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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF MERCER PARK OPPORTUNITIES CORP.
Section 1
PURPOSE
The audit committee (the “
”) is a committee of the board of directors (the “
”) of
Audit Committee
Board
Mercer Park Opportunities Corp. (the “
”). The primary function of the Audit Committee is to assist the
Corporation
directors of the Corporation in fulfilling their applicable roles by:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
recommending to the Board the appointment and compensation of the Corporation’s external
auditor;
overseeing the work of the external auditor, including the resolution of disagreements between the
external auditor and management;
pre-approving all non-audit services (or delegating such pre-approval if and to the extent permitted
by law) to be provided to the Corporation by the Corporation’s external auditor;
satisfying themselves that adequate procedures are in place for the review of the Corporation’s
public disclosure of financial information, other than those described in (g) below, extracted or
derived from its financial statements, including periodically assessing the adequacy of such
procedures;
establishing procedures for the receipt, retention and treatment of complaints received by the
Corporation regarding accounting, internal controls or auditing matters, and for the confidential,
anonymous submission by employees of the Corporation of concerns regarding questionable
accounting or auditing matters;
reviewing and approving any proposed hiring of current or former partner or employee of the
current and former auditor of the Corporation; and
reviewing and approving the annual and interim financial statements, related Management
Discussion and Analysis (“MD&A”) and other financial information provided by the Corporation
to any governmental body or the public.
The Audit Committee should primarily fulfill these roles by carrying out the activities enumerated in this
Charter. However, it is not the duty of the Audit Committee to prepare financial statements, to plan or conduct
internal or external audits, to determine that the financial statements are complete and accurate and are in
accordance with Canadian generally accepted accounting principles, to conduct investigations, or to assure
compliance with laws and regulations or the Corporation’s internal policies, procedures and controls, as these are the
responsibility of management, and in certain cases, the external auditor.
Section 2
LIMITATIONS ON AUDIT COMMITTEE’S DUTIES
In contributing to the Audit Committee’s discharge of its duties under this Charter, each member of the Audit Committee shall be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Nothing in this Charter is intended to be, or may be construed as, imposing on any members of the Audit Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which the directors are subject.
Members of the Audit Committee are entitled to rely, absent actual knowledge to the contrary, on (i) the
integrity of the persons and organizations from whom they receive information, (ii) the accuracy and completeness
of the information provided, (iii) representations made by management as to the non-audit services provided to the
Corporation by the external auditor, (iv) financial statements of the Corporation represented to them by a member of
management or in a written report of the external auditors to present fairly the financial position of the Corporation
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in accordance with generally accepted accounting principles, and (v) any report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by any such person.
Section 3
COMPOSITION AND MEETINGS
The Audit Committee should be comprised of not less than three directors as determined by the Board, all of whom shall be independent within the meaning of NI 52-110 – Audit Committees (“52-110”) of the Canadian Securities Administrators (or exempt therefrom), and free of any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee. All members of the Audit Committee should have (or should gain within a reasonable period of time after appointment) a working familiarity with basic finance and accounting practices. At least one member of the Audit Committee should have accounting or related financial management expertise and be considered a financial expert. Each member should be “financially literate” within the meaning of 52-110. The Audit Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or an outside consultant.
The members of the Audit Committee shall be elected by the Board on an annual basis or until their
successors shall be duly appointed. Unless a Chair of the Audit Committee (the “Chair”) is elected by the full
Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee
membership.
In addition, the Audit Committee members should meet all of the requirements for members of audit
committees as defined from time to time under applicable legislation and the rules of any stock exchange on which
the Corporation’s securities are listed or traded.
The Audit Committee should meet at least four times annually, or more frequently as circumstances
require. The Audit Committee should meet within forty-five (45) days following the end of the first three financial
quarters to review and discuss the unaudited financial results for the preceding quarter and the related MD&A, and
should meet within 90 days following the end of the fiscal year end to review and discuss the audited financial
results for the preceding quarter and year and the related MD&A.
The Audit Committee may ask members of management or others to attend meetings and provide pertinent
information as necessary. For purposes of performing their duties, members of the Audit Committee shall have full
access to all corporate information and any other information deemed appropriate by them, and shall be permitted to
discuss such information and any other matters relating to the financial position of the Corporation with senior
employees, officers and the external auditor of the Corporation, and others as they consider appropriate.
For greater certainty, management is indirectly accountable to the Audit Committee and is responsible for
the timeliness and integrity of the financial reporting and information presented to the Board.
In order to foster open communication, the Audit Committee or its Chair should meet at least annually with
management and the external auditor in separate sessions to discuss any matters that the Audit Committee or each of
these groups believes should be discussed privately. In addition, the Audit Committee or its Chair should meet with
management quarterly in connection with the Corporation’s interim financial statements.
A quorum for the transaction of business at any meeting of the Audit Committee shall be a majority of the
number of members of the Audit Committee or such greater number as the Audit Committee shall by resolution
determine.
Meetings of the Audit Committee shall be held from time to time and at such place as any member of the
Audit Committee shall determine upon 48 hours’ notice to each of its members. The notice period may be waived by
all members of the Audit Committee. Each of the Chair of the Board, the external auditor, the Chief Executive
Officer, the Chief Financial Officer or the Corporate Secretary shall be entitled to request that any member of the
Audit Committee call a meeting.
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This Charter is subject in all respects to the Corporation’s memorandum and articles of association from
time to time.
Section 4
ROLE
As part of its function in assisting the Board in fulfilling its oversight role (and without limiting the
generality of the Audit Committee’s role), the Audit Committee should:
(1)
(2)
(3)
(4)
(5)
(6)
Determine any desired agenda items;
Review and recommend to the Board changes to this Charter, as considered appropriate from time to time;
Review the public disclosure regarding the Audit Committee required by 52-110;
Review and seek to ensure that disclosure controls and procedures and internal control over financial
reporting frameworks are operational and functional;
Summarize in the Corporation’s annual information form the Audit Committee’s composition and
activities, as required; and
Submit the minutes of all meetings of the Audit Committee to the Board upon request.
Documents / Reports Review
(7)
(8) (9) (10)
Review and recommend to the Board for approval the Corporation’s annual and interim financial statements, including any certification, report, opinion, undertaking or review rendered by the external auditor and the related MD&A, as well as such other financial information of the Corporation provided to the public or any governmental body as the Audit Committee or the Board require.
Review other financial information provided to any governmental body or the public as they see fit.
Review, recommend and approve any of the Corporation’s press releases that contain financial information.
Seek to satisfy itself and ensure that adequate procedures are in place for the review of the Corporation’s
public disclosure of financial information extracted or derived from the Corporation’s financial statements
and related MD&A and periodically assess the adequacy of those procedures.
External Auditor
(11)
(12)
(13)
(14)
(15)
Review and seek to ensure that all financial information provided to the public or any governmental body,
as required, provides for the fair presentation of the Corporation’s financial condition, financial
performance and cash flow.
Instruct the external auditor that its ultimate client is not management and that it is required to report
directly to the Audit Committee, and not management.
Monitor the relationship between management and the external auditor including reviewing any
management letters or other reports of the external auditor and discussing any material differences of
opinion between management and the external auditor.
Review and discuss, on an annual basis, with the external auditor all significant relationships it has with the
Corporation to determine the external auditor’s independence.
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(16)
(17)
(18)
(19)
(20)
Pre-approve all non-audit services (or delegate such pre-approval, as the Audit Committee may determine and as permitted by applicable Canadian securities laws) to be provided by the external auditor.
Review the performance of the external auditor and any proposed discharge of the external auditor when
circumstances warrant.
Periodically consult with the external auditor out of the presence of management about significant risks or
exposures, internal controls and other steps that management has taken to control such risks, and the
fullness and accuracy of the financial statements, including the adequacy of internal controls to expose any
payments, transactions or procedures that might be deemed illegal or otherwise improper.
Communicate directly with the external auditor and arrange for the external auditor to be available to the
Audit Committee and the full Board as needed.
Review and approve any proposed hiring by the Corporation of current or former partners or employees of
the current (and any former) external auditor of the Corporation.
Audit Process
(21)
(22)
(23)
(24)
Review the scope, plan and results of the external auditor’s audit and reviews, including the auditor’s engagement letter, the post-audit management letter, if any, and the form of the audit report. The Audit Committee may authorize the external auditor to perform supplemental reviews, audits or other work as deemed desirable.
Following completion of the annual audit and quarterly reviews, review separately with each of
management and the external auditor any significant changes to planned procedures, any difficulties
encountered during the course of the audit and, if applicable, reviews, including any restrictions on the
scope of work or access to required information and the cooperation that the external auditor received
during the course of the audit and, if applicable, reviews.
Review any significant disagreements among management and the external auditor in connection with the
preparation of the financial statements.
Where there are significant unsettled issues between management and the external auditor that do not affect
the audited financial statements, the Audit Committee shall seek to ensure that there is an agreed course of
action leading to the resolution of such matters.
Financial Reporting Processes
(25)
(26)
(27)
(28)
Review the integrity of the financial reporting processes, both internal and external, in consultation with the external auditor as they see fit.
Consider the external auditor’s judgments about the quality, transparency and appropriateness, not just the
acceptability, of the Corporation’s accounting principles and financial disclosure practices, as applied in its
financial reporting, including the degree of aggressiveness or conservatism of its accounting principles and
underlying estimates, and whether those principles are common practices or are minority practices.
Review all material balance sheet issues, material contingent obligations (including those associated with
material acquisitions or dispositions) and material related party transactions.
Review with management and the external auditor the Corporation’s accounting policies and any changes
that are proposed to be made thereto, including all critical accounting policies and practices used, any
alternative treatments of financial information that have been discussed with management, the ramification
of their use and the external auditor’s preferred treatment and any other material communications with
management with respect thereto.
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(29)
(30)
(31)
Review the disclosure and impact of contingencies and the reasonableness of the provisions, reserves and estimates that may have a material impact on financial reporting.
If considered appropriate, establish separate systems of reporting to the Audit Committee by each of
management and the external auditor.
Periodically consider the need for an internal audit function, if not present.
Risk Management
(32)
Review program of risk assessment and steps taken to address significant risks or exposures of all types, including insurance coverage and tax compliance.
General
(33)
(34)
(35)
(36)
With prior Board approval, the Audit Committee may at its discretion retain independent counsel, accountants and other professionals to assist it in the conduct of its activities and to set and pay (as an expense of the Corporation) the compensation for any such advisors.
Respond to requests by the Board with respect to the functions and activities that the Board requests the
Audit Committee to perform.
Periodically review this Charter and, if the Audit Committee deems appropriate, recommend to the Board
changes to this Charter.
Review the public disclosure regarding the Audit Committee required from time to time by applicable
Canadian securities laws, including:
(i)
(ii)
(iii)
(iv)
(v)
the Charter of the Audit Committee;
the composition of the Audit Committee;
the relevant education and experience of each member of the Audit Committee;
the external auditor services and fees; and
such other matters as the Corporation is required to disclose concerning the Audit
Committee.
(37)
(38)
Review in advance, and approve, the hiring and appointment of the Corporation’s senior financial
executives by the Corporation, if any.
Perform any other activities as the Audit Committee deems necessary or appropriate including ensuring all
regulatory documents are compiled to meet Committee reporting obligations under 52-110.
Section 5
AUDIT COMMITTEE COMPLAINT PROCEDURES
Submitting a Complaint
(1)
Anyone may submit a complaint regarding conduct by the Corporation or its employees or agents (including its independent auditors) reasonably believed to involve questionable accounting, internal accounting controls or auditing matters. The Chair should oversee treatment of such complaints.
Procedures
(2)
The Chair will be responsible for the receipt and administration of employee complaints.
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(3)
In order to preserve anonymity when submitting a complaint regarding questionable accounting or auditing matters, the employee may submit a complaint confidentially.
Investigation
(4)
The Chair should review and investigate the complaint. Corrective action will be taken when and as warranted in the Chair’s discretion.
Confidentiality
(5)
The identity of the complainant and the details of the investigation should be kept confidential throughout the investigatory process.
Records and Report
(6)
The Chair should maintain a log of complaints, tracking their receipt, investigation, findings and resolution, and should prepare a summary report for the Audit Committee.
The Audit Committee is a committee of the Board and is not and shall not be deemed to be an agent of the
Corporation’s securityholders for any purpose whatsoever. The Board may, from time to time, permit departures
from the terms hereof, either prospectively or retrospectively, and no provision contained herein is intended to give
rise to civil liability to securityholders of the Corporation or other liability whatsoever.
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