Baker Hughes 2007 Annual Report Download - page 64

B-1 Baker Hughes Incorporated
ANNEX B
BAKER HUGHES INCORPORATED
CHARTER OF THE AUDIT/ETHICS
COMMITTEE OF THE BOARD OF DIRECTORS
(as amended and restated January 23, 2008)
The Board of Directors of Baker Hughes Incorporated (the
“Company”) has heretofore constituted and established an
Audit/Ethics Committee (the “Committee”) with authority,
responsibility and specific duties as described in this Charter.
It is intended that this Charter and the composition of the
Committee comply with the rules of the New York Stock
Exchange (the “NYSE”). This document replaces and super-
sedes in its entirety the previous Charter of the Committee
adopted by the Board of Directors of the Company.
Purpose
The Committee’s purpose is to assist the Board of Directors
with oversight of: (i) the integrity of the Company’s financial
statements and financial reporting system, (ii) the Company’s
compliance with legal and regulatory requirements, (iii) the
independent auditor’s qualifications, independence and perfor-
mance and (iv) the performance of the Company’s internal
audit function. The Committee shall also prepare the report of
the Committee to be included in the Company’s annual proxy
statement, carry out the duties and responsibilities set forth in
this Charter and conduct an annual self-evaluation.
Composition
The Committee and Chairman of the Committee shall
be elected annually by the Board of Directors and are subject
to removal pursuant to the terms of the Company’s Bylaws.
The Committee shall be comprised of not less than three non-
employee Directors who are (i) independent (as defined by
Section 10A(m)(3) of the Securities Exchange Act of 1934 and
the rules and regulations thereunder and the NYSE) and (ii)
financially literate (as interpreted by the Board of Directors in
its business judgment). Such Committee members may not
simultaneously serve on the audit committee of more than
three public companies. At least one member of the Commit-
tee shall be an “audit committee financial expert,” as defined
by the Securities and Exchange Commission (“SEC”). The audit
committee financial expert must have: (i) an understanding of
GAAP and financial statements; (ii) experience in the (a) prepa-
ration, auditing, analyzing or evaluating of financial state-
ments of generally comparable issuers or supervising one or
more persons engaged in such activities and (b) applying
GAAP principles in connection with the accounting for esti-
mates, accruals and reserves; (iii) an understanding of internal
control over financial reporting; and (iv) an understanding of
audit committee functions. The Committee may, if appropri-
ate, delegate its authority to subcommittees.
If a member of the Committee ceases to be independent
for reasons outside the member’s reasonable control, his or
her membership on the committee may, if so permitted under
then applicable NYSE rules, continue until the earlier of the
Company’s next annual meeting of stockholders or one year
from the occurrence of the event that caused the failure to
qualify as independent.
Principal Responsibilities
The principal responsibilities of the Committee are: (i) to
provide assistance to the Board of Directors in fulfilling its
responsibility in matters relating to the accounting and report-
ing practices of the Company, the adequacy of the Company’s
internal controls over financial reporting and disclosure con-
trols and procedures, and the quality and integrity of the
financial statements of the Company; and (ii) to oversee the
Company’s compliance programs. The independent auditor
is ultimately accountable to the Board of Directors and the
Committee, as representatives of the Company’s stockholders,
and shall report directly to the Committee. The Committee
has the ultimate authority and direct responsibility to select,
appoint, evaluate, compensate and oversee the work, and,
if necessary, terminate and replace the independent auditor
(subject, if applicable, to stockholder ratification). The Com-
mittee shall have authority to conduct or authorize investiga-
tions into any matters within its scope of responsibilities.
The Committee shall have the authority to engage inde-
pendent counsel and other advisors, as the Committee deems
necessary to carry out its duties. The Committee shall have the
sole authority to approve the fees paid to any independent
advisor retained by the Committee, and the Company shall
provide funding for such payments. In addition, the Company
must provide funding for ordinary administrative expenses of
the Committee that are necessary or appropriate in carrying
out its duties.
The Committee shall review the composition, expertise and
availability of the Committee members on an annual basis.
The Committee shall also perform a self-evaluation of the
Committee and its activities on an annual basis.
The Committee shall meet in executive session at each
regularly scheduled meeting, including separate, private meet-
ings with the independent registered public accounting firm,
corporate auditors, general counsel and compliance officer.
The Committee shall also meet in executive session with such
other employees as it deems necessary and appropriate.
This Charter is intended to be flexible so that the Commit-
tee is able to meet changing conditions. The Committee is
authorized to take such further actions as are consistent with
the following described responsibilities and to perform such
other actions as applicable law, the NYSE, the Company’s
charter documents and/or the Board of Directors may require.
To that end, the Committee shall review and reassess the
adequacy of this Charter annually. Any proposed changes
shall be put before the Board of Directors for its approval.
With regard to its audit responsibilities, the
Committee shall:
•฀ Receive฀and฀review฀reports฀from฀the฀independent฀registered฀
public accounting firm pursuant to the Sarbanes-Oxley Act
of 2002 (“SOX”) and Section 10(A)(k) of the Exchange Act
regarding: (i) all critical accounting policies and practices
being used; (ii) all alternative treatments of financial infor-
mation within generally accepted accounting principles that
have been discussed with management, and the treatment