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investigation฀by฀governmental฀professional฀authorities,฀
within฀the฀preceding฀five฀years,฀respecting฀one฀or฀more฀inde-
pendent฀audits฀carried฀out฀by฀the฀auditors,฀and฀any฀steps฀
taken฀to฀deal฀with฀such฀issues.฀Conduct฀an฀active฀discussion฀
with฀the฀independent฀auditors฀with฀respect฀to฀any฀disclosed฀
relationships฀or฀services฀that฀may฀impact฀the฀objectivity฀and฀
independence฀of฀the฀auditors;฀and,฀select฀the฀independent฀
auditors฀to฀be฀employed฀or฀discharged฀by฀the฀Company.฀
Review฀competence฀of฀partners฀and฀managers฀of฀the฀inde-
pendent฀auditors฀who฀lead฀the฀audit฀as฀well฀as฀possible฀
rotation฀of฀the฀independent฀auditors.฀The฀Committee฀shall฀
establish฀hiring฀policies฀for฀the฀Company฀of฀employees฀or฀
former฀employees฀of฀the฀independent฀auditors฀in฀accordance฀
with฀the฀NYSE฀rules,฀SOX฀and฀as฀specified฀by฀the฀SEC฀and฀
review฀and฀discuss฀with฀management฀and฀the฀independent฀
auditors฀any฀proposals฀for฀hiring฀any฀key฀member฀of฀the฀
independent฀auditors’฀team.
•฀ Prior฀to฀commencement฀of฀the฀annual฀audit,฀review฀with฀
management,฀the฀internal฀auditors฀and฀the฀independent฀
auditors฀the฀proposed฀scope฀of฀the฀audit฀plan฀and฀fees,฀
including฀the฀areas฀of฀business฀to฀be฀examined,฀the฀per-
sonnel฀to฀be฀assigned฀to฀the฀audit,฀the฀procedures฀to฀be฀
followed,฀special฀areas฀to฀be฀investigated,฀as฀well฀as฀the฀
program฀for฀integration฀of฀the฀independent฀and฀internal฀
audit฀efforts.฀
•฀ Review฀policies฀and฀procedures฀for฀the฀engagement฀of฀the฀
independent฀auditors฀to฀provide฀audit฀and฀non-audit฀ser-
vices,฀giving฀due฀consideration฀to฀whether฀the฀independent฀
auditor’s฀performance฀of฀non-audit฀services฀is฀compatible฀
with฀the฀auditor’s฀independence฀and฀review฀and฀pre-approve฀
all฀audit฀and฀non-audit฀fees฀for฀such฀services,฀subject฀to฀
the฀deminimus฀exception฀under฀the฀Sarbanes-Oxley฀Act.฀
With฀the฀exception฀of฀the฀annual฀audit,฀the฀Committee฀
may฀delegate฀to฀a฀member฀of฀the฀Committee฀the฀author-
ity฀to฀pre-approve฀all฀audit฀and฀non-audit฀services฀with฀any฀
such฀decision฀presented฀to฀the฀full฀Committee฀at฀the฀next฀
scheduled฀meeting.
•฀ Review฀with฀management฀and฀independent฀auditors฀the฀
accounting฀and฀reporting฀policies฀and฀procedures฀that฀may฀
be฀viewed฀as฀critical,฀any฀improvements,฀questions฀of฀choice฀
and฀material฀changes฀in฀accounting฀policies฀and฀procedures,฀
including฀interim฀accounting,฀as฀well฀as฀significant฀account-
ing,฀auditing฀and฀SEC฀pronouncements.
•฀ Review฀with฀management฀and฀independent฀auditors฀the฀
financial฀reporting฀and฀disclosure฀issues,฀including฀material฀
correcting฀adjustments฀and฀off-balance฀sheet฀financings฀and฀
relationships,฀if฀any,฀discuss฀significant฀judgment฀matters฀
made฀in฀connection฀with฀the฀preparation฀of฀the฀Company’s฀
financial฀statements฀and฀ascertain฀that฀any฀significant฀dis-
agreements฀among฀them฀have฀been฀satisfactorily฀resolved,฀
and฀ascertain฀that฀no฀restrictions฀were฀placed฀by฀manage-
ment฀on฀implementation฀of฀the฀independent฀or฀internal฀
auditors’฀examinations.฀Regularly฀scheduled฀executive฀฀
sessions฀will฀be฀held฀for฀this฀purpose.฀
•฀ Review฀with฀management฀and฀the฀independent฀auditors฀
the฀results฀of฀the฀annual฀audit฀prior฀to฀release฀of฀the฀
audited฀financial฀statements฀in฀the฀Company’s฀annual฀
report฀on฀Form฀10-K฀filed฀with฀the฀SEC,฀including฀a฀review฀
of฀the฀MD&A฀section,฀quarterly฀financial฀statements฀prior฀to฀
release฀in฀the฀Company’s฀quarterly฀report฀on฀Form฀10-Q฀filed฀
with฀the฀SEC,฀including฀a฀review฀of฀the฀MD&A฀section,฀and฀
have฀management฀review฀the฀Company’s฀financial฀results฀
with฀the฀Board฀of฀Directors฀prior฀to฀the฀release฀of฀earnings.
•฀ Establish฀guidelines฀with฀respect฀to฀earnings฀press฀releases฀
and฀financial฀information฀and฀earnings฀guidance฀provided฀
to฀analysts฀and฀rating฀agencies.฀The฀Committee฀may฀request฀
a฀prior฀review฀of฀any฀annual฀or฀quarterly฀earnings฀release฀or฀
earnings฀guidance฀and฀delegate฀to฀the฀Chairman฀of฀the฀
Committee฀the฀authority฀to฀review฀any฀such฀earnings฀
releases฀and฀guidance.
•฀ Review฀with฀the฀Board฀of฀Directors฀any฀issues฀that฀arise฀with฀
respect฀to฀the฀quality฀or฀integrity฀of฀the฀Company’s฀financial฀
statements฀and฀reporting฀system,฀the฀Company’s฀compliance฀
with฀legal฀or฀regulatory฀requirements,฀the฀performance฀and฀
independence฀of฀the฀Company’s฀independent฀auditors฀or฀
the฀performance฀of฀the฀internal฀audit฀function.฀
•฀ Review฀guidelines฀and฀policies฀on฀risk฀assessment฀and฀risk฀
management฀related฀to฀the฀Company’s฀major฀financial฀risk฀
exposures฀and฀the฀steps฀management฀has฀taken฀to฀monitor฀
and฀control฀such฀exposures.
•฀ Annually฀prepare฀a฀report฀to฀stockholders฀included฀in฀the฀
Company’s฀proxy฀statement฀(a)฀stating฀that฀the฀Committee฀
has฀(i)฀reviewed฀and฀discussed฀the฀audited฀financial฀state-
ments฀with฀management;฀(ii)฀discussed฀with฀the฀independent฀
auditors฀the฀matters฀required฀to฀be฀discussed฀by฀Statement฀
on฀Auditing฀Standards฀No.฀61;฀(iii)฀received฀a฀formal฀written฀
report฀from฀the฀independent฀auditors฀concerning฀the฀audi-
tors’฀independence;฀and฀(iv)฀based฀upon฀the฀review฀and฀฀
discussion฀of฀the฀audited฀financial฀statements฀with฀both฀
management฀and฀the฀independent฀auditors,฀the฀Committee฀
recommended฀to฀the฀Board฀of฀Directors฀that฀the฀audited฀
financial฀statements฀be฀included฀in฀the฀Company’s฀Annual฀
Report฀on฀Form฀10-K฀for฀the฀last฀fiscal฀year฀for฀filing฀with฀
the฀SEC฀and฀(b)฀cause฀the฀Charter฀to฀be฀included฀periodically฀
in฀the฀proxy฀statement฀as฀required฀by฀applicable฀rules.
•฀ Review฀actions฀taken฀by฀management฀on฀the฀independent฀
auditors฀and฀internal฀auditors’฀recommendations฀relating฀
to฀organization,฀internal฀controls฀and฀operations.
•฀ Meet฀separately฀and฀periodically฀with฀management,฀the฀
internal฀auditors฀and฀the฀independent฀auditors฀to฀review฀
the฀responsibilities,฀budget฀and฀staffing฀of฀the฀Company’s฀
internal฀audit฀function,฀the฀effectiveness฀of฀the฀Company’s฀
internal฀controls,฀including฀computerized฀information฀sys-
tems฀controls,฀and฀security.฀Review฀the฀Company’s฀annual฀
internal฀audit฀plan,฀staffing฀and฀budget,฀and฀receive฀regular฀
reports฀on฀their฀activities,฀including฀significant฀findings฀and฀
management’s฀actions.฀Review฀annually฀the฀audit฀of฀the฀
expenses฀of฀the฀Company’s฀senior฀management.
B-2฀฀฀฀Baker฀Hughes฀Incorporated