Audit Committee Charter

Revised as of October 23, 2019


The Audit Committee (the “Committee”) is composed of three or more Directors who meet the independence and experience requirements of the New York Stock Exchange ("NYSE") and the independence requirements of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Company’s Director Independence Standards.  The Board of Directors (the “Board”) will determine whether the Audit Committee members meet these requirements.

Members of the Committee, including its Chairman, are selected by the Board on at least an annual basis, and the selections may be changed by the Board at any time. The Committee is responsible to the Board and reports regularly to the Board on the activities of the Committee. The Committee may create subcommittees and vest those subcommittees with the authority of the full Committee with respect to specific matters delegated to such subcommittee.

No Committee member may simultaneously serve on the audit committee of more than three public companies, including Pinnacle West Capital Corporation (the “Company”), unless the Board determines that such simultaneous service would not impair the ability of such Director to effectively serve on the Committee. The Company shall disclose this determination on the Company’s website or in its annual proxy statement.

Each member of the Committee shall be “financially literate,” and at least one member of the Committee shall be an “audit committee financial expert,” as such qualifications are defined by the rules of the Securities and Exchange Commission and the NYSE, as applicable.

The Committee will meet as often as it determines, but not less frequently than quarterly.  The Committee will periodically meet separately with each of management, the internal auditors, and the independent auditor.


  1. The Committee’s primary function is to assist oversight by the Board or other Board committees of:  (1) the integrity of the Company’s financial statements and internal controls; (2) the independent auditor’s qualifications and independence; (3) the performance of the Company’s internal audit function and independent auditors; and (4) compliance by the Company with legal and regulatory requirements.
  2. The Committee shall determine whether to recommend to the Board that the Company’s audited financial statements be included in the Company’s annual report on Form 10-K and direct that its report with respect to such determination be included in the Company’s annual proxy statement.
  3. The Committee shall be directly responsible for the appointment, compensation, retention, and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.  The independent auditor shall report directly to the Committee. The Committee shall have the authority to engage independent counsel and other advisors, as it determines necessary to carry out its duties.  
  4. The Committee shall pre-approve all auditing and non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act.  The Committee may delegate to the Chairman of the Committee authority to grant pre-approvals of audit and non-audit services, provided that decisions of the Chairman to grant pre-approvals are presented to the full Committee at its next scheduled meeting. 
  5. The Company shall provide for appropriate funding, as determined by the Committee, for payment of (a) compensation to the independent auditor, (b) compensation to the independent counsel and any other advisors, and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
  6. The Committee shall, at least annually, obtain and review a report by the independent auditor describing:
    (a) the independent auditor’s internal quality-control procedures;
    (b) 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;
    (c) any steps taken to deal with any such issues; and
    (d) all relationships between the independent auditor and the Company (in order to assess the auditor’s independence).  In addition to discussing the foregoing matters with the independent auditor, the Committee shall take other appropriate actions as it may deem necessary to satisfy itself of the independent auditor’s independence, including the review and evaluation of the lead partner of the independent auditor and a consideration as to whether there should be regular rotation of the audit firm itself.  The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
  7. Set policies for the Company’s hiring of employees or former employees of the independent auditor.
  8. Discuss with the independent auditor any issues on which the Company’s audit team consulted the independent auditor’s national accounting office on auditing or accounting issues presented by the engagement and, if the Committee deems it necessary or appropriate, discuss such issues directly with the national accounting office.
  9. Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
  10. Review and concur in the appointment, replacement or dismissal of the Director of Audit Services.
  11. Review and approve the Audit Services Department’s Charter and any material amendments thereto.
  12. Review with the Director of Audit Services and approve the annual internal audit plan and scope of internal audits and any significant changes to the audit plan or scope of internal audits.  The review and approval shall include a discussion with the independent auditor and the Director of Audit Services of the responsibilities, budget, staffing, and resources necessary to achieve the annual audit plan and internal audits. 
  13. Review communications from the Audit Services Department on the Department’s performance related to the annual audit plan and other matters.
  14. Review summaries of the significant reports to management prepared by the Audit Services Department and management’s responses thereto.
  15. Reviews the results of internal and external Audit Services Department quality assessments.
  16. Review and discuss with management and the independent auditor, prior to the filing of the Company’s annual audited financial statements and quarterly financial statements:
    (a) the annual audited financial statements or quarterly financial statements, as applicable; and
    (b) the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.
  17. Discuss with the independent auditor the matters required to be discussed by professional standards, including the Commission’s rules and Public Company Accounting Oversight Board guidance, relating to the conduct of the audit, including any problems or difficulties encountered in the course of the audit work and management’s response; any restrictions on the scope of activities or access to requested information; and any significant disagreements with management.
  18. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies.
  19. Review and discuss quarterly reports from the independent auditors on:
    (a) all critical accounting policies and practices to be used;
    (b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and
    (c) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
  20. Review and discuss with management the Company’s draft earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.  Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentation to be made).
  21. Discuss with management and the independent auditor the effect on the Company’s financial statements of new or amended regulatory and accounting requirements, including with respect to off-balance sheet structures.
  22. Discuss guidelines and policies to govern the process by which risk assessment and risk management is undertaken across the Company and discuss the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.
  23. Periodically review, with management, principal risks related to or arising out of the Company’s financial statements audit functions, or other matters addressed by the Committee, and assess the effectiveness of the Company’s measures to address these risks. 
  24. Review disclosures made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q concerning any significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting or any fraud involving management or other employees who have a significant role in the Company’s internal controls.
  25. Obtain information from the independent auditor if Section 10A(b) of the Exchange Act has been implicated.  Generally, Section 10A(b) requires the independent auditor, if it detects or becomes aware of any illegal act, to ensure that the Committee is adequately informed.
  26. Review management’s monitoring of the Company’s compliance with the Company’s Code of Ethics and Business Practices.
  27. Review and approve the Company’s Code of Ethics for Financial Executives and any amendments thereto.
  28. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports, which raise material issues regarding the Company’s financial statements or accounting policies.
  29. Discuss with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies.
  30. Establish and review the effectiveness of procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
  31. Conduct a Committee self-assessment on at least an annual basis to determine whether the Committee is functioning effectively.\
  32. Review this Audit Committee Charter, at least biennially, and, if appropriate, recommend changes to the Board of Directors.


While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles.  This is the responsibility of management and the independent auditor.

This Audit Committee Charter is not intended to change or augment the obligations of the Company or its directors or management under the federal securities laws or to create new standards for determining whether directors or management have fulfilled their duties, including fiduciary duties, under applicable state law.


Provide the Committee with the necessary resources to discharge the Committee’s duties and responsibilities, as reflected in this Charter and as assigned to the Committee by the Board.

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