Charter for Audit Committee
Bell Industries, Inc.
Charter for Audit Committee
1. The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Bell Industries, Inc. is to assist the Board in fulfilling its oversight responsibilities with respect to (i) the integrity of the Company's quarterly and annual financial statements and financial information filed with the Securities and Exchange Commission (the "SEC"), (ii) the independent auditor's qualifications and independence, (iii) the performance of the Company's independent auditor, (iv) the Company's financial accounting principles and policies, and (iv) the Company's system of internal controls. The Committee shall also have the responsibility to prepare the Committee's report to be included in the Company's annual proxy statement.
2. The Committee will consist of not fewer than three directors, each of whom is independent of the Company and free of any relationship that in the opinion of the Board would interfere with their exercise of independent judgment as a member of the Committee. Each member of the Committee shall satisfy the independence requirements of the American Stock Exchange ("AMEX") and applicable law, including the Sarbanes-Oxley Act of 2002 ("SOA") and all rules promulgated thereunder by the SEC. Other than in the capacity as a member of the Board and any committee of the Board, a member of the Committee may not accept, directly, or indirectly, any consulting, advisory or other compensatory fee from the Company. One member shall serve as Chairman of the Committee. The members of the Committee shall serve one-year terms, and shall be appointed by the Board annually on the day of the Annual Meeting of the Shareholders or on such other date as the Board shall determine. Members of the Committee may be removed or replaced by the Board.
3. Each Committee member shall be financially literate or shall become financially literate within a reasonable period of time after his or her appointment to the Committee. Additionally, at least one member of the Committee shall have accounting or related financial management experience and sufficient education and experience to have acquired the attributes necessary to meet the criteria of an audit committee financial expert as defined in Item 401(h) of SEC Regulation S-K. The Board shall determine whether each member is financially literate and whether at least one member has the requisite accounting or financial management expertise and sufficient education and experience to meet the audit committee financial expert criteria. The designation or identification of a person as an audit committee financial expert shall not impose on such person any duties, obligations or liability greater than the duties, obligations and liability imposed on such person as a member of the Committee. Also, the designation does not relieve other members of the Committee or the Board of any of their duties, obligations or liability.
4. The Committee shall meet with such frequency and at such intervals as it shall determine is necessary to carry out its duties and responsibilities, but in any case, at least quarterly. Meetings of the Committee may be called as needed by the Committee Chairman. The Committee Chairman will preside, when present, at all meetings of the Committee. The Committee may meet in person or via teleconference and may take action by written consent. Minutes of each meeting will be maintained with the Corporate records.
5. The Committee shall have the authority to engage and determine funding for such independent accounting, independent counsel, and other advisors, as it deems necessary or appropriate to carry out its responsibilities, and is empowered to cause the Company to pay the compensation of such advisors.
6. The Committee is responsible for overseeing the Company's financial reporting process on behalf of the Board. Management is responsible for the preparation, presentation and integrity of the Company's financial statements and for the appropriateness of the accounting and reporting policies that are used by the Company. The independent auditor is responsible for auditing the Company's financial statements and for reviewing the Company's interim financial statements. The independent auditor is ultimately accountable to the Board and the Committee, as representatives of the Company's shareholders. In carrying out its responsibilities, the Committee shall perform the following functions:
• Appoint or replace the independent auditor and approve the fees and other compensation to be
paid to the independent auditor.
• Pre-approve audit and non-audit services provided by the
independent auditor consistent with applicable law and exchange requirements.
• Review and discuss with the Board any relationship between the independent auditor and the
Company or any other relationships that may adversely affect the independence of the independent auditor,
including in connection therewith, the nature of all services provided by the auditor.
• Ensure the independent auditor submits, on a periodic basis, a formal written statement to the
Committee delineating all relations, if any, between the independent auditor and the Company.
• Review the experience and qualifications of the senior members of the independent auditor team
and the quality control procedures of the independent auditor.
• Determine that there is appropriate
rotation of partner level personnel assigned to the Company's audit engagement.
• Review and discuss with the independent auditor the plans for, and the scope of, the annual audit.
• Review and discuss with the independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended by Statement of Auditing Standards No. 90 relating to the conduct
of the audit.
• Review and discuss with management of the Company and the independent auditor the
Company's annual audited and quarterly financial statements and related disclosures.
• Review and discuss with management all earnings releases and other financial press releases prior
to their distribution.
• Review and discuss with the independent auditor the adequacy of the Company's internal accounting
controls.
• Review and discuss with the independent auditor the report of their annual audit and
the accompanying management letter, if any.
• Review and discuss with the independent auditor the adequacy of financial and accounting personnel
and cooperation received during the course of the audit or quarterly reviews.
• Determine, with regard to new or unusual transactions or events, the independent auditor's
reasoning for the appropriateness of the accounting principles, estimates, judgments and disclosure
practices adopted by management.
• Review any year-to-year changes in accounting principles or
practices.
• Inquire of management and the independent auditor about any potential financial or reporting
risks or exposures to the Company and review with management the steps taken to minimize such risks.
• Establish procedures for the receipt, retention, and treatment of complaints received by the
Company regarding accounting and internal accounting controls and for the confidential submission by
employees of the Company of concerns regarding questionable accounting matters.
• Discuss with management and the independent auditor any correspondence with regulators or
governmental agencies and any complaints or concerns regarding the Company's financial statements or
accounting policies.
• Following each Committee meeting, report at the next meeting of the full Board all significant
items discussed at the Committee meeting.
• Review the Audit Committee Charter on at least an annual
basis and recommend changes to the Charter to the full Board as appropriate.
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 13, 2004.
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