Members
The Board of Directors of Kansas City Life Insurance Company shall annually appoint from its members an Audit Committee (the “Committee”). The Committee shall be composed of at least three members of the Board of Directors. The Chairman of the Committee shall be appointed by the Board of Directors. Any vacancies shall be filled by the Board of Directors.
Qualifications of Members
Each member of the Committee shall be a Director who, in the judgment of the Board of Directors, is financially literate and possesses the ability to read and understand the fundamental financial statements of the Company and its subsidiaries, including balance sheets, income statements and cash flow statements. At least one member of the Committee shall, in the judgment of the Board of Directors, have accounting or related financial management expertise, which may include employment experience in finance or accounting, certification in accounting or other comparable experience, including experience as a chief executive officer, chief financial officer, or other senior officer with financial oversight responsibilities.
Independence of Members
At a minimum, a majority of Committee Members shall qualify as an ‘Independent Director” as defined by the OTCQX under the OTCQX Rules for US Companies published from time to time by the OTC Marketplace. Independent Director members should be Directors who are not an Executive Officer or employee of the Company or any other Person having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out their responsibilities as a director.
Meetings, Quorum, Informal Actions, Minutes
The Committee shall meet on a regular basis. Special meetings may be called by the Chair of the Committee. A majority of the members of the Committee shall constitute a quorum. Concurrence of a majority of the quorum (or, in case a quorum at the time consists of two members of the Committee, both members present) shall be required to take formal action of the Committee. Written minutes shall be kept for all formal meetings of the Committee.
The Committee may act by unanimous written consent, and may conduct meetings via conference telephone or similar communication equipment.
Members of the Committee may meet informally with officers or employees of the Company and its subsidiaries and with the Company's independent auditors and may conduct informal inquiries and studies without the necessity of formal meetings. The Committee may delegate to its chair or to one or more of its members the responsibility for performing routine functions as, for example, review of press releases announcing results of operations.
Responsibilities
The Committee shall provide assistance to the Board of Directors in fulfilling their oversight responsibility to the shareholders, potential shareholders, the investment community, and others relating to the Company's financial statements and the financial reporting process, the systems of internal accounting and financial controls, the internal audit function, and the annual independent audit of the Company's financial statements. In so doing, the Committee shall be responsible for maintaining free and open communications between the Committee, independent auditors, the internal auditors, and management of the Company. In discharging its oversight role, the 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 power to retain outside counsel or other experts for this purpose.
The Company's independent auditors shall report directly to the Committee. The Committee shall be directly responsible for the appointment, compensation, and oversight of the work of the Company's independent auditors, including the resolution of disagreements between the independent auditors and the Company's management, and, where appropriate, the replacement of the Company's independent auditors subject to the approval of the Board. The Committee shall receive written disclosure regarding independence from an accounting firm prior to their engagement. The Committee shall approve all auditing services and all significant non-audit services to be provided to the Company by the independent auditors. The Board of Directors may, in its sole discretion, determine to submit to stockholders for approval or ratification the appointment of the Company's independent auditors.
The Committee shall oversee the independence and performance of the Company's independent auditors. The Committee shall ensure that the independent auditors periodically submit a formal written statement delineating all relationships between the auditors and the Company and shall engage in an active dialogue with the auditors with respect to any disclosed relationships or services that may impact the auditor's independence or objectivity. The Committee shall make recommendations to the Board of Directors for appropriate action in response to the auditors' report to satisfy itself that the auditors are independent.
Without limiting the generality of the foregoing, the Committee shall:
Review the scope of proposed audits to be performed with respect to the Company's financial statements in the context of the Company's particular characteristics and requirements.
Review the results of the auditing engagement with the independent auditors and any recommendations the auditors may have with respect to the Company's financial, accounting or auditing systems.
Review significant deficiencies and material weaknesses and breaches of internal controls encountered during the course of the audit with the independent auditors.
Inquire of management and the independent auditors whether any significant financial reporting issues were discussed during the course of the audit and, if so, how they were resolved.
Review changes in accounting standards or rules promulgated, as applicable, by the Financial Accounting Standards Board, Public Accounting Oversight Board, the Securities and Exchange Commission, the OTC Marketplace, and various Insurance Departments that may affect the Company's financial statements with management and the independent auditors.
Request an explanation from management and the independent auditors concerning the effects of significant changes in accounting practices or policies.
Inquire about significant contingencies or estimates that may affect the Company's financial statements and the basis for the Company's presentation of such matters.
Review the adequacy of the internal financial and operational controls of the Company with staff performing internal auditing functions and with the independent auditors.
Establish procedures for the confidential, anonymous submission by the employees, and the receipt, retention, and treatment by the Company, of the complaints regarding accounting, internal accounting controls, or auditing matters.
At least annually, meet individually and privately with the independent auditors, internal auditors, and management in executive session to, among other matters, help evaluate the Company's internal financial accounting and reporting staff and procedures.
Review the Company’s risk management process and receive regular reports from the Risk Oversight Committee.
Receive and review a draft of the annual and quarterly disclosure and financial statements and the financial section of the annual report to stockholders, with accompanying notes, and the Management's Discussion and Analysis.
Report the Committee's activities to the full Board of Directors on a regular basis.
Review, approve, or ratify any related party transactions. The procedure for review includes the nature of the relationship, the materiality of the transaction, the related person’s interest in the transaction and position, the benefit to them and the Company, and the effect on the related person’s willingness or ability to properly perform their duties at the Company. The Committee may utilize the Company Code of Ethics for officers, Directors, and employees as it deems it to be applicable.
Review and assess the adequacy of this Charter on a regular basis.
Committee Resources
The Committee is authorized to employ the services of such Counsel, consultants, experts and personnel, including persons already employed or engaged by the Company, as the Committee may deem reasonably necessary to enable it to fully perform its duties and fulfill its responsibilities. The Committee shall determine the appropriate funding that the Company shall provide for payments of compensation to the independent auditors and to any experts employed by the Committee.
