Pacific Financial Corporation

AUDIT COMMITTEE CHARTER

The Audit Committee is appointed by the Pacific Financial Corporation (“Company”) Board of Directors (“Board”) to assist the Board in monitoring:

  • The integrity of the financial statements of the Company,
  • The compliance by the Company with applicable legal and regulatory requirements and,
  • The independence and performance of the Company’s internal and external auditors.

The members of the Audit Committee will meet the independence and financial experience requirements of the Nasdaq Stock Market, Inc. Members of the Audit Committee will be appointed by the Board.

The Audit Committee will have the authority to retain special legal, accounting or other consultants to advise the Committee. The Audit 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 Audit Committee shall make timely reports to the Board detailing Committee actions.

The Audit Committee has the responsibility and powers as set forth in this Charter, however:

  • It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles which is the responsibility of management and the independent auditor.
  • Further, it is not the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent audit or to assure compliance with applicable laws and regulations.

Duties, Responsibilities and Powers of the Audit Committee:

  • Review and reassess the adequacy of the Charter annually and recommend any proposed changes to the Board for approval.
  • Review the annual audited financial statements with the Company’s management, including major issues regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect the Company’s financial statements.
  • Review and analysis prepared by management and the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements.
  • Review with management and the independent auditor the Company’s quarterly financial statements prior to the filing of its Form 10-Q.
  • Meet periodically with management to review the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
  • Review major changes to the Company’s auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management.
  • Recommend to the Board the appointment of the independent auditor, which firm is ultimately accountable to the Audit Committee and the Board.
  • Review and pre-approve any and all fees to be paid to the independent auditor prior to any engagement for services.
  • Receive periodic reports from the independent auditor regarding the auditor’s independence consistent with Independence Standards Board Standard 1, discuss such reports with the auditor, and if so determined by the Audit Committee, take or recommend that the full Board take appropriate action to oversee the independence of the auditor.
  • Evaluate together with the Board the performance of the independent auditor and, if so determined by the Audit Committee, recommend that the Board replace the independent auditor.
  • Review the appointment and replacement of the senior internal auditing executive.
  • Review the significant reports to management prepared by the internal auditing department and management’s responses.
  • Meet with the independent auditor prior to the audit to review the planning and staffing of the audit.
  • Obtain from the independent auditor assurance that Section 10A of the Securities Exchange Act of 1934 has not been implicated.
  • Obtain reports from management, the Company’s senior internal auditing executive and the independent auditor that the Company’s subsidiary entities are in conformity with applicable legal requirements.
  • Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit.
  • Review with the independent auditor any problems or difficulties the auditor may have encountered and, any management letter provided by the auditor and the Company’s response to that letter. Such review should include: Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. Any changes required in the planned scope of the internal audit. The internal audit department responsibilities, budget and staffing.
  • Prepare the Audit Committee report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement.
  • Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations.
  • Review with the Company’s general counsel legal matters that may have a material impact on the financial statements, the Company’s compliance policies and any material reports or inquiries received from regulators or governmental agencies.
  • Meet at least annually with the chief financial officer, the senior internal auditing executive and the independent auditor in separate executive sessions