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Rules of Business Practice for the 2005–2010 USP Board of Trustees

8. Audit Committee

8.01 Composition

The Audit Committee shall be appointed by the Chairperson and shall be composed of at least three members of the Board, one of whom shall be the Treasurer. The Treasurer shall serve as chairperson of the Audit Committee.

8.02 Functions

The Audit Committee shall:

1. Perform the following functions with regard to independent audits of the organization:
   1. Recommend to the Board suitable accounting firms to conduct such audits. The Board shall vote annually to select the audit firm to conduct the annual audit. Such selection shall ensure appropriate rotation of the firm and individuals within the firm responsible for conducting the audit.
   2. Oversee the independent audit of the organization, including meeting with auditors to discuss the scope of the audit, reviewing and analyzing the audit results, discussing with auditors and management the adequacy and effectiveness of the accounting and financial controls, and discussing with the auditors and management any other problems, issues or concerns arising out of the audit.
   3. Approve any non-audit service to be provided by USP's audit firm. A non-audit service shall mean any service other than those related to the preparation, completeness, and accurate reporting of the financial statements. None of the following non-audit services may be approved for the audit firm: (i) bookkeeping or other services related to the accounting records or financial statements of USP; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources functions; (vii) broker or dealer, investment adviser, or investment banking services; and (viii) legal and expert services unrelated to the audit. Any other non-audit services, including tax services, may be provided by USP's audit firm if approved by the Audit Committee.
   4. Annually, obtain and review a report by the independent auditors describing: (i) the firm's internal control procedures; (ii) any material issues raised by the most recent internal control review or other review inquiry or investigation by governmental or professional authorities within the preceding five years, respecting any independent audits carried out by the firm and any steps taken to deal with any such issues; and (iii) all relationships between the auditor and the USP.
   5. Require the auditors to report to the Audit Committee in a timely fashion: (i) all critical accounting policies to be utilized; (ii) all alternative treatments of financial information that have been discussed with management, the ramifications thereof, and the preference of the auditor; and (iii) other material written communications between the independent auditor and senior management.
   6. Report to the Board on its audit-related activities at least annually.
2. Ensure that all financial events are recorded in an appropriate manner.
3. Ensure the accurate preparation of meaningful financial statements.
4. Safeguard the assets of the Convention through appropriate controls.
5. Review the findings of any examinations conducted by regulatory agencies, and make recommendations if needed.
6. Oversee the development, implementation and enforcement of the USP Code of Ethics and USP Policies, including:
   1. Working with staff to develop and update the Code of Ethics and Policies, and recommending the Code and Policies to the Board for its approval.
   2. Ensuring adequate training of new and existing employees with regard to the Code and Policies.
   3. Overseeing investigations of possible violations of the Code and Policies and imposition of disciplinary action when necessary and appropriate.

8.03 Foreign Subsidiary Oversight

The Audit Committee also shall provide oversight to the company's foreign subsidiaries with respect to the functions described in Section 8.02 above, in accordance with local laws and the governing documents of such subsidiaries.

8.04 Investigatory Authority

In performing its functions, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the company and the authority to engage independent counsel and other advisers as it deems necessary to carry out its duties.