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Audit and Risk Committee Charter
Revised: February 2009
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 Audit and Risk Committee Charter (72k)
Purpose of the Audit and Risk Committee
The Audit and Risk Committee (the “Committee“) is a committee of the Board of
Directors (the “Board”) of Radian Group Inc. (the “Company“).
The Committee assists the Board in its responsibilities related to the
integrity and reporting of the Company’s quarterly and annual financial
statements; the qualifications, compensation,
independence and performance of the Company’s internal and independent auditors;
the Company’s system of internal accounting and financial controls; and the
Company’s compliance with legal and regulatory requirements.
The Committee is directly responsible for the appointment, compensation, retention and oversight of the independent auditors
who audit the Company’s financial statements, and for resolving any disagreements between management and the independent auditors regarding financial reporting.
The Committee reviews, prior to release, the quarterly and annual financial statement information including
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.“
Although the Credit Committee of the Board of Directors has primary responsibility for
overseeing the Company’s credit management procedures,
the Audit and Risk Committee is responsible for reviewing the Company’s risk management
processes in a general manner and for oversight of enterprise risk as defined by the
Committee of Sponsoring Organizations (COSO).
The function of the Committee is oversight. Management remains responsible for
the preparation, presentation and integrity of the Company’s financial
statements and public disclosures. Management is also responsible for
maintaining appropriate accounting and financial policies and internal
controls along with procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Internal audit examines and
evaluates business processes including the Company’s system of internal controls. The independent auditors are responsible for planning and carrying out an audit in accordance with generally accepted auditing standards. Both the Chief Audit Executive, who reports administratively to the CEO, and the independent auditors report directly to the Committee.
In discharging its oversight role, the Committee is authorized to investigate any matter it
deems appropriate, or to perform any other duties which, in the opinion of the
Committee, are appropriate and consistent with this charter or which may be
delegated to it by the Board.
Committee Membership
The Committee shall be composed of at least three independent directors, as
“independence“ is defined in the Company’s Guidelines of Corporate
Governance, the listing standards of the New York Stock Exchange and the rules of
the Securities and Exchange Commission (“SEC“). All Committee members
shall be financially literate and at least one member shall have accounting or
related financial management expertise in accordance with the rules of the
New York Stock Exchange. At least one member shall be an
“Audit Committee Financial Expert“ as that term is defined in the
rules of the SEC.
An assessment of a director’s qualification to serve on the Committee,
the Committee appointments, including the designation of the Chair of the
Committee and the designation of any Committee members as
“Audit Committee Financial Experts,“ are made on an annual basis by the
full Board upon the recommendation of the Governance Committee.
Committee Meetings
The
The Committee will meet in person or telephonically as follows: regular quarterly Committee meetings;
meetings to discuss and review the Company’s financial results; and meetings to discuss and review SEC
forms 10-Q or 10-K prior to filing. The Committee may meet more frequently as circumstances require.
The Committee shall meet periodically in separate executive sessions with management
(including the Chief Financial Officer and Chief Accounting Officer), the Chief Audit
Executive and the independent auditors, and have such other direct and independent
interaction with such persons from time to time as the members of the Committee deem appropriate.
General Responsibilities
In performing its responsibilities, the Committee will:
Oversight
| O1 |
After appropriate review, appoint the independent auditors to be retained to audit the financial statements of the Company. Appropriate review will, at a minimum, require the Committee to evaluate the lead partner of the independent auditors (including ensuring the rotation of audit partners as required by law) and obtain at least annually a report by the independent auditors describing: (i) the independent auditors’ internal quality control procedures; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the independent auditors, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits performed by the independent auditors, and any steps taken to deal with any such issues; and (iii) all relationships between the independent auditors and the Company.
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| O2 |
Pre-approve all audit and non-audit (including internal control-related) services to be provided by the independent auditors, in conformity with the Committee’s Pre-Approval Policy for Audit and Non-Audit Services, and obtain from management on a quarterly basis a list of all of the Company’s engagements for
non-audit services being provided by auditing firms other than the Company’s independent auditors due to the fact that the Company’s independent auditors are prohibited by SEC rules from providing certain services.
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| O3 |
Pre-approve or ratify, as necessary, all related person transactions in accordance with the Company’s Policy Regarding Related Person Transactions and report to the Board of Directors on a quarterly basis the Committee’s determination regarding each related person transaction recommended or presented to the Committee.
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| O4 |
Establish and modify as necessary Radian’s hiring policy related to employees or former employees of the independent auditors.
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| O5 |
Review with the Chief Audit Executive the charter, plans, activities, staffing, skill sets, budget, and organizational structure of the internal audit function. Ensure there are no unjustified restrictions or limitations placed on the function, and review and concur in the compensation, appointment, replacement, or dismissal of the Chief Audit Executive. Monitor the effectiveness of the internal audit function, including its compliance with the
International Standards for the Professional Practice of Internal Auditing.
Annually discuss the proposed internal audit plan and level of coordination between the internal and external auditors and review and approve the Chief Audit Executive’s annual goals and objectives.
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| O6 |
Oversee the development by the General Counsel of procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or audit matters, including a means for Company employees to submit concerns regarding questionable accounting or auditing matters in a confidential and anonymous manner.
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| O7 |
Investigate any matter brought to its attention within the scope of its duties, consistent with this Charter, with full access to all books, records, facilities and personnel of the Company, and with the authority to retain counsel or other advisors, if in its judgment that is appropriate, at the expense of the Company.
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| O8 |
Ensure that meeting minutes are prepared and discussed and, as appropriate, review the matters discussed at each Committee meeting with the Board of Directors.
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| O9 |
Conduct an annual performance evaluation of the Committee and review and reassess its responsibilities, functions and Charter as appropriate. Formally review and reassess the content of key Company policies for relevance and propriety, making changes as necessary.
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| O10 |
Ensure that the Company provides adequate funding, as determined by the Committee, to the Committee for payment of the independent auditors, compensation to any advisers engaged by the Committee, and payment of ordinary administrative expenses incurred by the Committee in carrying out its duties.
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Audit and Financial Reporting
| A1 |
Review and provide feedback on the independent auditors’ plan (including staffing) and scope for the current year audit, including proposed audit fees and engagement letter.
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| A2 |
Review with financial management and the independent auditors significant financial reporting issues and practices and ensure that appropriate accounting
principles are being applied. Also, annually review with financial management the “closing of the books” process.
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| A3 |
Meet in separate, private sessions periodically with management, the independent auditors and the Chief Audit Executive and discuss the adequacy and effectiveness of accounting and financial controls of the Company. Review the independent auditors’ management letter when presented. Regularly review with the independent auditors any audit problems or difficulties, and management’s response. Oversee the resolution of any disagreements between management and the auditor regarding financial reporting.
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| A4 |
Discuss the Company’s earnings press releases as well as financial information provided to analysts and rating agencies.
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| A5 |
Review and discuss with the independent auditors and with management: (a) the auditors’ responsibility under generally accepted auditing standards; (b) the significant financial reporting issues and judgments made in connection with preparation of the financial statements, including accounting policies used by the Company and any changes thereto; (c) accounting estimates used by the Company and the process used by management in formulating them; (d) any adjustments arising from the audit that could, either individually or in the aggregate, have a significant impact on the Company’s financial reporting process; (e) any uncorrected misstatements aggregated by the independent auditors and pertaining to the latest period presented that were determined by management to be immaterial, both individually and in the aggregate, to the financial statements taken as a whole; (f) any consultation with other accountants; (g) any difficulties encountered by the independent auditors in the course of the audit work, any restrictions on the scope of the independent auditors’ activities or access to requested information, and any disagreements with management, whether or not satisfactorily resolved, about matters that individually or in the aggregate could be significant to the Company’s financial statements; (h) any major issues discussed with management prior to retention of the independent auditors; (i) any material alternative accounting treatments within GAAP that have been discussed with management, including ramifications of the use of the alternative treatments and the treatment preferred by the independent auditors; and (j) any accounting and financial reporting proposals that may have a significant impact on the Company’s financial reports.
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| A6 |
Annually, review a formal written statement from the independent auditors delineating all relationships between the auditor and the Company, consistent
with PCAOB Rule 3526,
Communications with Audit Committees Concerning Independence;
actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors; and take appropriate action in
response to the independent auditors’ report to satisfy itself of the auditors’ independence.
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| A7 |
Review the results of the annual audit and quarterly reviews and discuss the financial statements with management and the independent auditors prior to public release, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and recommend that the audited financial statements be included in the Company's Annual Report on Form 10-K.
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| A8 |
Approve the Committee’s Charter and report to stockholders as required by the SEC for inclusion in the Company’s annual proxy statement.
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| A9 |
Review disclosures by the Company’s CEO and CFO during the certification process for the SEC Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls over financial reporting or material weaknesses therein and any fraud, whether or not material, involving management or other employees who have a significant role in the Company’s internal controls, as well as management’s remediation plan for any significant deficiencies or material weaknesses.
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| A10 |
Annually review and assess management’s evaluation of the adequacy of disclosure controls and procedures and internal control over financial reporting, including any attestation of the same by the independent auditors.
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| A11 |
Review the significant reports to management prepared by the internal audit department and management’s responses.
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Compliance
| C1 |
Require management to present and discuss, as soon as practicable, all reports received from regulators (e.g. SEC, IRS, State Insurance Departments and Rating Agencies, etc.) which may have a material effect on the Company’s financial statements or accounting policies.
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| C2 |
Review with General Counsel legal and regulatory matters, contingent liabilities or other legal matters that may have a material effect on the Company’s financial statements, systems of internal control or regulatory compliance. Review the Company’s legal representation letter presented to the independent auditors and discuss significant items, if any, with Company General Counsel.
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| C3 |
Review activities related to, and evaluate compliance with, the Company’s Code of Conduct and Ethics.
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Risk
| R1 |
Discuss and review in a general manner guidelines and policies to govern the process by which the Company undertakes risk assessment and management.
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| R2 |
Discuss the Company’s major financial risk exposures, including the risk of fraud, and the steps management has taken to monitor and control those exposures.
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| R3 |
Review the Company’s quality assurance processes to mitigate potential risks and its loss reserving methodology.
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| R4 |
Inquire of management, the Chief Audit Executive and the independent auditors about significant risks or exposures and assess the steps management has taken to minimize such risks to the Company.
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| R5 |
Review the Company’s information technology initiatives.
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Approved: February 10, 2009
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