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Audit and Risk Committee Charter
Revised: February 2008
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 Audit and Risk Committee Charter (67k)
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 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 auditor 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, with full access to all books, records, facilities and personnel of the Company. To conduct these activities, the Committee is authorized to retain independent counsel, auditors or other advisers with adequate funding provided by the Company.
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 recommendation of the Governance Committee.
Committee Meetings
The
Committee will meet in person or telephonically as follows: regular 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.
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 and obtain at least annually a report by the independent auditors describing: (i) that 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 performed by the firm, and any steps taken to deal with any such issues; and (iii) all relationships between the firm and the Company. |
| 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. |
| 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. |
| O4 |
Establish and modify as necessary Radian’s hiring policy related to employees or former employees of the independent auditors. |
| 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 MBO’s. |
| 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 such complaints in a confidential and anonymous manner. |
| O7 |
Investigate any matter brought to its attention within the scope of its duties with the authority to retain counsel or other advisors, if in its judgment that is appropriate, at the expense of the Company. |
| O8 |
Submit meeting minutes and, as appropriate, discuss the matters discussed at each Committee meeting with the Board of Directors. |
| 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. |
| 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. |
Audit and Financial Reporting
| A1 | Review and provide feedback on the independent auditors’ plan and scope for the current year audit including proposed audit fees and engagement letter. |
| 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. |
| A3 | Meet in separate, private sessions at least quarterly 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. |
| A4 | Discuss with management and the independent auditors, the quarterly financial statements prior to public release, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 10-Q. |
| A5 |
Discuss Company policy regarding earnings press releases as well as financial information provided to analysts and rating agencies. |
| A6 | Review the Company’s legal representation letter presented to the independent auditors and discuss significant items, if any, with Company General Counsel. |
| A7 | Review and discuss with the independent auditor the matters required to be discussed by SAS 61, including the auditor’s responsibility under generally accepted auditing standards; the significant accounting policies used by the Company; accounting estimates used by the Company and the process used by management in formulating them; any consultation with other accountants; and any major issues discussed with management prior to its retention. |
| A8 |
Annually, review a formal written statement from the independent auditor delineating all relationships between the auditor and the Company, consistent with Independence Standards Board Standard No. 1; actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor; and take appropriate action in response to the independent auditor’s report to satisfy itself of the auditor’s independence. |
| A9 |
Review the results of the annual audit and discuss the annual financial statements with management and the independent auditors, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and recommend the audited financial statements to be included in the Company's Annual Report on Form 10-K. |
| A10 |
Approve the Committee’s charter and report to stockholders as required by the SEC for inclusion in the Company’s annual proxy statement. |
| A11 |
Review and discuss with management and the independent auditor (a) all critical accounting policies and practices used by the Company; (b) any significant changes in Company accounting policies and any significant financial reporting issues and judgments made in preparing the financial statements; (c) 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 auditor; and (d) any accounting and financial reporting proposals that may have a significant impact on the Company’s financial reports. |
| A12 |
Review and discuss with the independent auditor any accounting adjustments that were noted or proposed by the independent auditor and were “passed” as immaterial or otherwise. |
| A13 |
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. |
| A14 |
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. |
| A15 |
Review the significant reports to management prepared by the internal audit department and management’s responses. |
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 financial statements or related Company compliance policies. |
| C2 | Review with General Counsel legal and regulatory matters, contingent liabilities or other sensitive information that may have a material effect on the Company’s financial statements, systems of internal control or regulatory compliance. |
| C3 | Review activity related to and evaluate the Company’s Code of Conduct and Ethics. |
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. |
| 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. |
| R3 |
Review the Company’s quality assurance processes to mitigate potential risks and its loss reserving methodology. |
| 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. |
| R5 | Review the Company’s information technology initiatives.
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Approved: February 13, 2008
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