MEDTRONIC PLC BOARD OF DIRECTORS AUDIT COMMITTEE CHARTER
(As amended through March 3, 2022)
(As amended through March 3, 2022)
The purpose of the Audit Committee (the “Committee”) is to represent and assist the Board of Directors (the “Board”) of Medtronic plc (the “Company”) in its oversight of (1) the integrity of the financial reporting of the Company, (2) the independence, qualifications and performance of the Company’s external independent auditor and the performance of the internal auditors and (3) the Company’s compliance with legal and regulatory requirements. The Committee also prepares the disclosure required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement.
The Committee will consist of three or more directors, each of whom will satisfy the independence requirements for directors and audit committee members under the Companies Act 2014 (and every statutory modification, replacement and re-enactment thereof for the time being in force) (the “Companies Act”), the rules of the New York Stock Exchange and Rule 10A-3 of the Securities Exchange Act of 1934, as such requirements are interpreted by the Board in its business judgment.
The members of the Committee and Committee Chair are appointed by the Board and serve until their successors are duly appointed in connection with a change in Committee composition, or until they are no longer on the Board. Each member of the Committee must be financially literate and at least one member of the Committee must be an “audit committee financial expert” as defined by the Securities and Exchange Commission and determined by the Board.
Unless otherwise determined by the Board (in which case disclosure of such determination will be made in accordance with applicable New York Stock Exchange rules), no member of the Committee may serve on the audit committee of more than two other public companies.
The Committee has the authority in its sole discretion to retain, and terminate the retention of, such outside legal, accounting or other consultants or advisors as it determines appropriate to assist it in the performance of its functions, or to advise or inform the Committee. The Committee may also meet with investment bankers and financial analysts. The Committee will have full access to all books, records and facilities of the Company and 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 (provided that directors will use their judgment to ensure that any contact with employees is not disruptive to the business operations of the Company and will, to the extent not inappropriate, inform the Chief Executive Officer of any significant communication between a director and an officer or employee of the Company). The Company will provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor and to any advisors retained by the Committee, and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
On behalf of the Board, the Committee has, among its duties and responsibilities:
1. Review the annual audited financial statements with management and the independent auditor, including the Company’s disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations, significant issues and judgments regarding accounting and auditing principles and practices, and the effect of regulatory and accounting initiatives on the Company’s financial statements, and recommend to the Board whether the financial statements should be included in the Form 10-K. The review of the annual audited financial statements also includes a review of any transactions as to which management obtained a letter pursuant to Public Company Accounting Oversight Board (PCAOB) Auditing Standard 6105.
2. Review, upon completion of the audit, the financial statements proposed to be filed with the Companies Registration Office (in Dublin) with the Company’s annual return.
3. Review and discuss with management and the independent auditor the Company’s quarterly financial statements prior to filing the Form 10-Q, including the results of the independent auditor’s review of them and the Company’s disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations.
4. Review major issues and changes to the Company’s auditing and accounting principles and practices and financial statement presentations as suggested by the independent auditor, internal auditors or management, and analyses setting forth significant financial reporting issues and judgments, including analyses of the effects of non-GAAP financial measures on the financial statements, and the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
5. Discuss the Company’s guidelines, policies and processes with respect to the Company’s financial controls and procedures, including discussions of major enterprise-level risk exposures that may affect the Company’s financial statements, operations, business continuity, reputation, and the reliability and security of the information technology, security systems and product security/technology owned by the Company or used in its business operations (with respect to product security and other product- and service-related technology matters, as reviewed regularly by the Quality Committee, and with respect to financial matters as reviewed regularly by the Finance and Financial Risk Committee). Discuss the steps management has undertaken to monitor and control such exposures. Receive ongoing assessments of the Company’s risk management processes.
6. Be directly responsible, in its capacity as a committee of the Board, for the appointment, compensation, retention and oversight of the work of the independent auditor, including resolution of disagreements between management and the independent auditor regarding financial reporting, subject to the provisions of the Companies Act relating to the fixing of the compensation of the independent auditor. In this regard, the Committee will appoint (and seek shareholder ratification of such appointment) and retain, compensate, evaluate, and terminate when appropriate, the independent auditor, which will report directly to the Committee.
7. Pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor and establish policies and procedures for the engagement of the independent auditor to provide auditing and permitted non-audit services.
8. Obtain and review, at least annually, a report by the independent auditor describing the independent auditor’s internal quality-control procedures, and any material issues raised by the most recent internal quality-control review, or peer review, 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 independent auditor, and any steps taken to deal with any such issues, and all relationships between the independent auditor and the Company.
9. Review at least annually the qualifications, performance and independence of the independent auditor, and receive from and discuss with the independent auditor the auditor’s report regarding its independence. Discuss with the independent auditor the matters required to be discussed under the applicable PCAOB Auditing Standards. Review the experience and qualifications of the lead partner each year and determine that all partner rotation requirements are executed, and consider whether there should be rotation of the independent auditor itself. The Committee may remove the independent auditor if circumstances warrant, based upon its review of the performance and independence of the independent auditor.
10. Prepare the Report of the Committee as required by the rules and regulations of the Securities and Exchange Commission for inclusion in the Company’s annual proxy statement. This report must (i) describe the review of the audited financial statements and that the Committee has discussed with the independent auditor the matters required to be discussed by the applicable PCAOB Auditing Standards; (ii) state that the Committee has received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB and has discussed with the independent auditor the independent auditor’s independence; and (iii) state that as a result of the review and discussions described in the report, the Committee has recommended that the financial statements be included in the Company’s Form 10-K.
11. Meet with the independent auditor prior to the audit to review the scope and planning of the audit.
12. Review with the independent auditor the results of the annual audit examination, and any issues the auditor may have encountered in the course of its audit work and management’s response. This review should include, among other things, any management letter, any restrictions on the scope of activities or access to requested information, any significant disagreements with management, and a discussion of the responsibilities, budget and staffing of the Company’s internal audit function.
13. Discuss with management, which has principal responsibility for the Company’s financial statements and disclosures, the Company’s earnings press releases and corporate policies with respect to the type and presentation of information to be included in earnings releases (paying particular attention to any use of “pro forma” or “adjusted” non-GAAP financial information), and the Company’s financial information and earnings guidance provided to analysts and rating agencies.
14. Receive reports from the independent auditor and management regarding, and review the adequacy and effectiveness of, the Company’s internal controls, including information technology and security systems relating to internal controls, as well as any significant deficiencies and material weaknesses in internal controls and material changes in such controls reported to the Committee by the independent auditor, the internal auditor or management, and any special audit steps adopted in light of any significant deficiencies or material weaknesses. Receive reports from management regarding, and review the adequacy and effectiveness of, the Company’s disclosure controls and procedures, including those required by Rule 13a-14 under the Exchange Act.
15. Receive reports from management regarding, and review compliance processes relating to, the Company’s Code of Conduct, Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics for the Board of Directors.
16. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Consider and approve, as deemed appropriate, any request for waiver under the Company’s Code of Conduct, Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics for the Board of Directors.
17. Review with the Company’s General Counsel and independent auditor (1) legal matters that may have a material impact on the financial statements, (2) any fraud involving management or other employees who have a significant role in the Company’s internal controls, (3) compliance policies, and (4) any material reports or inquiries received from regulators, governmental agencies or employees that raise material issues regarding the Company’s financial statements and accounting or compliance policies.
18. Review and discuss with the Company’s 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.
19. Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations.
20. Receive reports from the Chief Ethics and Compliance Officer or his or her designee approximately four times a year regarding the performance of the Company’s global compliance program, including the results of significant compliance audits and investigations conducted within the global compliance program and corrective or preventive actions taken as a result of significant compliance audits and investigations.
21. Meet in executive session with the Chief Ethics and Compliance Officer, or his or her designee, at his, her, or the Committee’s request, to discuss any aspect of the performance of the Company’s global compliance program, including the results of significant compliance audits and investigations conducted within the global compliance program and corrective or preventive actions taken as a result of significant compliance audits and investigations.
22. Provide prior approval for all decisions relating to the appointment, material discipline, or termination of the Chief Ethics and Compliance Officer, as well as consultation and prior approval of compensation or benefit decisions impacting the Chief Ethics and Compliance Officer.
23. Review candidates for the positions of Chief Financial Officer and Corporate Controller of the Company and provide oversight with respect to the appointment, performance assessment and replacement of the Vice President, Corporate Audit.
24. Review with the independent auditor and the Vice President, Corporate Audit, the internal audit charter, planned scope and results of the internal audit plan, including budget, responsibilities and staffing.
25. Receive communications from the Vice President, Corporate Audit, or his or her designee, approximately four times a year, or at his, her or the Committee’s request, discuss any aspect of the Company’s internal audit function, including the performance of the Company’s internal audit function, the results of significant internal audits and internal audit investigations, and any other matters.
26. Establish clear policies for hiring employees and former employees of the independent auditor.
27. Review the Committee’s own performance annually.
28. Review this Charter annually and recommend any changes to the Board for approval.
29. Report its activities to the Board regularly, specially addressing any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditor, or the performance of the internal audit function.
The compensation of Committee members will be as determined by the Board. No member of the Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than fees paid in his or her capacity as a member of the Board or of a committee of the Board.
The Committee will meet as often as may be deemed necessary or appropriate in its judgment, but not less frequently than four times per year, either in person, telephonically or virtually, and at such times and places as the Committee determines. The Committee may request any director, officer or employee of the Company or the Company’s outside counsel to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Committee will meet with the Chief Financial Officer, the Corporate Controller, the Vice President, Corporate Audit, the Vice President, Global Ethics and Compliance Officer and the independent auditor in separate executive sessions periodically.
The Committee may, in its discretion, form and delegate authority to subcommittees, including a single member, when appropriate and consistent with applicable law and NYSE listing standards. Any actions taken by a subcommittee will be reported to the full Committee at its next meeting.