Smart Powerr : CREG Audit Committee Charter

The Board ofDirectors (the "Board") of China Recycling Energy Corporation (the "Company")hereby sets forth the authority and responsibilities of the Audit Committee(the "Committee") as described below, subject to amendment by the Board fromtime to time.

PURPOSE

The Committee'spurpose is to act on behalf of the Board to oversee the integrity of theCompany's financial statements, the independent auditor's qualifications andindependence and the performance of both the Company's internal audit functionand the independent auditor. TheCommittee's role includes oversight of the qualitative aspects of financialreporting and disclosure to stockholders and the investment community, theCompany's risk management policies that relate to the financial controlenvironment, financial reporting and disclosure controls and the Company'sprocedures for compliance with significant applicable legal, ethical andregulatory requirements that impact the financial statements. The Committee must also prepare an auditcommittee report as required by the Securities and Exchange Commission (the"SEC") to be included in the annual proxy statement.

Although theCommittee has the responsibilities set forth in this Audit Committee Charter(this "Charter"), management is responsible for preparing the Company'sfinancial statements and the independent auditor is responsible for auditingthose financial statements. It is notthe duty of the Committee to plan or conduct the audit or to determine that theCompany's financial statements are complete and accurate or are in accordancewith generally accepted accounting principles ("GAAP"). Nothing in this Charter changes, or isintended to change, the responsibilities of management or the independentauditor. Moreover, nothing in thisCharter is intended to increase the liability of the members of the Committeebeyond that which existed before this Charter was approved by the Board.

COMPOSITION

The Committeeshall be comprised of three or more Board members, each of whom must satisfythe experience and, as reasonably and in good faith determined by the Board,the independence requirements of the NASDAQ Stock Market Marketplace Rules ("NASDAQ") and applicable state andfederal laws, including the rules and regulations of the SEC, as applicable to audit committee members(including, with respect to the chairperson of the Committee, any specialrequirements applicable to chairpersons of audit committees) and in effect fromtime to time when and as required. Inaddition, no member of the Committee shall have participated in the preparationof the financial statements of the Company or any current subsidiary of theCompany at any time during the past three years. Each Committee member must beable to read and understand fundamental financial statements, including abalance sheet, an income statement and a cash flow statement. At least onemember of the Committee must have past employment experience in finance oraccounting, requisite professional certification in accounting or othercomparable experience or background that confirms financial sophistication. Inaddition, at least one member of the Committee must be designated by the Boardto be the "audit committee financial expert," as defined in Item 407(d)(5)(ii)of Regulation S-K. The members of the Committee and the Committee chairpersonshall be appointed annually by the Board and may be removed at any time, withor without cause, by the Board.

The Committeeshall have the power to create subcommittees, each consisting of one or more ofits members, with such powers as the Committee shall from time to timeconfer. Each subcommittee shall keepminutes of its meetings and report them to the Committee.

OPERATING PRINCIPLES

In fulfilling itsfunction and responsibilities, the Committee should give due consideration tothe following operating principles and processes:

·Communication- Regular and meaningful contact throughout the yearwith the Chairman of the Board, other committee chairpersons, members of seniormanagement and other key Committee advisors, independent and internal auditors,etc., as applicable, is viewed as important for strengthening the Committee'sknowledge of relevant current and prospective business, financial reporting anddisclosure issues. In addition, ifeither the internal or the independent auditor identify significant issueswarranting the attention of the Committee or the full Board that, in theirjudgment, have been communicated to management but have not been adequatelyaddressed, they should be communicated to the Committee chairperson or anymember of the Committee.

·Committee Expectations and InformationNeeds- The Committee shouldcommunicate to the Chief Executive Officer or his designee, internal audit andother external parties the expectations of the Committee and the nature, timingand extent of any specific information or other supporting materials requestedby the Committee, for its meetings and deliberations.

·Resources- The Committee shall be authorized to access, at theCompany's expense, such internal and external resources, including retaininglegal, financial or other advisors, as the Committee deems necessary or appropriateto fulfill its defined responsibilities. The Committee shall have the sole authority to approve the fees, costsand other terms of engagement of such outside resources. The Company shall atall times make adequate provisions for the payment of all fees and othercompensation approved by the Committee to the Company's independent auditor inconnection with the preparation or issuance of its audit report or performanceof other audit, review or attest services for the Company, or to any consultants,advisors or experts retained by the Committee, as well as for other ordinaryadministrative expenses of the Committee as necessary or appropriate to carryout its duties.

·Meeting Agendas- Committee meeting agendas shall be theresponsibility of the Committee chairperson with input from Committee membersand other members of the Board, with additional input from members of seniormanagement and outside advisors to the extent deemed appropriate by thechairperson.

·Committee Meeting Attendees- The Committee shall be authorized torequest members of senior management, outside counsel, the internal auditfunction, the independent auditor and other advisors to participate inCommittee meetings, as necessary, to carry out the defined committee responsibilities. Either internal or independent auditors, orcounsel, may, at any time, request a meeting with the Committee or Committeechairperson with or without management attendance. In any case, the Committee shall meetperiodically in separate sessions with internal and independent auditors andmanagement.

·Reporting to the Board of Directors- The Committee shall maintain minutes ofmeetings and, through the Committee chairperson, shall report all materialactivities of the Committee to the Board from time to time or whenever sorequested by the Board. Any plandeveloped by the Committee for fulfilling its role and responsibilities shouldbe presented to and discussed with the full Board, and approved by the full Board. In addition, minutes from Committee meetingsshould be distributed to each Board member prior to the subsequent Boardmeeting.

MEETINGS

The Committeeshould meet as frequently as considered necessary by the Committee or thechairperson and shall meet at least four times annually and, to the extentpracticable, in conjunction with the regularly scheduled Board meetings. The Committee shall fix its own rules ofprocedure. A majority of regular membersthen serving on the Committee shall constitute a quorum.

AUTHORITY AND RESPONSIBILITY

The Committee'skey responsibilities include oversight of the independent auditor, oversight ofthe internal audit function, and oversight of compliance with financialdisclosure and audit requirements and related laws and regulations. In carrying out its responsibilities, theCommittee shall undertake the following:

Oversight of theIndependent Auditors

· TheCommittee shall have the sole authority to select, retain, oversee andterminate (if necessary) the independent auditor, including the scope of andplans for the audit, the adequacy of staffing and the compensation to be paidto the independent auditor.

· TheCommittee shall have the sole authority to review and approve the retention ofthe independent auditor to perform all audit and non-audit services, includingthe compensation to be paid for such services. The Committee must approve allof these services prior to the Company's receipt of such services. Authoritymay be delegated to one or more Audit Committee members, provided that allapprovals of audit and non-audit services pursuant to this delegated authoritybe presented to the full Committee at its next meeting .

· Theindependent auditor, in its capacity as an independent registered publicaccounting firm, shall be responsible to the Board and, as delegated, to theCommittee as representatives of the stockholders.

· Theindependent auditor shall be viewed as the Board's and Committee'srepresentatives in executing the Committee's oversight of periodic, annual andother financial reporting to stockholders. They shall report all relevant issues to the Committee responsive toagreed-on Committee expectations. TheCommittee should review the work of the independent auditor in executing theirrole of oversight.

· TheCommittee shall review and discuss with the Company's independent auditors: (i)the auditors' responsibilities under generally accepted auditing standards andthe responsibilities of management in the audit process; (ii) the overall auditstrategy; (iii) the scope and timing of the annual audit; (iv) any significantrisks identified during the auditors' risk assessment procedures; and (v) whencompleted, the results, including significant findings, of the annual audit. Inaddition, the Committee shall review and assess the overall scope and focus ofany interim audits, including the scope and level of involvement with unauditedquarterly or other interim-period information.

· TheCommittee shall, on an annual basis, review, assess and report to the Board onthe performance and qualifications of the independent auditor and the auditpartner, taking into account the opinions of members of management and theCompany's internal audit function. Atleast annually, the Committee shall obtain and review a report by the Company'sindependent auditor describing the accounting firm's internal quality controlprocedures and any material issues raised by the most recent internal qualitycontrol review, or peer review, of the firm or by any inquiry or investigationby any governmental or professional authorities, within the preceding fiveyears, respecting one or more independent audits carried out by the firm, andany steps taken to deal with any such issues. The Committee shall discuss thisreport with the Company's independent auditor and any relationships or servicesthat may impact the objectivity and independence of the auditor.

· TheCommittee shall, on an annual basis, review, assess and report to the Board onthe independence of the independent auditor, taking into account the opinionsof members of management and the Company's internal audit function andincluding an analysis of all non-audit services provided by the independentauditor and the effect, if any, on such independence. The Committee shall obtain: (i) a writtenstatement from the independent auditor delineating all relationships betweenthe auditor and the Company and (ii) written disclosures from the Company'sindependent auditors regarding their independence. Additionally, the Committee should seek tomaintain an active dialogue with the independent auditor with respect todisclosed relationships or services that may impact auditor objectivity orindependence and should take, or recommend to the full Board, appropriateaction to ensure the independence of the independent auditor.

· TheCommittee shall monitor the rotation of the partners of the independent auditoron the Company's audit engagement team as required by applicable law orregulation and shall consider periodically and adopt, if deemed appropriate, apolicy regarding rotation of auditing firms.

· TheCommittee shall set clear policies regarding the employment by the Company ofany employees or former employees of the independent auditor.

Oversight of the Internal Audit Function

· Theinternal audit function shall be responsible to senior management, but have adirect reporting responsibility and an effective line of communication to theBoard through the Committee.

· TheCommittee shall review and assess the annual internal audit plan and theprocess used to develop the plan, status of activities, significant findings,recommendations and management's response.

· TheCommittee shall regularly discuss with the independent auditor theresponsibilities, budget and staffing of the internal audit function.

· Seniormanagement shall consult with the Committee regarding changes in the seniormanagement of the internal audit function.

Oversight of FinancialReporting Compliance

·Annual and Interim Financial Reports- The Committee shall review and discusswith the independent auditor and management the Company's annual and interimfinancial reports, including (i) the independent auditor's assessment of thequality, not just acceptability, of accounting principles, (ii) thereasonableness of significant judgments and estimates (including materialchanges in estimates), (iii) any audit adjustments noted or proposed by theindependent auditor (whether "passed" or implemented in the financial reports),(iv) the adequacy of the disclosures in the financial statements, (v) theCompany's disclosure under "Management's Discussion and Analysis of FinancialCondition and Results of Operations" and(vi) any other matters required to be communicated to the Committee by theindependent auditor under Statement on Auditing Standards No. 114 (which supersedesStatement on Auditing Standards No. 61), as amended or supplemented. Such review and discussion shall occur priorto the filing or distribution of such reports.

·Fraud and Regulatory Noncompliance- The Committee shall review and assess theinternal and independent auditors' responsibility for detecting accounting andreporting financial errors, fraud and defalcations, illegal acts andnoncompliance with the code of business conduct and ethics and regulatoryrequirements.

·Regulatory Examinations- The Committee shall review and assess SECinquiries and the results of examinations by other financial regulatoryauthorities in terms of important findings, recommendations and management'sresponse.

·Financial Reporting- The Committee shall review withmanagement and the independent auditor (i) significant issues and risks thatarise regarding accounting principles and financial statement presentation,including the adoption of new or material changes to existing criticalaccounting policies or to the application of those policies; (ii) allalternative treatments of financial information within generally acceptedaccounting principles that have been discussed with management, including theramifications of the use of such alternative treatments; (iii) the potentialimpact of regulatory and accounting initiatives and any other significantreporting issues and judgments; and (iv) any analyses prepared by management orthe independent auditor with regard to the above and related auditor views.

·Risk Assessment and Management- The Committee shall periodically reviewand assess the Company's guidelines and policies governing risk assessment andrisk management.

·Auditor Recommendations ­- The Committee shall review and assessimportant internal and independent auditor recommendations on financialreporting, controls, other matters and management's response.

·Changes in Accounting Principles,Regulatory or Legal Matters- The Committee shall review and discuss with the independent auditor anychanges in important accounting principles, regulatory or legal matters thatcould have a material impact on the Company's financial statements and theapplication thereof in both annual and interim financial reports.

·Required Communications- The Committee shall receive and reviewall required communications from the independent auditor.

·Conflicts and Disagreements Between theIndependent Auditor and Management-The Committee shallregularly review with the independent auditor, and ultimately resolve, anyconflicts or disagreements between management and the independent auditorregarding financial reporting, accounting practices or policies, including (i)problems or difficulties the independent auditor encountered in the course ofthe audit work and (ii) any restrictions on the scope of the independentauditor's activities or on access to requested information.

·Proxy Statement Reports- The Committee shall prepare such reportsregarding matters within the scope of the Committee's role and responsibilitiesas may be required to be included in the Company's annual proxy statement orother public filings under applicable rules and regulations.

·Code of Business Conduct and Ethics- The Committee shall review and assess,on an annual basis, the Company's code of business conduct and ethics andpolicies regarding significant conflicts of interest and related-partytransactions.

·Complaints and Concerns- The Committee shall establish andmaintain procedures for the receipt, retention and treatment of complaintsreceived by the Company regarding accounting, internal accounting controls, orauditing matters. The Committee shallalso establish and maintain procedures for the confidential, anonymoussubmission by employees of the Company of concerns regarding questionableaccounting or auditing matters.

·Legal Matters- The Committee shall periodically review, with theCompany's counsel, any matter that could have a significant impact on theCompany's financial statements.

·Disclosure Controls- The Committee shall review each quarterthe report of the committee or individual in charge of internal control systemreview, with a more detailed review of the internal control report filed withthe Form 10-K; and meet with the Chief Executive Officer and Chief FinancialOfficer each quarter to discuss the report, any deficiencies or materialweaknesses in internal controls, and any fraud involving persons with asignificant role in the Company's internal controls or disclosurecontrols. The review should include adiscussion of the Company's risk assessment and risk management policies,including discussion of major financial risk exposures and steps management hastaken to monitor and control them.

·Other Financial Disclosure- The Committee shall review and discussearnings press releases, as well as financial information and earnings guidanceprovided to analysts and rating agencies.

Other Responsibilities

·Audit Committee Charter- The Committee shall review, on an annualbasis, the Audit Committee Charter and shall recommend any proposed changes forapproval by the full Board.

·Annual Performance Evaluation of the AuditCommittee- The Committeeshall review, discuss and assess at least annually its own performance as wellas the role and responsibilities of the Committee, seeking input from seniormanagement, the full Board and others. Changes in the role and/or responsibilities of the Committee as outlinedin this Charter, if any, shall be recommended to the full Board for approval.

·Related Party Contracts- In advance of any related partytransaction, the Committee shall review such transaction and recommend itsdecision for approval to the full Board.

·Other Activities- The Committee shall perform any otheractivities consistent with this Charter, the Company's bylaws and governinglaw, as the Committee or the Board deems necessary or appropriate.