The Allstate Corporation
The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities for the Corporation in the following areas: the integrity of financial statements and other financial information; the evaluation of the qualifications, performance, and independence of the independent registered public accountant; compliance with legal and regulatory requirements; the performance of the internal audit function; risk assessment and risk management; and disclosure controls and procedures, internal controls, accounting, and financial reporting processes. In carrying out its responsibilities, the Committee has the responsibilities and powers provided in this Charter.
The size of the Audit Committee is set from time to time by the Board, but will always consist of at least three directors. The Chair and other members of the Committee are appointed by the Board based on the recommendation of the Nominating and Governance Committee in accordance with the independence and experience requirements of the New York Stock Exchange, the SEC, and the provisions of the Director Independence Standards adopted by the Board. The Chair and other members of the Committee may be removed by the Board. Each member of the Committee shall be, in the Board’s judgment, “financially literate” or shall become financially literate within a reasonable period of time after his or her appointment, and at least one member shall be an “audit committee financial expert” as determined by the Board in accordance with SEC rules. No director may serve as a member of the Committee if such director serves on the audit committees of more than two other public companies unless the Board determines, based on the recommendation of the Nominating and Governance Committee, that such simultaneous service would not impair the ability of such director to effectively serve on the Committee and such determination is disclosed in the Corporation’s annual proxy statement.
The Committee Chair determines the number, time, place, and agenda of the Audit Committee meetings. The Committee meets not less than four times a year. At least quarterly, the Committee meets separately with management, with the internal auditors, and with the independent registered public accountant and may meet with the Corporation’s internal auditors and/or independent registered public accountant without management present whenever the Committee deems it appropriate. The Committee Chair reports regularly to the Board on the Committee’s actions and recommendations and, after each meeting, reviews with the Board any issues that arose with respect to the integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance, qualifications, and independence of the independent registered public accountant, or the performance of the internal audit function.
IV. Powers and Responsibilities
Independent Registered Public Accountant
The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work of the independent registered public accountant in preparing or issuing an audit report or performing other audit, review, or attest services for the Corporation. The Committee has sole authority and responsibility to retain and terminate the Corporation’s independent registered public accountant, to pre-approve all auditing and all permitted non-auditing services to be provided by the independent registered public accountant, and to approve the terms of and fees for such services, subject to de minimis exceptions allowed by law. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of all auditing and all permitted non-auditing services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting.
The Audit Committee may not retain as the Corporation’s independent registered public accountant any firm in which the chief executive officer, chief financial officer, controller, or any person serving in an equivalent position for the Corporation was employed and participated in any capacity in an audit of the Corporation during the one-year period prior to the date of initiation of the audit for which the retention is being made. The Audit Committee maintains a hiring policy for employees or former employees of the independent registered public accountant who participated in any capacity in an audit of the Corporation.
At least annually, the Audit Committee evaluates the qualifications, performance, and independence of the Corporation’s independent registered public accountant, including an evaluation of the lead audit partner. As appropriate, the Committee considers whether the role of the Corporation’s independent registered public accountant should be rotated among different registered public accounting firms. In addition, the Committee ensures the rotation of audit partners as required by law. As part of its evaluation, the Committee reviews a report by the independent registered public accountant that describes the firm’s internal quality-control procedures, including any material issues raised by the firm’s 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, relating to one or more independent audits conducted by the firm and any steps taken to deal with any such issues. Annually, the Committee obtains a written report from the independent registered public accountant on its independence and all relationships between it and the Corporation consistent with applicable requirements of the Public Company Accounting Oversight Board. The Committee discusses with the independent registered public accountant any such disclosed relationships and their impact on the firm’s independence. If any concerns with such independence are identified, the Committee takes such action as it deems appropriate or necessary.
Review of Financial Reports and Information
The Audit Committee reviews and discusses with management, its internal auditors, and the independent registered public accountant the Corporation’s annual audited and quarterly unaudited financial statements, including matters required to be discussed by Statement of Auditing Standards No. 114. In addition throughout the year, the Audit Committee reviews and discusses the following:
- Management’s discussion and analysis of financial condition and results of operations (“MD&A”).
- Financial statement presentations, including any significant changes in the selection or application of accounting principles.
- Any major issues regarding accounting principles.
- Critical accounting estimates, including comparisons with the critical accounting estimates of other companies in the industry.
- Significant items impacting the Corporation’s financial statements, risk factors, and forward-looking statements contained in the Corporation’s disclosures under MD&A.
- The effect of regulatory and accounting initiatives on the Corporation’s financial statements.
- Analyses prepared by management and/or the independent registered public accountant setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative generally accepted accounting principles methods on the financial statements.
- The adequacy of internal control over financial reporting and disclosure controls and procedures that could significantly affect the Corporation’s financial statements or MD&A and any special audit steps adopted in light of material control deficiencies.
The Audit Committee reviews disclosures made to the Committee by the Corporation’s chief executive officer and chief financial officer during their certification process for the annual and quarterly financial reports about any significant deficiencies in the design or operation of internal controls over financial reporting or material weaknesses in such controls and any fraud involving management or other employees who have a significant role in the Corporation’s internal controls.
The Audit Committee recommends to the Board whether the audited financial statements should be included in the Corporation’s annual report on Form 10-K and prepares (or causes to be prepared) the report on such financial statements included in the Corporation’s annual proxy statement.
The Audit Committee reviews with the general counsel of the Corporation the status of legal matters that may have a material impact on the Corporation’s financial statements.
The Audit Committee discusses the Corporation’s process for preparing earnings releases, as well as its processes for providing financial information and earnings or earnings-related guidance to analysts and rating agencies, generally (including the types of information to be disclosed and types of presentations to be made).
While the Audit Committee has the responsibilities and powers set forth in this Charter, the Committee is not required to plan or conduct audits or to determine that the Corporation’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. These are the responsibilities of the independent registered public accountant and management.
In carrying out its oversight responsibilities, the Committee is not providing expert or special assurance as to the Corporation’s financial statements and legal and regulatory compliance or any professional certification as to the work of the independent registered public accountant. It is not the duty or responsibility of the Committee or its members to conduct auditing or accounting reviews or procedures or to set independence standards for the independent registered public accountant. Each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Corporation from which the Committee receives information, (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary (which the Committee Chair shall promptly report to the Board), and (iii) representations made by management or the independent registered public accountant as to any non-audit services.
Review of Independent Registered Public Accountant Reports
The Audit Committee reviews the independent registered public accountant’s reports on the Corporation’s financial statements. The Committee discusses with the independent registered public accountant judgments about the quality (not just the acceptability) of the accounting principles used in the Corporation’s financial reporting. The Committee also reviews the scope of audits conducted by the Corporation’s independent registered public accountant. The Committee reviews with the independent registered public accountant any significant difficulties encountered in the audit work, including any restrictions on the scope of the independent registered public accountant’s activities or on access to requested information, any significant disagreements with management and management’s response, and addresses those as the Committee deems appropriate. The Committee may review with the independent registered public accountant any accounting adjustments that were noted; any significant communications between the audit team and the independent registered public accountant’s national office respecting auditing or accounting issues presented by the engagement; any “management” or “internal control” letter issued or proposed by the independent registered public accountant to the Corporation; and any other issues on the independent registered public accountant’s reports that the Committee may deem appropriate.
Insurance Company Statutory Financial Reports
Unless the Audit Committee elects to act as the audit committee of an insurance company subsidiary of the Corporation, it shall not be responsible for oversight of statutory financial reporting and financial statements filed with state insurance regulators by such subsidiary. However, the Committee reviews and discusses criteria for the selection of the members of the audit committees of the Corporation’s insurance company subsidiaries. The Committee also reviews and discusses with management and the independent registered public accountant significant deficiencies or material weaknesses in internal control over statutory financial reporting of the Corporation’s insurance company subsidiaries and such other matters as the Committee may deem appropriate in connection with statutory financial reporting.
Retention of Outside Experts and Funding
The Audit Committee has the power to conduct or authorize special projects or investigations related to any matters brought to its attention, with full access to all books, records, facilities, and personnel of the Corporation as the Committee considers necessary to discharge its responsibilities. It has the authority, without seeking Board approval, to retain independent outside counsel, accountants, or others to assist it with such projects, investigations, or other matters in the conduct of its business. The Committee may seek advice from the Corporation’s internal counsel or regular outside counsel and may also use the Corporation’s internal auditors for such purposes. The Corporation shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent registered public accountant for the purpose of issuing an audit report or performing other audit, review, or attest services for the Corporation, for payment of compensation to any advisors employed by the Committee, and for payment of the Committee’s ordinary administrative expenses in carrying out its duties.
Oversight of Internal Audit
The Audit Committee is responsible for oversight of the Corporation’s internal audit function. It maintains functional oversight of the internal audit department to ensure its independence and approves its charter. The Audit Committee reviews the appointment and performance of the senior internal auditing executive. The Committee reviews and approves the internal audit plan and reviews significant findings from the internal audit department. The Committee discusses with the independent registered public accountant and management the internal audit department responsibilities, audit plan, budget, and staffing.
The Board has oversight responsibility for risk management. The Audit Committee assists the Board in fulfilling its oversight responsibilities for the Corporation’s risk assessment and risk management processes. The Audit Committee discusses with management policies with respect to the Corporation’s processes of risk assessment and risk management, including the Corporation’s major financial risk exposures and the steps management has taken to monitor and control them. The Committee discusses with the chief risk officer the guidelines and policies to govern the process by which risk assessment and risk management is undertaken.
Oversight of Compliance and Ethics Programs
The Audit Committee is responsible for oversight of the Corporation’s ethics and compliance program. At least annually, the Audit Committee reviews and discusses with the chief ethics and compliance officer a report describing the Corporation’s ethics and compliance program and its effectiveness. This includes any ethics and compliance matters that may have a material impact on the Corporation’s reputation, operations, financial condition, results of operations, or cash flows. In addition, the Audit Committee reviews any significant recommendations from the Corporation's independent registered public accountant and internal auditors concerning ethics and compliance and compliance with the Company’s policies relating to ethics, conflicts of interest, perquisites, and use of corporate assets. The Committee requests that the chief ethics and compliance officer communicate directly and promptly with the Committee on any breach of the Corporation’s Code of Ethics, or any potential or actual criminal conduct, by any executive officer.
Self-Evaluation and Charter Review
The Audit Committee at least annually i) evaluates its own performance and reports to the Board on such evaluation and ii) reviews and assesses the adequacy of its Committee Charter and recommends any proposed changes to the Board.
Code of Ethics and Complaint Resolution
The Audit Committee reviews and approves the Corporation’s Code of Ethics applicable to the Board of Directors and all Corporation employees, including the chief executive officer, chief financial officer, chief accounting officer or controller, executive and senior financial officers, and other employees performing similar functions, and periodically assesses the adequacy of the Code of Ethics. The Committee has the sole authority to grant waivers under, or changes to, the Code of Ethics for directors, executive officers, and senior financial officers. The Committee establishes procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, and auditing matters and also for the confidential and anonymous submission by employees of related concerns, as required by the rules and regulations of the SEC.
* For purposes of this Charter, the phrase “criminal conduct” includes felonies and Class A misdemeanors under federal law and serious crimes under state law.
As amended, effective July 13, 2010