The primary responsibility of the Audit Committee (the "Committee") is to assist the Board of Directors (the "Board") of Digital Power Corporation (the “Company”) in overseeing management's conduct of the Company's financial reporting process. The Committee performs this role by reviewing the financial reports and other financial information released by the Company, the annual independent audit of the Company's financial statements by the Company's independent auditors (the “Auditors”), and the Company's legal compliance and ethics programs.
The Committee has sole responsibility for the retention, compensation, and oversight of the Auditors. The Auditors report directly to the Committee. The Committee also serves as an independent monitor of the Company’s financial reporting process and internal control over financial reporting. The Committee shall adopt procedures to allow the free flow of information to the Committee regarding the Company’s internal control over financial reporting and any concerns by officers or employees of the Company or the Auditors regarding accounting and auditing matters. In discharging its oversight role, the Committee is empowered to investigate any matters brought to its attention. In such investigations, the Committee shall have full access to all books, records, facilities, and personnel of the Company, and the power to retain outside counsel, auditors, or other experts. The Committee shall receive the funding reasonably necessary to retain the Auditors to perform its audit, and to retain any other experts required by the Committee to carry out its responsibilities.
The Committee shall be comprised of not less than two members of the Board, each of whom shall be an independent director in accordance with the rules of SEC and applicable law. Accordingly, no member shall have a relationship with the Company that interferes with the exercise of his or her independence from the Company and its management. Each member shall be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement, and at least one member of the Committee shall be a financial expert, in that he or she has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, as determined by the Board in accordance with the rules of the rules and regulations of the SEC and any other applicable law. Committee members shall be appointed by the Board.
The Committee shall meet at least quarterly. In addition, the Committee shall meet at least once annually with the Auditors, and with the chief financial officer (and other management as appropriate) in separate sessions to discuss any matters that the Committee or these other individuals believe should be discussed privately, and to resolve any disputes that may arise between management and the Auditors. The Committee shall also meet at least quarterly with management to discuss the Company’s system of internal control over financial reporting and management’s evaluation of the effectiveness of these controls.
A majority of Committee members shall constitute a quorum, but members of the Committee should endeavor to be present, in person or by telephone, at all meetings. The Chairperson of the Board may request that members of management and representatives of the Auditors be present at Committee meetings.
MINUTES OF MEETINGS
Minutes of each meeting shall be prepared and provided to Committee members and made available to the directors who are not members of the Committee.
The Committee's job is one of oversight. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the Auditors.
The following is a list of the regular functions of the Committee. These functions are set forth as a guide, with the understanding that the Committee may diverge from this guide as appropriate: