Audit Committee Charter

Purpose

The overall purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") is to assist the Board in fulfilling its oversight responsibilities and to carry out the functions associated with an audit committee of an issuer of the size and nature of Casa Energy Services Corp. (the "Corporation"). The purpose of the Committee is to ensure that the Corporation's management has designed and implemented an effective system to review and report on the integrity of the financial statements of the Corporation. As part of this mandate, the Committee shall take all necessary steps so as to ensure compliance by the Corporation with all laws and regulatory policies, rules, regulations and instruments pertaining to audit and financial reporting that are applicable to the Corporation from time to time.

Composition, Procedures, and Organization

  • The Committee shall be composed of three Directors, two of whom shall be non-executive Directors (i.e. Directors who are not officers or employees of the company or any of its affiliates). Knowledge of accounting principles and financial reporting is strongly recommended, and should be possessed by some members. Committee members should thoroughly understand the business and the industry, as well as their duties and responsibilities.
  • The Board may at any time remove or replace any member of the Committee and may fill any vacancy in the Committee.
  • The Chairperson shall be a non-executive Director appointed by the Committee members and may serve any number of consecutive terms. The Chairperson should be qualified, with knowledge of financial reporting and internal controls, and business in general. If the Chairperson of the Committee is absent from any meeting, the Committee shall select one of the other members of the Committee to preside at that meeting.
  • The Chairperson shall, in consultation with management of the Corporation and the auditors, establish the agenda for the meetings and ensure that properly prepared agenda materials are circulated to members with sufficient time for study prior to the meeting.
  • Notice of meeting may be given orally or by email, letter, facsimile transmission or telephone not less than 24 hours before the time fixed for the meeting. Members of the Committee may waive notice of any meeting. The notice need not state the purpose or purposes for which the meeting is being held.
  • The minutes of the Committee meetings shall accurately record the decisions reached and shall be distributed to Committee members and the Board.
  • The quorum for meetings shall be a majority of the members (the "Members") of the Committee, present in person or by telephone or other telecommunication device that permits all persons participating in the meeting to speak to and hear each other.
  • The Committee shall have access to the Corporation's external auditors and to such officers and employees of the Corporation, and of the subsidiaries of the Corporation (if any), and to such information respecting the Corporation, as the Committee considers to be necessary or advisable in order to perform its duties and responsibilities.
  • Meetings of the Committee shall be conducted as follows:
    • the Committee shall meet at least four times annually at such times and at such locations as may be requested by the Chairman, and the Corporation's external auditors or any member of the Committee may request a meeting of the Committee;
    • the Corporation's external auditors shall receive notice of and have the right to attend all meetings of the Committee;
    • the Committee may invite from time to time such persons as it may see fit to attend its meetings and to take part in discussion and consideration of the affairs of the Committee; and
    • the Chief Executive Officer and the Chief Financial Officer of the Corporation shall be invited to attend all meetings of the Committee, except executive sessions and private sessions with the external auditors, and other management representatives of the Corporation shall be invited to attend as necessary.
  • The Committee shall report to the Board on its proceedings, reviews undertaken and any associated recommendations.
  • The internal auditors of the Corporation (if any) and the external auditors of the Corporation shall have a direct line of communication to the Committee through the Chairman. The Corporation shall require the external auditors of the Corporation to report directly to the Committee.

Duties and Responsibilities

  • The Committee shall review and recommend for approval by the Board:
    • audited annual financial statements, in conjunction with the report of the external auditors; and
    • all public disclosure documents, including Annual Returns, containing audited or unaudited financial information.
  • In its review of financial statements, the Committee shall obtain an explanation from management of all significant variances between comparative reporting periods.
Financial Reporting and Accounting Trends
  • The Committee shall:
    • review and assess the effectiveness of management's policies and practices concerning financial reporting;
    • review with management and with the external auditor any proposed changes in major accounting policies, the presentation and impact of significant risks and uncertainties, and key estimates and judgements of management that may be material to financial reporting;
    • question management and the external auditor regarding significant financial reporting issues discussed and the method of resolution; and
    • review general accounting trends and issues of auditing policy, standards and practices which affect or may affect the company.
Internal Controls
  • The Committee may review and monitor management's internal control procedures, programs and policies, and assess the adequacy and effectiveness of internal controls over the accounting and financial reporting systems within the company, with particular emphasis on controls over computerized systems.
  • The Committee shall review:
    • the evaluation of internal controls by the external auditor, together with management's response;
    • the appointments of the chief financial officer and any key financial executives involved in the financial reporting process.
External Auditor
  • The objective of the Committee with respect to the external auditor is to support the auditor's independence.
  • The Committee shall consider whether the external auditor should be reappointed and recommend the appointment or reappointment of the external auditor to the Board.
  • The Committee shall review the scope and terms of the external auditor's engagement and the appropriateness and reasonableness of the proposed audit fees.
  • The Committee shall review any engagements for material non-audit services provided by the external auditor or its affiliates, together with the fees for such services, and consider the impact of this on the independence of the external auditor.
  • When a change of auditor is proposed, the Committee shall review all issues related to the change of auditor and the planned steps for an orderly transition.
Audit Procedures
  • The Committee shall review the audit plans of the external auditors, and shall inquire as to the extent to which the planned audit scope can be relied upon to detect weaknesses in internal control or fraud or other illegal acts. The audit plans shall be reviewed with the external auditor and with the management, and the Committee shall recommend to the Board the scope of the external audit as stated in the audit plan.
  • The Committee shall review any problems experienced by the external auditor in performing the audit, including any restrictions imposed by management or significant accounting issues of which there was disagreement with management.
  • The Committee shall review the post-audit or management letter containing the recommendations of the external auditor, and management's response and subsequent follow-up to any identified weakness.
Other Responsibilities
  • The Committee shall review such litigation, claims, transactions or other contingencies as the external auditor or any officer of the company may bring to its attention, and shall periodically review the company's risk management programs.
  • The Committee shall consider other matters of a financial nature as directed by the Board.