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual general meeting proxy statement.
33. Report to the Board regularly including with respect to all significant issues discussed and make recommendations to be acted upon by the Board.
34. Conduct an annual evaluation of the performance of the Committee.
35. Perform any other activities consistent with this Charter, the Company’s Articles of Association and governing law, as the Committee or the Board deems necessary or appropriate.
If required by the rules of the SEC or the NYSE, this Charter, as amended from time to time, shall be made available to the public on the Company’s website.
Last revised: December 7, 2023