Audit Committee

Charter of the Audit Committee

I. Committee Purpose
The Audit Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) to assist the Board in fulfilling its oversight responsibilities. The Committee’s primary duties and responsibilities are to (A) assist the Board in the oversight of (i) the integrity of the financial statements of Arbitron Inc. (the “Company”), (ii) the compliance by the Company with legal and regulatory requirements, (iii) the qualifications and independence of the Company’s registered public accounting firm (the “independent auditor”), and (iv) the performance of the Company’s internal audit function and the independent auditor; and (B) prepare a Committee report as required by the Securities and Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement.

The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities as it shall deem appropriate, including the authority to request any officer, employee or advisor of the Company to meet with the Committee or any advisors engaged by the Committee. Without limiting the foregoing, the Committee shall have direct access to the independent auditor, the Company’s internal auditor, and the Company’s investment advisors. The Committee has the authority to retain, at the Company’s expense, special legal, accounting, or other consultants or experts that it deems necessary in the performance of its duties, on the same terms as if the Board authorized the retention. The Committee is empowered, without further action by the Board, to cause the Company to pay the ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

II. Structure and Membership
Members. Committee members shall meet the independence, experience and financial expertise requirements under the applicable rules of the New York Stock Exchange (the “NYSE”). Except as otherwise permitted by the applicable rules of the NYSE, the Committee shall be comprised of three or more members of the Board, as determined by the Board, each of whom must meet the independence standards as defined by NYSE rules and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Selection and Removal. Committee members and the Committee chair shall be appointed by the Board upon the recommendation of the Nominating and Corporate Governance Committee. If a Committee chair is not designated or present, the members of the Committee may designate a chair by majority vote of the Committee membership. Unless otherwise determined by the Board, (in which case disclosure shall be made in the Company’s annual proxy statement), no member of the Committee may serve on the audit committee of more than two other public companies. The Board may remove members of the Committee from such Committee, with or without cause.

Financial Literacy. Each member of the Committee must be financially literate, as such qualification is interpreted by the Board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Committee. At least one member of the Committee must have accounting or related financial management expertise, as the Board interprets such qualification in its business judgment. Unless otherwise determined by the Board (in which case disclosure of such determination shall be made in the Company’s annual report filed with the SEC), at least one member of the Committee shall be an “audit committee financial expert” (as defined by applicable SEC rules).

Compensation. Members of the Committee shall receive compensation only in the form of directors’ fees from the Company for serving on the Committee. Directors’ fees may be in the form of cash, stock and/or company stock options or other in-kind consideration ordinarily available to directors. No member of the Committee may receive, directly, or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than fees paid in his or her capacity as a member of the Board or a committee of the Board.

III. Committee Responsibilities and Duties
The Committee shall discharge its responsibilities, and shall assess the information provided by the Company’s management and the independent auditor, in accordance with its business judgment. Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, for the appropriateness of the accounting principles and reporting policies that are used by the Company and for establishing and maintaining adequate internal control over financial reporting. The independent auditor is responsible for auditing the Company’s financial statements and the Company’s internal control over financial reporting and for reviewing the Company’s unaudited interim financial statements. The authority and responsibilities set forth in this Charter do not reflect or create any duty or obligation of the Committee to plan or conduct any audits, to determine or certify that the Company’s financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles (“GAAP”) or applicable law, or to guarantee the independent auditor’s reports.

Nothing contained in this Charter is intended to create, or shall be construed as creating, any responsibility or liability for the members of the Committee except to the extent otherwise provided under the Delaware General Corporate Law, which shall continue to set the legal standard for the conduct of the members of the Committee.

General Responsibilities
1. Review and reassess the adequacy of this Charter at least annually and recommend any proposed changes to the Board. Submit the Charter to the Board for approval, include a copy of the Charter as an appendix to the Company’s proxy statement at least every three years and/or have a current copy of the Charter posted on the Company’s website, in accordance with applicable SEC rules. If the Charter has been materially amended since the beginning of the Company’s last fiscal year, a copy of the Charter should be included as an appendix to the Company’s proxy or information statement.
2. In consultation with management, the independent auditor and the persons performing the internal auditing function, coordinate the Board’s oversight of the Company’s internal control over financial reporting, disclosure controls and procedures and the Company’s Code of Ethics and Conduct. Discuss significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures. Review significant findings prepared by the independent auditor and the persons performing the internal auditing function together with management’s responses, including the status of previous recommendations. Receive and review the certifications of the Chief Executive Officer and Chief Financial Officer required by SEC rules.
3. Review with management and the independent auditor the Company’s financial results prior to the release of earnings, the earnings press releases and financial information and earnings guidance provided to analysts and rating agencies prior to filing or distribution. Discuss generally the type and presentation of information to be disclosed in the Company’s earnings press releases.
4. Prepare annually a Committee report to shareholders as required by the SEC for inclusion in the Company’s annual proxy statement.
5. Review with management guidelines and policies to govern the process by which risk assessment and risk management are undertaken.
6. Set clear hiring policies for employees or former employees of the independent auditor.
Oversight of the Independent Auditor
1. The Committee shall review the performance of the independent auditor, which review shall include a review and evaluation of the lead partner of the independent auditor. The Committee shall be directly responsible for the appointment, compensation, evaluation, retention, oversight and, when necessary, termination of the engagement of the independent auditor. The Committee shall review the independent auditor’s audit plan and engagement letter and discuss scope, staffing, locations, reliance upon management, and internal audit and general audit approach. The independent auditor shall report directly to the Committee.
2. On an annual basis, the Committee shall assess the independent auditor’s independence. In connection with this assessment, the Committee shall obtain and review a report by the independent auditor describing all relationships between the auditor and the Company, including the disclosures required by Independence Standards Board Standard No.1. The Committee shall engage in an active dialogue with the independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the auditor.
3. The Committee shall be directly responsible for setting the compensation of the independent auditor. The Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of the independent auditor established by the Committee.
4. The Committee shall preapprove all audit services to be provided to the Company, whether provided by the principal auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by the independent auditor; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable NYSE and SEC rules.
5. The independent auditor shall report directly to the Committee, and the Committee shall be directly responsible for the oversight of the work of the independent auditor, including resolution of disagreements between management and the independent auditor regarding financial reporting. In connection with its oversight role, the Committee shall, from time to time as appropriate:
  1. Receive and consider the reports required to be made by the independent auditor regarding:
    1. Critical accounting policies and practices;
    2. Alternative treatments within GAAP for policies and practices related to material items that have been discussed with management, including ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and
    3. Other material written communications between the independent auditor and management.
  2. Review with the independent auditor:
    1. Any audit problems or difficulties the independent auditor encountered in the course of the audit work, including any restrictions on the scope of the independent auditor’s activities or on access to requested information, and any significant disagreements with management and management’s response;
    2. The adequacy of the Company’s internal controls;
    3. Significant financial reporting issues and judgments made by management in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and
    4. The effect of off-balance sheet structures on the financial statements of the Company.
6. The Committee shall direct the independent auditor to use its best efforts to perform all reviews of interim financial information prior to disclosure by the Company of such information and to discuss promptly with the Committee and the Chief Financial Officer any matters identified in connection with the auditor’s review of interim financial information which are required to be discussed by applicable auditing standards. The Committee shall direct management to advise the Committee in the event that the Company proposes to disclose interim financial information prior to completion of the independent auditor’s review of interim financial information.
7. At least annually, the Committee shall obtain and review a report by the independent auditor describing: the independent auditor’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, 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 independent auditor, and any steps taken to deal with any such issues.
8. The Committee shall consider the independent auditor’s judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.
Audited Financial Statements
1. The Committee shall meet and review and discuss with management and the independent auditor the Company’s audited financial statements prior to filing or distribution, including reviewing the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the matters about which Statement on Auditing Standards No. 61 requires discussion. This review should include a discussion of significant issues regarding accounting principles, practices and judgments with management and the independent auditor.
2. The Committee shall consider whether it will recommend to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K.
Quarterly Financial Statements
1. The Committee shall review with management and the independent auditor the Company’s quarterly financial statements (including the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the reports of the Chief Executive Officer and the Chief Financial Officer required to be filed under applicable SEC rules). Discuss any significant changes to the Company’s accounting principles and any items required to be communicated by the independent auditor in accordance with Statement on Auditing Standards No. 61.
2. The Committee shall communicate with management and the independent auditor quarterly to review the Company’s financial statements and significant findings based upon the auditor’s limited review procedures.
Internal Audit Function and Legal Compliance
1. Review all internal audit functions including review of the audit budget, audit plan, changes in the audit plan, activities, organizational structure and qualifications of the internal audit function whether performed by internal or external resources.
2. Review the appointment, performance, and replacement of the senior internal audit executive or third party performing the internal audit functions.
3. Review significant reports prepared by the internal audit function together with management’s response and follow-up to these reports.
4. At least annually, review with the Company’s legal counsel any legal matters that could have a material impact on the Company’s financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies. In addition, review with the Company’s legal counsel conflict-of-interest employee statements, and with management the Company’s insurance coverage and pension funding.
5. Establish and periodically review procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters.
6. Establish and periodically review procedures for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
7. The Committee shall have such other duties as may be delegated from time to time by the Board.

IV. Procedures and Administration

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The Committee may also act by unanimous written consent in lieu of a meeting in accordance with the Company’s bylaws.
The Committee chair shall prepare and/or approve an agenda in advance of each meeting of the Committee.
The Committee shall periodically meet separately with management, with the independent auditor, with the persons performing the internal audit functions and as a committee to discuss any matters that the Committee or any of these groups believe should be discussed.
The Committee shall maintain minutes of its meetings and shall regularly report to the Board.
The Committee may form and delegate authority to one or more subcommittees as it deems appropriate from time to time under the circumstances (including a subcommittee consisting of a single member). Any decision of a subcommittee to preapprove audit, review, attest, or non-audit services shall be presented to the full Committee at its next scheduled meeting.
The Committee shall conduct an annual performance and self-evaluation of the Committee.

Effective Date: February 27, 2007

Back to List of Charters