Audit Committee Charter

Revised effective February 7, 2023
Reviewed as of February 7, 2023

ORGANIZATION

This charter governs the operation of the Audit Committee (the “Committee”). The Committee shall review and reassess the adequacy of this charter at least annually and obtain the approval of the Board of Directors for any proposed changes to the charter. The Committee and its Chair shall be appointed by the Board of Directors, to serve at the discretion of the Board, and shall be comprised of at least three Directors, each of whom meets the independence requirements set forth in applicable rules of the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange. All Committee members shall be financially literate, and at least one member shall be an “audit committee financial expert” as that term is defined by applicable rules of the SEC.

MEETINGS

The Committee shall meet regularly, or more frequently as the Committee as a whole or the Chair may from time to time determine to be appropriate. At all meetings of the Committee a majority of the Committee members shall be necessary to constitute a quorum for the transaction of business. Members of the Committee may participate in meetings by means of conference telephone or similar communications equipment whereby all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting. The Committee may also act as otherwise permitted by law or the Company’s Bylaws.

STATEMENT OF POLICY

The Audit Committee shall assist the Board in providing oversight of the systems and procedures relating to the integrity of the Company’s financial statements, the Company's financial reporting process, its systems of internal accounting and financial controls, the performance of the internal audit function, risk management, enterprise cybersecurity, the annual independent audit process of the Company's annual financial statements, audit and assurance processes for ESG reporting, the Company’s compliance with legal and regulatory requirements and the qualification, independence and performance of the Company’s primary independent audit firm (the “Auditor”). The Committee is not responsible for the implementation of the foregoing activities. Such implementation is the sole responsibility of management. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, reports, facilities, and personnel of the Company and authority to engage independent legal, accounting or other advisors as it deems necessary to carry out its duties, at Company expense.

Management and the Auditor are responsible for planning and conducting audits and determining that the audited financial statements are complete, accurate and in accordance with U. S. Generally Accepted Accounting Principles. The Committee, in carrying out its oversight responsibilities, shall discuss with the Auditor and management their respective judgments regarding the quality and the acceptability of the Company's financial reporting.

RESPONSIBILITIES AND PROCESSES

The following shall be the principal recurring processes of the Audit Committee in carrying out its oversight responsibilities:

Independent Auditor

• The Auditor reports directly to the Committee. Annually, the Committee shall evaluate and appoint the Auditor taking into account the opinions of management and internal audit. The Committee shall have the sole authority to select, evaluate and, where it deems appropriate, replace or rotate the Auditor. The Committee shall receive from the Auditor an annual report on (1) the Auditor’s quality control procedures, (2) any material issues raised by the most recent internal quality control review, or peer review, of the Auditor, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to audits carried out by the Auditor, and any steps taken to deal with any such issues, (3) as necessary, the timetable for the rotation of partners under legal requirements, (4) all relationships between the Auditor and the Company, and (5) such other reports as the Committee deems appropriate from the Auditor regarding the Auditor’s independence, and discuss with the Auditor such reports and the matters included in the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board. If necessary, the Committee shall take appropriate action with respect to the independence of the Auditor.
• The Committee shall pre-approve all audit and non-audit services (and related fees) provided by the Company’s Auditor, as outlined below, and implement procedures so that the Auditor does not perform any service that is prohibited under the Public Company Accounting Oversight Board and SEC rules.
  • Audit Fees:
    Annually, the Committee will review and approve the audit services and the estimated audit fees for the following fiscal year. The projections will be updated quarterly and the Committee will pre-approve any amounts exceeding the original estimates.
  • Non-Audit Services and Fees:
    Annually, and otherwise as necessary, the Committee will review and approve all non-audit services and the estimated fees for such services for the current fiscal year. For recurring services such as employee benefit plans, tax compliance, due diligence, expatriate tax returns, internal control reviews, statutory filings and import/export reviews, the Committee will review and approve the services and estimated total fees therefor by category of service. The projections will be updated quarterly and the Committee will pre-approve any amounts exceeding the original estimates. For non-recurring services such as tax or other consulting, the Committee will review and approve the services and estimated fees by category of service and all individual projects exceeding an amount determined by the Committee from time to time. The projections will be updated quarterly and the Committee will pre-approve any amounts exceeding the original estimates and any new projects exceeding an amount determined by the Committee from time to time.
  • Approval Matrix:
    Should an engagement need pre-approval before the next Committee meeting, authority to grant such approval is delegated to the Audit Committee Chair. Such approval will be reviewed with the entire Committee at the next quarterly meeting.
• The Committee shall monitor management’s compliance with the following hiring policy for employees and former employees of the Auditor. The Company shall not hire an employee or former employee of the Auditor who has provided audit, review, or attest services for the Company during the last two previous fiscal years into an “accounting role or financial reporting oversight role” as defined by the SEC. This definition includes the following Corporate positions: Members of the Board of Directors, Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, General Counsel, Chief Accounting Officer, Controller, Director of Internal Audit, VP of Internal Audit, Director of Financial Reporting, and Treasurer.

Internal Controls and Audit Function

The audit function is designed to provide a check that a system of internal controls is maintained throughout the Company which protects the assets of the Company and provides the proper authorization and recording of transactions such that the financial information is reliable and materially accurate; and financial statements fairly present, in all material respects, the financial condition and results of operations of the Company in accordance with U. S. Generally Accepted Accounting Principles (“GAAP”).

• The Committee shall review with management the performance, appointment, and replacement of the senior internal auditing executive.
• The Committee shall discuss with the internal auditors and the Auditor the overall scope and plans for their respective audits. Also, the Committee shall discuss with management, the internal auditors and the Auditor the adequacy and effectiveness of the Company's accounting and financial controls, including a review and discussion of any significant audit findings, management’s responses, and the progress of the related corrective action plans.
• The Committee shall provide the senior internal auditing executive with unrestricted access to communicate personally and directly with the Committee at any time on any auditing or internal control matter.
• The Committee shall review and discuss with the internal auditors and the Auditor the organizational structure, qualifications, responsibilities, budget and staffing of the Company’s internal audit department.
• The Committee shall review and discuss with management and the internal auditors the Company’s policies and practices with respect to risk assessment and risk management, including major financial risk exposures, enterprise cybersecurity risk exposures, and the steps management has taken to monitor, mitigate and control such exposures.

Annual Audit and Quarterly Reviews

• The Committee will discuss with the Auditor the results of the annual audit and quarterly reviews, the Company’s critical accounting policies and practices, all alternative treatments within GAAP discussed with management (including ramifications of use of alternatives, and the preferred method of the Auditor), other written material communication (including any management letter or schedule of unadjusted differences), any audit problems or difficulties and management’s response, and any other matters required to be communicated to the Committee by the Auditor under Generally Accepted Auditing Standards.

Financial Reporting

• The Committee shall review with management and the Auditor the audited financial statements to be included in the Company's Annual Report on Form 10-K, and the Company’s quarterly financial statements, including any disclosure by the Company under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Based on these reviews, the Committee shall annually report to the Board whether the Committee recommends inclusion of the audited financial statements in the Company's Annual Report and Form 10-K.
• The Committee shall discuss the types of information to be included in, and the type of presentation of, earnings press releases and financial information and earnings guidance provided to analysts and ratings agencies. The Committee shall be informed by management of financial information and earnings guidance that have been provided to analysts and ratings agencies.

Proxy Report

• The Committee shall review and approve the disclosure in the report of the Committee required to be included in the Company's annual proxy statement by the rules of the Securities and Exchange Commission.

Finance

• Study and consider financial matters affecting the operations of the Company, including its hedging strategies for currency, commodities and interest rate exposures, and shall advise the Board with respect thereto.

Retirement Plans

• The Committee shall be responsible for oversight of (i) the investment management of the defined benefit and defined contribution plans of the Company, its subsidiaries and its divisions (the “Plans”), and (ii) funding of the qualified defined benefit Plans.
• The Committee may delegate the above Plan responsibilities to the Emerson Retirement Plan Management Review Committee (the “Management Review Committee”). The members of the Management Review Committee shall be selected by the Committee. The Management Review Committee shall review its activities with the Committee at least annually, including its evaluation of the management and investment performance of the Plans and the funded status of the qualified defined benefit Plans.

Other Responsibilities

• The Committee shall establish procedures for the receipt, retention and treatment of complaints made to the Company, by employees and non-employees, regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
• At least quarterly, the Committee shall meet separately with representatives from the Auditor, the internal auditors and management.
• The Committee shall review annually a summary of the Company’s litigation activities during the most recent fiscal year, and any other matters relating thereto that the Committee may from time to time deem appropriate. The Committee shall review annually a summary of the Company’s environmental activities during the most recent fiscal year, a summary of anticipated environmental audits and expenditures for the next fiscal year, and any other matters relating thereto that the Committee may from time to time deem appropriate.
• The Committee shall review and approve audit and assurance processes for ESG reporting in the Company’s financial and ESG reports, including, all such disclosures filed with the Securities and Exchange Commission.

Other Matters

• The Committee and its members shall have unrestricted access to management. The Committee shall have sole discretion, in its areas of responsibility, at Company expense, to retain and terminate independent advisors, including sole authority to approve the fees and retention terms for such advisors, if it shall determine the services of such advisors to be necessary or appropriate. Should any member of the Committee believe that participation of management or independent advisors in any discussion of a particular subject at any meeting would be advisable, they are free to make such request.
• The Committee may, when appropriate in its discretion, delegate authority with respect to specific matters to one or more members, provided that all decisions of any such members are presented to the full Committee at its next scheduled meeting.

REPORTS TO BOARD AND PERFORMANCE EVALUATION

The Committee shall report to the Board of Directors regularly regarding issues that arise in connection with the performance of its responsibilities outlined herein, including, but not limited to, 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 Auditor or the performance of the internal audit function. The Committee shall perform an annual evaluation of its performance, pursuant to the procedures established by the Corporate Governance and Nominating Committee.

Audit Committee Charter Download