This Audit Committee Charter (“Charter”) has been adopted by the Board of Directors (the “Board”) of Diana Containerships Inc. (the “Company”).
Statement of Purpose
The Audit Committee of the Board of the Company (the “Committee”) shall assist the Board in its oversight of (i) the quality and integrity of the Company’s financial statements and its accounting, auditing and financial reporting practices, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence and (iv) the performance of the Company’s independent auditors and the Company’s internal audit function. It may also have such other duties as may from time to time be assigned to it by the Board and are required by the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and the Nasdaq Stock Market (the “NASDAQ”) or any other securities exchange on which the Company’s securities are traded. In carrying out its responsibilities, the Board believes that the policies and procedures set forth in this Charter should remain flexible and be interpreted to allow the Committee to best adapt and react to changing business and regulatory requirements.
The Committee shall maintain free and open communication with the independent auditors, internal auditors, and Company management. In discharging its oversight role, the Committee shall have full access to all Company books, records, facilities, personnel and outside professionals. The Committee shall have the authority and shall receive necessary funding from the Company to retain special legal, accounting or other consultants or advisors employed by the Committee and shall obtain such advice and assistance from such special legal, accounting or other consultants or advisors as the Committee deems necessary. The Committee shall have sole authority to approve related fees and retention terms. Each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board) and (iii) representations made by management as to all audit and non-audit services provided by the independent auditors to the Company.
The membership of the Committee shall consist of at least two directors that are appointed to the Committee by the Board, each of whom the Board has determined is free of any material relationship with the Company, either directly or as a partner, shareholder or officer of an organization with a relationship to the company, and who satisfy the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934 and the NASDAQ or any other securities exchange on which the Company’s securities are traded. The Board shall appoint a member as a chairman of the Committee, who shall be responsible for leadership of the Committee, including scheduling and presiding over meetings, preparing agendas, making regular reports to the Board, and maintaining regular liaison with the Company’s Chief Executive Officer, Chief Financial Officer, lead independent audit partner and director of internal audit. In the absence of the appointed chairman from any meeting of the Committee, the Committee may select another member to act as chairman for such meeting. Additionally, each director appointed to the Committee shall serve on the Audit Committees of no more than two public companies other than the Company, unless the Board determines that such simultaneous service would not impair the ability of the member to effectively serve the Committee. The Board shall every two years review the Committee’s and its members’ compliance with such requirements and the Board may remove any director from the Committee at any time for any reason with or without cause.
The Committee shall meet as often as it deems necessary in order to perform its responsibilities, but not less than three times annually. The Committee may act by unanimous written consent in lieu of a meeting. The Committee shall also periodically meet with the Company’s management, internal auditors and independent auditors separately from the Board. The presence of a majority, but no fewer than two, of the then-appointed members of the Committee shall constitute a quorum. In every case where a quorum is present, action of the Committee may be taken by the Committee upon the affirmative vote of a majority of the members present.
The Committee’s job is one of oversight. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements. Management and the internal auditing department are responsible for maintaining appropriate accounting and financial reporting principles and practices and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for auditing the annual financial statements.
The Committee and the Board recognize that management and the independent auditors have more resources and time and more detailed knowledge and information regarding the Company’s accounting, financial and auditing practices than do Committee members; accordingly, the Committee’s oversight role does not provide any expert or special assurance as to the Company’s financial statements or any certification as to the work of the independent auditors. Nor is it the duty of the Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditors, or to assure compliance with laws and regulations.
Although the Board and the Committee may wish to consider other duties from time to time, the general recurring activities of the Committee in carrying out its oversight role are described below. The Committee shall be responsible for:
Oversight of Independent Auditor and the Audit Process
- The appointment, replacement, compensation, evaluation and oversight of the work of the independent auditors to be retained to audit the annual financial statements of the Company and review the quarterly financial statements of the Company.
- Annually obtaining and reviewing the independent auditors’ formal written statement 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.
- Annually obtaining from the independent auditors a formal written statement describing all relationships between the independent auditors and the Company and actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships that may impact the objectivity and independence of the auditors, and shall consider whether the independent auditors’ provision of non-audit services to the Company, if any, is compatible with the auditors’ independence. The Committee shall recommend that the Board take appropriate actions to satisfy itself as to the independent auditors’ independence.
- Monitoring the regular rotation of the audit partners of the independent auditors as required by applicable law.
- Overseeing the relationship with the independent auditors, including discussing with the auditors the planning and staffing of the audit and the nature and rigor of the audit process, receiving and reviewing audit reports, reviewing with the auditors any problems or difficulties the auditors may have encountered in carrying out their responsibilities and any management letters provided by the auditors and the Company’s response to such letters, and providing the auditors full access to the Committee and the Board to report on all appropriate matters.
- Pre-approving or approving all audit and non-audit services provided by the independent auditor to the Company and obtaining from the independent auditors at least annually a formal written statement of the fees billed for all audit services (including any comfort letters) and all permitted non-audit services provided by the independent auditors for the most recent fiscal year. The Chairman of the Committee must provide prior approval of all non-audit services to be provided by the independent auditor, subject to the de-minimus exception set forth in Section 10A of the Securities Exchange Act of 1934.
- Reviewing the annual audited financial statements and quarterly financial statements, as applicable, and discussing them with management and the independent auditors. These discussions shall include the matters required to be discussed under the Statement of Auditing Standards adopted by the American Institute of Certified Public Accountants, consideration of the quality of the Company’s accounting principles as applied in its financial reporting, and the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such discussions may include a review of particularly sensitive accounting estimates, reserves and accruals, review of judgmental areas, review of critical accounting policies and alternative treatments of financial information, review of audit adjustments, review of risk exposures that may have a material impact on the Company’s financial statements and the policies and steps management has taken to monitor and control such exposures, and other such inquiries as the Committee or the independent auditors shall deem appropriate. Based on its review, and its confirmation that management believes the financial statements to be included in the Company’s annual report contain no material misstatements, the Committee shall make its recommendation to the Board as to the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 20-F (or the Annual Report to Shareholders, if distributed prior to the filing of the Form 20-F).
- Keeping the independent auditors informed of the Committee's understanding of the Company's relationships and transactions with related parties that are significant to the company; and reviewing and discussing with the independent auditors the auditors' evaluation of the Company's identification of, accounting for, and disclosure of its relationships and transactions with related parties, including any significant matters arising from the audit regarding the Company's relationships and transactions with related parties.
- To review and discuss with the Company's independent auditors any other matters required to be discussed by PCAOB Auditing Standards No, 16, Communications with Audit Committees, including, without limitation, the auditors' evaluation of the quality of the company's financial reporting, information relating to significant unusual transactions and the business rationale for such transactions and the auditors' evaluation of the company's ability to continue as a going concern.
Oversight of Internal Audit
- Preparing annually a report of the Committee and the submission of such report to the full Board for approval and, to the extent required by the rules of the U.S. Securities and Exchange Commission then applicable to the Company, to cause such report to be included in the Company’s annual proxy statement.
- Discussing with management the financial statements proposed to be included in the Company’s Annual Report on Form 20-F and obtaining assurances from management that such financial statements contain no material misstatements or omissions and obtaining from the independent auditors confirmation that, in the course of their audit, they learned of no material misstatements.
- Providing oversight of the Company’s auditing, accounting and financial reporting principles, policies, controls, procedures and practices, and reviewing significant changes to the foregoing as suggested by the independent auditors, internal auditors or management.
- Discussing with management and/or the Company’s general or outside legal counsel any legal matters (including the status of pending litigation) that may have a material impact on the Company’s financial statements, and any material reports or inquiries from regulatory or governmental agencies.
- Receiving from the Chief Executive Officer and Chief Financial Officer of the Company a report of all significant deficiencies and material weaknesses in the design or operation of internal controls, and any fraud that involves management or other employees who have a material role in the Company’s internal controls and procedures.
- Discussing with management and the independent auditors the quality and adequacy of the Company’s internal audit controls and procedures and the internal audit function’s organization, responsibilities, plans, results, budget and staffing, as well as providing oversight to any internal audit activities, including review of significant reports prepared by the internal auditors, and management’s response.
- Discussing with management and independent auditors earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
- Establishing clear hiring policies for employees or former employees of the external auditors.
- Discussing with management policies with respect to risk assessment and risk management.
- Establishing and reviewing procedures for the receipt, retention and treatment of complaints from the Company’s employees on accounting, internal accounting controls or auditing matters, as well as for confidential, anonymous submissions by the Company’s employees of concerns regarding questionable accounting or auditing matters.
- Unless otherwise determined by the Board, reviewing all material related-party transactions, including transactions between the Company and its officers or directors or affiliates or members of the immediate families of such directors or officers.
- Regularly reporting the Committee’s activities to the Board and making such recommendations with respect to the above and to any other matters as the Committee may deem necessary or appropriate.
- Engaging in an annual self-assessment of the Committee with the goal of continuing improvement. The Committee shall review this Charter every two years and recommend any proposed changes to the Board for approval.