Corporate Governance - Committee


Nu Skin Enterprises, Inc. Audit Committee Charter

(Last Modified April 23, 2018)

I. PURPOSE

The Audit Committee (the "Committee") of the Board of Directors (the "Board") of Nu Skin Enterprises, Inc. ("NSE") is appointed by the Board to:

  • Assist the Board in its oversight of:

    1. The integrity of the financial statements of NSE;

    2. NSE's compliance with legal and regulatory requirements;

    3. The independent auditor's qualifications and independence; and

    4. The performance of NSE's internal audit function and independent auditor.

  • Oversee NSE's risk assessment and risk management programs and plans for NSE's major financial risk exposures, operational risks related to information systems and facilities, and public disclosure and investor related risks, and confer with the chairs of the Nominating and Corporate Governance Committee and Executive Compensation Committee regarding their respective oversight of NSE's risk assessment and risk management programs and NSE's related guidelines and policies.

  • Oversee NSE’s financial processes, controls, and reporting, and prepare an annual Audit Committee Report for inclusion in NSE’s public filings in accordance with applicable rules and regulations of the SEC.

II. STRUCTURE AND OPERATIONS

Composition and Qualifications

The Committee shall be comprised of three or more members of the Board, as determined by the Board from time to time. Each member shall meet the applicable independence, financial literacy and experience requirements of the NYSE and of the SEC as they may be amended or supplemented from time to time, subject to any applicable transition and cure periods with respect to such requirements. At least one member of the Committee shall meet the accounting or related financial management expertise requirements of the NYSE and of the SEC as they may be amended or supplemented from time to time. No member of the Committee may serve on the audit committees of more than three public companies, including NSE, unless the Board (i) determines that such simultaneous service would not impair the ability of such member to effectively serve on the Committee, and (ii) discloses such determination in the annual proxy statement.

Appointment and Removal

The members of the Committee shall be appointed by the Board and may be removed, with or without cause, by a majority vote of the Board.

Committee Chair

Unless a Committee Chair (the "Chair") is elected by the full Board, the members of the Committee shall designate the Chair by the majority vote of the full Committee membership. In the event of a tie vote on any issue, the Chair's vote shall decide the issue.

III. MEETINGS

The Committee shall meet as often as its members deem necessary to perform the Committee's responsibilities. As part of its goal to foster open communication, the Committee shall periodically meet separately with each of management, the chief internal audit executive and the independent auditor to discuss matters that are more appropriate to discuss privately. In addition, the Committee should meet with the independent auditor and management quarterly to review NSE's financial statements in a manner consistent with that outlined below. The Chair or any member of the Committee may call meetings of the Committee. All meetings of the Committee may be held by conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting in this manner shall constitute presence in person at the meeting. Any action required or permitted to be taken at any meeting of the Committee may be taken without a meeting if all of the Committee members consent to the action in writing or by electronic transmission. The writing or writings or electronic transmission or transmissions shall be filed with the minutes of the proceedings of the Committee. All other conduct of Committee meetings shall be governed as provided in the Bylaws of NSE, as amended from time to time. The Committee shall maintain minutes or other records of meetings and activities of the Committee.

All non-management directors that are not members of the Committee may attend meetings of the Committee. Additionally, the Committee may invite to its meetings any other persons as it deems appropriate in order to carry out its responsibilities including management personnel and other directors. The Committee may also exclude from its meetings any persons it deems appropriate.

IV. RESPONSIBILITIES AND DUTIES

The following responsibilities shall serve as the general guidelines of the Committee in carrying out the purposes of the Committee as outlined in Section I of this Charter. These responsibilities should serve as a guide with the understanding that the Committee may diverge from or carry out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, stock exchange, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time.

The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate. In this regard, the Committee shall have the authority to retain independent legal, accounting or other advisers as it determines necessary to carry out its duties as set forth herein, including the authority to determine and approve the fees payable to such advisors and any other terms of retention and any administrative expenses of the Committee that are necessary or appropriate to carry out such duties. NSE shall provide for appropriate funding, as determined by the Committee, for payment of: (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for NSE; (ii) compensation to any advisers employed by the Committee pursuant to this paragraph; and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out the Committee's duties.

The Committee shall have the authority to delegate any of its responsibilities to a subcommittee or subcommittees as the Committee may deem appropriate, so long as at least one member of the subcommittee shall be an audit committee financial expert.

The Committee shall be given full access to NSE's chief internal audit executive and other members of the internal audit group, Board, executives and independent auditor as necessary to carry out these responsibilities. While acting within the scope of its stated purpose, the Committee shall have all the authority of the Board.

Notwithstanding the foregoing, the Committee is not responsible for certifying NSE's financial statements or guaranteeing the independent auditor's report. The fundamental responsibility for NSE's financial statements and disclosures rests with management.

The Committee's responsibilities are organized into six categories: (i) Independent Auditor Oversight, (ii) Internal Audit Oversight, (iii) Financial Reporting Process/Document Review, (iv) Compliance Oversight, (v) Risk Assessment and Management, and (vi) Reporting.

Independent Auditor Oversight Responsibilities

  1. The Committee has sole authority to appoint, retain, compensate, evaluate and terminate NSE's independent auditor. The Committee shall be directly responsible for oversight of the work of the independent auditor (including approving the audit plan and resolution of disagreements between management and the independent auditor), and the independent auditor shall report directly to the Committee and meet separately with the Committee periodically. The Committee may seek the input and advice of management and other board members in fulfilling these responsibilities, but these responsibilities may not be delegated to management.

  2. The Committee shall establish procedures for the approval of audit and non-audit services in advance. In accordance with such procedures, the Committee shall pre-approve all audit and non-audit services to be provided for NSE by the independent auditor (including the related fees and terms) to the extent required by and in a manner consistent with applicable law. Pre-approval authority may be delegated to one or more of the members of the Committee, who shall report at the next meeting of the Committee regarding any pre-approvals granted.

  3. The Committee shall review, at least annually, the qualifications, performance and independence of the independent auditor. In conducting this review and evaluation, the Committee should:

    1. Obtain and review a report by the independent auditor describing: (i) the firm's internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (iii) (to assess the auditor's independence) all relationships between the independent auditor and NSE;

    2. Include the review and evaluation of the lead partner of the independent auditor and assure the regular rotation of the lead partner as required by SEC rules;

    3. Take into account the opinions of management and the chief internal audit executive;

    4. Review and assess such other requirements as may be applicable; and

    5. Present its conclusions to the full Board.

  4. The Committee shall establish policies consistent with the SEC, NYSE and other applicable regulatory requirements for the hiring by NSE of employees or former employees of the independent auditor.

Internal Audit Oversight Responsibilities

  1. The chief internal audit executive shall report directly to the Committee and shall meet separately with the Committee periodically. The Committee shall have the ultimate responsibility for the appointment, replacement, reassignment, or dismissal of the chief internal audit executive. The Committee may seek the input of other Board members and the executive management team in fulfilling this responsibility.

  2. The Committee shall consider and evaluate the audit scope, plan, staff, and budget of the internal audit function and confer with the independent auditor and management as they determine appropriate on these matters.

  3. The Committee shall consider and review the internal audit report with management and the chief internal audit executive, including:

    1. Significant findings and management's responses thereto;

    2. Encountered audit difficulties, including scope restrictions and information access;

    3. Changes in the planned scope of the internal audit plan; and

    4. Compliance with the Standards for the Professional Practice of Internal Auditing.

Financial Reporting Process/Document Review Responsibilities

  1. The Committee shall meet separately with management periodically.

  2. The Committee shall review and discuss with management, and to the extent the Committee deems necessary or appropriate, the chief internal audit executive and the independent auditor, NSE's disclosure controls and procedures that are designed to ensure the reports NSE files with the SEC comply with the SEC's rules and forms.

  3. The Committee shall review with management as well as the chief internal audit executive and the independent auditor the adequacy and effectiveness of NSE's internal accounting and financial controls and the recommendations of management, the chief internal audit executive, and the independent auditor regarding the accounting and financial reporting processes and system of internal controls for the improvement of accounting practices and internal controls.

  4. The Committee shall review and discuss with management, the chief internal audit executive and the independent auditor:

    1. NSE's annual and quarterly financial statements including Management's Discussion and Analysis of Financial Condition and Results of Operations.

    2. The clarity of the financial disclosures made by NSE.

    3. The significant accounting and reporting policies, practices and procedures used to prepare the annual and quarterly financial statements, including any significant changes in the selection or application of accounting principles, and major issues as to the adequacy of NSE's internal controls and any special audit steps adopted in light of material control deficiencies, and any significant financial reporting issues and judgments made in connection with the preparation of the financial statements including the effects of (i) alternative GAAP methods, (ii) off-balance sheet structures, and (iii) regulatory and accounting initiatives on NSE's financial statements.

    4. A description of transactions on which management obtained accounting treatment letters (SAS No. 50) and other matters related to the conduct of the audit that are to be communicated to the Committee under generally accepted auditing standards or requirements of the Public Company Accounting Oversight Board or as may be requested by the Committee.

  5. The Committee shall review and discuss the independent auditor's report regarding its audit or review of the financial statements, including the report required under Section 204 of the Sarbanes Oxley Act. The Committee shall inquire as to the independent auditor's judgment of the quality, not just the acceptability, of the accounting principles used.

  6. The Committee shall review with the independent auditor significant changes required in the independent auditor's audit plan and any problems or difficulties and management's response to such matters. This review shall include issues such as:

    1. Restrictions on the scope of the independent auditor's activities or on access to requested information;

    2. Any significant disagreement with management;

    3. Accounting adjustments that were proposed by the independent auditor but were "passed" (as immaterial or otherwise);

    4. Communications between the independent auditor team and the independent auditor firm's national office respecting auditing or accounting issues presented by the audit engagement;

    5. Any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditor to NSE; and

    6. Discussion of the responsibilities, budget and staffing of NSE's internal audit function.

  7. The Committee shall review and discuss with management, and if the Committee deems appropriate, the independent auditor, NSE's earnings press releases and other financial information, including earnings guidance provided to analysts and rating agencies. This discussion may be done generally (i.e., discussion of the types of information to be disclosed and the type of presentation to be made, paying particular attention to any use of "pro forma," or "adjusted" non-GAAP information). The entire Committee need not discuss in advance each earnings release or each instance in which earnings guidance is provided.

  8. The Committee shall discuss with management and the independent auditor any material negative issues presented in any press stories and analysts' reports, and obtain an explanation thereof.

  9. The Committee shall provide input regarding the appointment of individuals to significant management positions related to financial accounting and reporting, such as chief financial officer, controller and other significant financial positions.

  10. Receive and review disclosures made to the Committee by NSE's chief executive officer and chief financial officer during their certification process for NSE's Forms 10-K and Forms 10-Q about (i) any significant deficiencies in the design or operation of internal controls or material weakness therein, (ii) any fraud involving management or other employees who have a significant role in NSE's internal controls, and (iii) any significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

Compliance Oversight Responsibilities

  1. The Committee shall oversee and report to the Board regarding NSE's compliance program and shall discuss with NSE's chief compliance officer and management the compliance of NSE and its subsidiaries with NSE's Code of Conduct and applicable legal requirements.

  2. The chief compliance officer shall report directly to the Committee and the Committee shall have the ultimate responsibility for the appointment, replacement, reassignment, or dismissal of the chief compliance officer. The Committee may seek the input of other Board members and the executive management team in fulfilling this responsibility.

  3. The Committee shall review and have authority to ratify the Code of Conduct, and any amendments or revisions thereto, adopted by NSE.

  4. The Committee shall review and have authority to grant any proposed waiver of NSE's Code of Conduct for members of the Board, executive officers, or any other individual to the extent Board approval of such waiver is required by applicable rules and regulations promulgated by the Securities and Exchange Commission or the New York Stock Exchange or triggers a disclosure requirement under such rules and regulations.

  5. The Committee shall obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act has not been implicated. Section 10A(b) relates to illegal acts that have come to the attention of the independent auditor during the course of the audit.

  6. The Committee shall review with management and NSE's chief legal officer any legal matters that may have a material impact on the financial statements and any material reports or inquiries received from regulators or governmental agencies.

  7. In accordance with NSE's Policy and Procedures with Respect to Related Person Transactions, the Committee shall review transactions or courses of dealing with persons related to NSE which are significant in size and that are relevant to an understanding of NSE's financial statements, and shall review the policies and procedures utilized by management for the implementation of such transactions. In addition, in accordance with NSE's Policy and Procedures with Respect to Related Person Transactions, the Committee shall review and approve or reject such related-person transactions. The Committee has delegated the review and approval or rejection of related-person employment matters to the Executive Compensation Committee.

  8. The Committee shall establish procedures for: (i) the receipt, retention and treatment of complaints received by NSE regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by employees of NSE of concerns regarding questionable accounting or auditing matters.

Risk Assessment and Management Responsibilities

  1. The Committee shall oversee NSE's risk assessment and risk management programs and plans for NSE's major financial risk exposures, operational risks related to information systems and facilities, and public disclosure and investor related risks. The Committee shall discuss with management, including the chief internal audit executive and the chief compliance officer, regarding such risk assessment and risk management programs and NSE's related guidelines and policies.

  2. The Committee shall confer with the chairs of the Nominating and Corporate Governance Committee and Executive Compensation Committee regarding their respective oversight of NSE's risk assessment and risk management programs and NSE's related guidelines and policies.

Reporting Responsibilities

  1. The Committee shall prepare all Committee reports or other disclosures required to be included in NSE's annual report on Form 10-K, proxy statement or other public filings pursuant to and in accordance with applicable rules and regulations of the SEC.

  2. The Committee shall report regularly to the full Board as appropriate in fulfilling its oversight obligation hereto any issues that arise with respect to the quality or integrity of NSE's financial statements, NSE's compliance with legal or regulatory requirements, the performance and independence of NSE's independent auditor or the performance of the internal audit function and with respect to such other matters as are relevant to the Committee's discharge of its responsibilities. The report to the Board may be in writing or in the form of an oral report by the Chair or any other member of the Committee designated by the Committee to make such report.

  3. The Committee shall maintain minutes or other record of meetings and activities of the Committee.

V. ANNUAL PERFORMANCE EVALUATION

The Committee shall perform a review and evaluation, at least annually, of the performance of the Committee, including by reviewing the compliance of the Committee with this Charter, and shall report to the Board thereon. In addition, the Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.

Committee Members
Committee MemberNevin N. Andersen
Committee MemberDaniel W. Campbell
Committee MemberThomas R. Pisano
ChairpersonEdwina D. Woodbury