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Audit Committee Composition and Mandates

The Audit Committee (the "Committee") is a committee of the Board of Directors (the "Board") of RMP Energy Inc. ("RMP") to which the Board has delegated its responsibility for oversight of the nature and scope of the annual audit, management's reporting on internal accounting standards and practices, financial information and accounting systems and procedures, financial reporting and statements and recommending, for Board approval, the audited financial statements and other mandatory disclosure releases containing financial information.

Members: Doug Baker (Chair), Andrew Hogg and Lloyd Swift

The objectives of the Committee, with respect to RMP and its subsidiaries, are as follows:

  • To assist Directors in meeting their responsibilities in respect of the preparation and disclosure of the financial statements of RMP and related matters.
  • To provide better communication between directors and external auditors.
  • To ensure the external auditors' independence.
  • To increase the credibility and objectivity of financial reports.
  • To strengthen the role of the outside directors by facilitating in depth discussions between directors on the Committee, management and external auditors.

Mandate and Responsibilities of Committee

It is the responsibility of the Committee to satisfy itself on behalf of the Board with respect to RMP's internal control systems, including that such internal control systems are satisfactory with respect to:

  • identifying, monitoring and mitigating business risks; and
  • ensuring compliance with legal and regulatory requirements.
  • It is a primary responsibility of the Committee to review the annual and quarterly financial statements of RMP and related management's discussion and analysis ("MD&A") prior to their submission to the Board for approval. The process should include but not be limited to:
  • reviewing changes in accounting principles, or in their application, which may have a material impact on the current or future years' financial statements;
  • reviewing significant accruals, reserves or other estimates such as the ceiling test calculation;
  • reviewing accounting treatment of unusual or non-recurring transactions;
  • ascertaining compliance with covenants under loan agreements;
  • reviewing financial reporting relating to asset retirement obligations;
  • reviewing disclosure requirements for commitments and contingencies;
  • reviewing adjustments raised by the external auditors, whether or not included in the financial statements;
  • reviewing unresolved differences between management and the external auditors;
  • obtain explanations of significant variances with comparative reporting periods; and
  • determine through inquiry if there are any related party transactions and ensure the nature and extent of such transactions are properly disclosed.
  • The Committee is to review the financial statements and related information included in prospectuses, MD&A, information circular-proxy statements, annual information forms ("AIF"), before release and prior to Board approval.
  • With respect to the appointment of external auditors by the Board, the Committee shall:
  • be directly responsible for overseeing the work of the external auditors engaged for the purpose of issuing an auditors' report or performing other audit, review or attest services for RMP, including the resolution of disagreements between management and the external auditor regarding financial reporting;
  • review management's recommendation for the appointment of external auditors and recommend to the Board appointment of external auditors and the compensation of the external auditors;
  • review the terms of engagement of the external auditors, including the appropriateness and reasonableness of the auditors' fees;
  • when there is to be a change in auditors, review the issues related to the change and the information to be included in the required notice to securities regulators of such change; and
  • review and approve any non-audit services to be provided by the external auditors' firm and consider the impact on the independence of the auditors.
  • Review with external auditors (and the internal auditor if one is appointed by RMP) their assessment of the internal controls of RMP, their written reports containing recommendations for improvement, and management's response and follow-up to any identified weaknesses.
  • The Committee shall also review annually with the external auditors their plan for their audit and, upon completion of the audit, their reports upon the financial statements of RMP and its subsidiaries.
  • Review all public disclosure containing audited or unaudited financial information before release.
  • Review financial reporting relating to risk exposure.
  • Satisfy itself that adequate procedures are in place for the review of RMP's public disclosure of financial information from RMP's financial statements and periodically assess the adequacy of those procedures.
  • Establish procedures for:
  • the receipt, retention and treatment of complaints received by RMP regarding accounting, internal accounting controls, or auditing matters; and
  • the confidential, anonymous submission by employees of RMP of concerns regarding questionable accounting or auditing matters.
  • Review and approve RMP's hiring policies regarding partners, employees and former partners and employees of the present and external auditors of RMP.
  • Review any other matters that the Audit Committee feels are important to its mandate or that the Board chooses to delegate to it.
  • Undertake annually a review of this mandate and make recommendations to the Board or the committee of the Board, if any, having responsibility for corporate governance matters as to proposed changes.

Composition

  • The Committee shall be composed of at least three individuals appointed by the Board from amongst its members, all of which members will be independent (within the meaning of National Instrument 52-110Audit Committees ("NI 52-110")) unless the Board determines to rely on an exemption in NI 52-110. "Independent" generally means free from any direct or indirect material relationship with RMP which could, in the view of the Board, be reasonably expected to interfere with the exercise of the member's independent judgment.
  • All of the members must be financially literate within the meaning of NI 52-110 unless the Board has determined to rely on an exemption in NI 52-110. Being "financially literate" means members have the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by RMP's financial statements.

Meetings

  • The Committee shall meet at least four times per year and/or as deemed appropriate by the Committee Chair.
  • The Committee shall meet not less than quarterly with the auditors without management being present.
  • A quorum shall be a majority of the members of the Committee.
  • The Corporate Secretary or another individual acceptable to the Committee shall act as Secretary of the Committee.
  • Agendas, with input from management, shall be circulated to Committee members and relevant management personnel along with background information on a timely basis prior to the Committee meetings.
  • Minutes of each meeting shall be prepared by the Secretary to the Committee.
  • The Executive Chairman, the President and Chief Executive Officer and the Vice President, Finance and Chief Financial Officer or their designates shall be available to attend at all meetings of the Committee upon the invitation of the Committee.
  • The Controller, Treasurer and such other staff as are appropriate to provide information to the Committee shall be available to and attend meetings upon invitation by the Committee.

Reporting / Authority

  • Following each meeting, in addition to a verbal report, the Committee will report to the Board by way of providing copies of the minutes of such Committee meeting at the next Board meeting after a meeting is held (these may still be in draft form).
  • Supporting schedules and information reviewed by the Committee shall be available for examination by any director.
  • The Committee shall have the authority to investigate any financial activity of RMP and to communicate directly with the internal and external auditors. All employees are to cooperate as requested by the Committee.
  • The Committee may retain, and set and pay the compensation for, persons having special expertise and/or obtain independent professional advice to assist in fulfilling its duties and responsibilities at the expense of RMP.