Question

Mobile Security, Inc.

Mobile Security, Inc. (MSI) has been an audit client of Leo & Lee, LLP for the past 12 years. MSI is a small, publicly traded aviation company based in Cleveland, Ohio, where it manufactures high-tech unmanned aerial vehicles (UAV), also known as drones, and other surveillance and security equipment. MSI’s products are primarily used by the military and scientific research institutions, but there is growing demand for UAVs for commercial and recreational use. MSI must go through an extensive bidding process for large government contracts. Because of the sensitive nature of government contracts and military product designs, both the facilities and records of MSI must be highly secured.

The MSI board of directors consists of 12 members. The CEO and CFO are board members, and the remaining 10 board members are not employees of MSI. One of the board members, who is part of the audit committee, is stepping down next month, so MSI is looking to fill that spot.

Gather information: As MSI is looking for someone to fill the vacant board position, what requirements must be followed? What characteristics or qualities would be ideal for the board member to have?

Answer 1

!) Independence and Qualification : - Members of audit Committee must be an independent director, and the independence must be main- tained Coutinoruly and reviewed annually: NYSE listing Standard requirements:- Audit Committee member is not coneidered to be independent any of the following Conditions met :- → merubes is an employee as an executive office of the company during the last 3 years. → member is an immediate fermily member during the period of 12 months received more than $ 120,000 of direct Coupen canon 3 years → member is a present partner of Company's internal or independent auditur + Member is a current employee of audit firm as an immediate family member of Current employee of such from a personally worked on the company's audit during the period of last 3 years and during the last 3 CS Scanned with CamScanner

→ memberi is a canyent executive officer an immediate family member of the executive officer of Other Company which Yeceiver o make payments to the company for property of Services. The amount of transaction is greates of $1 million e 3% of gouss revenue of the other company. NACOAQ listing standards :- All couditions except the last one is Same in the NASDAQ listing standards. In there standards the fact Condition is as follows :- member a partner, Controlling shaiche kter a executive officer of the other company Organization which receiver or make payments to the company for property or service and the amount is greater Of $ 200,000 5% of gross revenue of the recipient, during the last 3 years cs Scanned with CamScanner

SEC requirements :- SEC defines the following forme which a member of audit Committee must possess: - - Member should have Understanding of geevally atrepted alounting principles and financial statement. 9 Must have an ability to apply GAAP's for calculating and analysing estimatel, gelewer and accruals. Understand the internal Control over financial Statements Understand the functions of audit committee. CS Scanned with CamScanner