Draft Audit Committee Charter Update For New Sec Requirements

---
name: audit-committee-charter-sec-update
task_id: corporate-governance/draft-audit-committee-charter-update-for-new-sec-requirements
description: Audit committee charter redline and commentary memorandum incorporating updated securities-law and governance requirements, revising auditor independence and oversight provisions, and identifying any committee composition independence issue that requires prompt remediation.
activates_for: [planner, solver, checker]
---

# Skill: Audit Committee Charter Update for New SEC Requirements

## 1. Subject-matter triage

- Treat the charter text as the primary deliverable and the commentary memo as secondary, but complete both; do not stop after a summary of proposed changes.
- Identify whether the source set contains a current committee-composition problem, because an independence lapse is an immediate governance issue that must be flagged separately from the charter rewrite.
- If more than one charter provision is affected, enumerate the affected provisions before drafting so each change is handled once and mapped to its source basis.

## 2. Failure modes the skill is correcting

- Producing only the redline charter without a commentary memorandum that explains the legal or governance basis for each change, leaving the board unable to evaluate whether each amendment is required or discretionary.
- Missing that an existing audit committee member's independence qualification has lapsed, which is a present issue requiring prompt remediation apart from the charter amendment process.
- Folding pre-approval, auditor independence, internal audit reporting, related party review, clawback oversight, cybersecurity oversight, complaints intake, and self-assessment into one generic revision instead of treating each as a distinct provision with its own purpose and authority.
- Relying only on visual redline styling that may not survive export, leaving changes ambiguous in plain text.
- Stating conclusions about required changes without naming the governing exchange rule, SEC rule, or recognized governance authority that supports them.
- Drafting commentary that describes the edits but does not classify urgency or recommend next steps.

## 3. Legal frameworks / domain conventions that apply

- Audit committee independence is governed by both the applicable exchange listing standards and the securities-law audit committee independence rules; the committee must satisfy the minimum independent-member requirement under the relevant framework, and any temporary exception must be tracked to confirm whether a replacement or removal is required.
- Pre-approval of audit and non-audit services must be addressed in the charter by reference to the audit committee's approval authority and any permitted delegated approval process for de minimis items.
- The independent auditor's annual independence communication must be received and reviewed by the audit committee; the charter should reflect that oversight.
- Charter references to auditing standards should be updated to the current oversight regime and current standards nomenclature rather than legacy references.
- Internal audit should have a direct reporting line to the audit committee, with any secondary management line stated separately as a governance structure rather than a substitute for committee oversight.
- Separate executive sessions with the independent auditor, internal audit leadership, and management are a recognized governance convention and should be stated as regular committee practice.
- Related party transaction oversight should align the charter with the company's related-party policy and the applicable disclosure or approval threshold under the securities-law and exchange framework.
- Clawback oversight should align the charter with the company's adopted clawback policy and the securities-exchange listing standard and securities-law framework that require recovery analysis and administration.
- Cybersecurity oversight should reflect the committee's role in overseeing risk management and incident response under applicable disclosure rules and related governance practices.
- Whistleblower and complaint intake provisions should reflect a modern, multi-channel mechanism that permits anonymous submissions for accounting, internal control, and auditing complaints.
- Annual committee self-assessment and charter review are best-practice governance conventions and should be reflected as recurring responsibilities to the full board.

## 4. Analytical scaffolds

- Independence issue: determine from the committee roster whether any member no longer meets independence requirements; if so, state the lapse, the applicable framework, the consequence for committee composition, and that remediation should precede adoption of the amended charter.
- Pre-approval provisions: draft a defined pre-approval policy that distinguishes routine or de minimis approvals from matters requiring full committee approval, and state the delegation mechanism with enough specificity to be operational.
- Auditing standards update: identify every legacy or outdated reference in the charter and replace it with the current standards terminology used by the applicable oversight regime.
- Executive sessions: add separate session language for the independent auditor, internal audit leadership, and management, and tie the sessions to regularly scheduled meetings.
- Internal audit reporting: specify direct reporting to the audit committee and preserve any administrative reporting relationship to management only if it does not dilute committee oversight.
- Related party transactions: link the charter to the company's related-party policy and the applicable approval or review threshold, so the charter and policy operate consistently.
- Clawback and cybersecurity: align the charter with the separate clawback policy and cybersecurity risk framework; avoid drafting language that conflicts with existing board-adopted policies.
- Whistleblower: modernize complaint intake language to cover electronic, hotline, web-based, or similar anonymous submission channels.
- Annual self-assessment: require periodic review of the committee's performance and charter, with reporting of results to the board.
- Commentary memo: for each redlined change, state the governing authority or governance convention, whether the change is required or best practice, the urgency of implementation, and any operational follow-up needed beyond the charter edit.
- If the source documents present multiple charter sections for revision, address each separately rather than collapsing them into a single omnibus explanation.
- Every legal proposition in the redline notes and memo should be tied to a named source of authority or recognized governance standard.

## 5. Vertical / structural / temporal relationships

- If an independence lapse exists, treat remediation as a sequencing issue: board attention and corrective action come before or alongside charter adoption, not after.
- Keep the charter text and the separate clawback policy consistent; the charter should cross-reference the adopted policy rather than restate policy mechanics that belong elsewhere.
- Preserve the distinction between committee oversight, management execution, and auditor independence so that reporting lines and approval authorities remain vertically separated.
- When a change depends on a separate policy or disclosure regime, note the dependency in the commentary so the board understands implementation order.

## 6. Output structure conventions

- Produce two files: a redline charter and a commentary memorandum; the memo does not replace the redline.
- Make the redline robust in plain text as well as in document formatting by marking each substantive edit with explicit change tags and a short rationale note.
- Use a conventional redline convention such as inserted, deleted, and replaced text markers so a reviewer can identify changes even if formatting is stripped.
- In the redline, attach a brief rationale note to each substantive change or to each revised section if section-level commentary is clearer.
- In the commentary memo, organize changes by charter provision or topic, and for each entry include:
  - the change made,
  - the authority or governance basis,
  - whether the change is required or best practice,
  - the implementation urgency,
  - any operational steps needed beyond the charter amendment.
- If an independence issue is present, call it out as a separate action item in the memo, distinct from the charter revision list.
- End the memo with a concise recommended actions section that assigns responsibility and timing for adoption, remediation, and any related policy updates.
- Use board-facing, drafting-ready language; do not use placeholder prose that merely describes what a lawyer should later write.