Purpose
The purpose of the Audit Committee (the “Audit Committee”) is to
carry out the responsibilities delegated by the board of directors
(the “Board”) of Morningstar, Inc. (“Morningstar” or the
“Company”) as set forth in this Charter, including:
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(a) assisting the Board in overseeing:
- the integrity of Morningstar’s financial statements,
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the qualifications and independence of Morningstar’s
independent registered public accounting firm,
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Morningstar’s accounting and financial reporting processes
and the audit of Morningstar’s financial statements,
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Morningstar’s disclosure controls and procedures and
internal controls over financial reporting and the related
audit, and
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the performance of Morningstar’s independent registered
public accounting firm and design, implementation and
performance of Morningstar’s internal audit function, and
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(b) preparing an Audit Committee report, in accordance with
federal securities laws, to be included in Morningstar’s annual
proxy statement.
Accountability
The independent registered public accounting firm engaged by
Morningstar is ultimately accountable to the Board and the Audit
Committee. The Audit Committee has the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace
the independent registered public accounting firm.
Membership
The Audit Committee will consist of at least three directors
(each, a “member”), each of whom must be "independent" as defined
under Rule 5605(a)(2) of The Nasdaq Stock Market Listing Rules
(the "Listing Rules"), and shall meet the criteria for
independence set forth in Rule 10A-3(b)(1) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). A
subsequent determination that any member of the Committee does not
satisfy the foregoing requirements shall not invalidate any action
theretofore taken by the Audit Committee except to the extent
required by law or determined appropriate to satisfy any
regulatory standards. The Board will interpret these rules using
its business judgment. The members will be appointed by the Board
on the recommendation of the Nominating and Corporate Governance
Committee and will serve at the discretion of the Board for a term
of one year. The Board shall appoint the Chair of the Audit
Committee. The Board is responsible for removing and adding
members and can do so at any time. Appointments to the Audit
Committee, including the Chair of the Audit Committee, shall
conform to Morningstar’s By-Laws, this Charter, and applicable
laws and regulations, as appropriate under the circumstances.
Each member must be able to read and understand financial
statements, including, but not limited to, the Company’s balance
sheet, income statement and cash flow statement. Each member must
not have participated in the preparation of Morningstar’s
financial statements or the financial statements of any current
subsidiary of Morningstar at any time during the past three years.
At least one member must have past employment experience in
finance or accounting, requisite professional certification in
accounting or other comparable experience or background that
results in the member’s financial sophistication, as defined by
the Listing Rules and an “audit committee financial expert” as
defined by the rules of the Securities and Exchange Commission
("SEC") and as interpreted by the Board in its business judgment.
If an Audit Committee member simultaneously serves on the audit
committee of more than three public companies, including
Morningstar, the Board must determine whether such service would
impair such director's ability to serve effectively on the Audit
Committee and disclose this determination in the Board meeting
minutes and in Morningstar’s annual proxy statement.
Audit Committee Organization and Procedures
The Audit Committee will meet quarterly in person or by telephone.
It may meet more frequently if the Audit Committee deems it
necessary to comply with the responsibilities defined in this
Charter.
The Audit Committee will have a Chair, who will be responsible
for, with input from the other members of the Audit Committee,
Morningstar’s independent registered public accounting firm and
the appropriate officers of Morningstar, calling, establishing
agendas for, and supervising the Audit Committee meetings. The
Chair will report to the Board the actions and recommendations of
the Audit Committee.
The meetings of and other actions taken by the Audit Committee
will be governed by the same rules regarding meetings, action
without meetings, notice, waiver of notice, and quorum and voting
requirements as are applicable to the Board. The Audit Committee
may also take any action permitted in this Charter by unanimous
written consent.
The Audit Committee may request any officer or employee of
Morningstar or Morningstar’s outside legal counsel or independent
registered public accounting firm to attend an Audit Committee
meeting or to meet with any members of, or advisors to, the Audit
Committee.
The Audit Committee will meet with management, the internal
auditors or similar individuals, and the independent registered
public accounting firm at least twice each year in separate
private sessions to discuss any matter that the Audit Committee,
management, the independent registered public accounting firm, or
any other person believes should be discussed privately.
The Audit Committee shall have the authority, in its sole
discretion, to select, retain, terminate, oversee the work of, or
obtain the advice of any consultant, legal counsel or other
advisor, including the authority to engage independent registered
public accounting firms for special audits, reviews and other
procedures. The Audit Committee shall be directly responsible for
the appointment, compensation, retention and oversight of the work
of any such consultant, legal counsel, independent auditor, or
other advisor retained by the Audit Committee (including
resolution of disagreements between management and the Company’s
independent registered public accounting firm regarding financing
reporting). The Company will provide appropriate funding, as
determined by the Audit Committee, for payment of compensation to
any consultant, legal counsel, independent auditor, or other
advisor retained by the Audit Committee. The Audit Committee shall
be empowered to access all books, records, facilities, personnel,
agents and advisors of the Company as it deems necessary or
appropriate to discharge its responsibilities.
The Audit Committee will keep minutes of its proceedings and shall
maintain copies of such minutes and each written consent to action
taken without a meeting.
The Audit Committee may, in its discretion and only to the extent
consistent with applicable law and regulations, delegate certain
of its authority to a subcommittee of the Audit Committee.
Limitation of Audit Committee Responsibilities
The Audit Committee and its members are not employees of the
Company and are not responsible for planning or conducting audits
or determining that Morningstar’s financial statements are
complete and accurate or in accordance with U.S. generally
accepted accounting principles (“GAAP”), or determining that
Morningstar’s internal controls over financial reporting are
effective. This is the responsibility of management and
Morningstar’s independent registered public accounting firm. Nor
is it the duty of the Audit Committee to conduct investigations or
to assure compliance with
Morningstar’s Code of Ethics (or any other code of ethics required
by the SEC or an exchange on which the Company’s stock is listed).
This is the responsibility of management. The Audit Committee’s
function is one of oversight only, and the fundamental
responsibility for Morningstar’s financial statements and
disclosures rests with management and the independent auditor.
Specific Responsibilities
The Audit Committee will:
1. Review Audit Committee Charter.
Review and reassess the adequacy of the Charter annually and
recommend any changes to the Board.
2. Retain Independent Registered Public Accounting Firm. Have
the direct responsibility for:
Have the direct responsibility for:
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(a) appointing, compensating, retaining, or replacing
Morningstar’s independent registered public accounting firm
(who shall report directly to the Audit Committee), subject,
if applicable, to shareholder ratification,
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(b) pre-approving, or adopting a policy to pre-approve, all
audit engagement fees and terms, as well as non-audit or tax
related engagements with Morningstar’s independent
registered public accounting firm, and
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(c) evaluating the qualifications, performance, and
independence of the independent registered public accounting
firm, based on the information in Paragraphs 3 and 4 below.
3. Quality Control of Independent Registered Public Accounting
Firm.
At least annually, obtain and review a report of Morningstar’s
independent registered public accounting firm describing:
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(a) the independent registered public accounting firm’s
internal quality control procedures, and
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(b) any material issues raised by the most recent internal
quality control review, or Public Company Accounting
Oversight Board inspection, of the firm, or by any inquiry
or investigation by governmental or professional authorities
within the five preceding years with respect to one or more
independent audits carried out by the firm, and any steps
taken to deal with any such issues.
4. Review Independence of Registered Public Accounting Firm.
Review, at least annually, the information provided by
management and the independent registered public accounting
firm relating to the independence of the registered public
accounting firm, including, among other things, information
related to the non-audit services provided and expected to be
provided by the independent registered public accounting firm.
In addition, the Audit Committee will:
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(a) ensure that the independent registered public accounting
firm submits at least annually a formal written report
delineating all relationships between the independent
registered public accounting firm and Morningstar consistent
with Public Company Accounting Oversight Board Ethics and
Independence Rule 3526,
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(b) actively engage in a dialogue with the independent
registered public accounting firm regarding any disclosed
relationships or services that may impact the independent
registered public accounting firm's objectivity and
independence, and
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(c) take appropriate action in response to the independent
registered public accounting firm’s report to satisfy itself
of the registered public accounting firm’s independence.
The Audit Committee will also:
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(a) review and evaluate the lead audit partner of the
independent registered public accounting firm,
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(b) consider whether there should be regular rotation of the
lead audit partner or the independent registered public
accounting firm itself, and
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(c) set hiring policies for employees or former employees of
the independent registered public accounting firm.
Review the plan, scope, and fees for the annual audit and
other examinations with the independent registered public
accounting firm.
Discuss with the independent registered public accounting firm
matters required by Statement on Auditing Standards No. 1301
(as amended from time to time) relating to the conduct of the
audit, including:
- (a) any restriction on audit scope, and
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(b) significant issues discussed with the independent
registered public accounting firm’s national office.
Review with the independent registered public accounting firm
any audit problems or difficulties the independent registered
public accounting firm encountered in the course of the audit
work and management’s response, including any restrictions on
the scope of the independent registered public accounting
firm’s activities or on access to requested information, and
any significant disagreements with management.
7. Review of Audit Results.
Review with the independent registered public accounting firm
the report of their annual audit or proposed report of their
annual audits of Morningstar’s financial statements and
internal controls over financial reporting, the accompanying
management letter, if any, the reports of their review of
Morningstar’s interim financial statements conducted in
accordance with Public Company Accounting Oversight Board
Standards AU Section 722, if conducted, and the reports of the
results of any other examinations outside of the course of the
normal audit procedures that the independent registered public
accounting firm may from time to time undertake, which will
include a review of:
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(a) major issues regarding:
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accounting principles and financial statement
presentations, including any significant changes in
Morningstar’s selection or application of accounting
principles, and
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the adequacy of Morningstar’s internal controls over
financial reporting and any special audit steps adopted
in light of related significant deficiencies or material
weaknesses,
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(b) analyses prepared by management and/or the independent
registered public accounting firm setting forth significant
financial reporting issues and judgments made in connection
with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the
financial statements, and
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(c) the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on Morningstar's
financial statements.
8. Discuss Financial Statements.
Review and discuss with appropriate officers of Morningstar
and the independent registered public accounting firm the
annual audited and quarterly unaudited financial statements of
Morningstar, and any other reports or financial information
deemed appropriate by the Audit Committee, including
Morningstar’s disclosures under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
resolve any disagreements between such officers and the
independent registered public accounting firm regarding
financial reporting.
9. Discuss Earnings Press Releases.
Discuss earnings press releases (including any use of “pro
forma” or “adjusted” non-GAAP information), as well as
supplemental financial information and earnings guidance
provided to investors, analysts and rating agencies, if
applicable, prior to their publication.
10. Appointment of Chief Audit Executive.
Review the appointment or replacement of the chief audit
executive.
11. Review Performance of Internal Audit Function.
Review with the chief audit executive, at least annually, the
scope of the internal audit program and the performance of the
internal audit group in executing its plans and meeting its
objectives.
12. Review Internal Audit Activities.
Review any significant ongoing internal audit activities with
the appropriate Morningstar personnel.
13. Morningstar Fraud and Abuse Policy.
Review and approve changes to the Morningstar Fraud and Abuse
Policy.
14. Review System of Internal Accounting Controls.
Review with the independent registered public accounting firm,
the appropriate senior financial executive, the Chief Legal
Officer and, as deemed appropriate by the Chair of the Audit
Committee, members of their respective staffs, the adequacy of
Morningstar’s internal accounting controls, Morningstar’s
financial, auditing, and accounting organizations and
personnel and Morningstar’s policies and compliance procedures
with respect to business practices.
15. Review Recommendations of Independent Registered Public
Accounting Firm.
Review with the appropriate senior financial executive and the
appropriate members of his, her or their staff recommendations
made by the independent registered public accounting firm as
well as any other matters, if any, as these people or other
officers of Morningstar may wish to bring to the attention of
the Audit Committee.
Obtain assurance from the independent registered public
accounting firm concerning compliance with the requirements of
Section 10A of the Exchange Act that relate to audit
procedures, pre-approval of non-audit services provided by the
independent registered public accounting firm, prohibited
services from the independent registered public accounting
firm, audit partner rotation, reports by the independent
registered public accounting firm to the audit committee, and
conflicts of interest by the independent registered public
accounting firm.
17. Related-party Transactions.
Review and approve, ratify, or reject transactions pursuant to
the Company’s related party transaction policy and procedures.
Review and reassess the adequacy of the related party
transaction policy and procedures periodically and recommend
any changes to the Board.
18. Discuss Risk Management.
Discuss with management Morningstar’s major financial,
technology, business continuity, artificial intelligence, and
cybersecurity risk exposures and the steps management has
taken to monitor and control these exposures.
19. Discuss Reports/Complaints.
Discuss with management and the independent registered public
accounting firm any correspondence with regulators or
governmental agencies and any employee complaints or published
reports that raise material issues regarding Morningstar’s
financial statements or accounting policies.
Establish and oversee procedures for the receipt, retention
and treatment of complaints received by Morningstar regarding
accounting, internal accounting controls or auditing matters,
and for the confidential, anonymous submission by Morningstar
employees of concerns regarding questionable accounting or
auditing matters.
20. Discuss Legal Matters.
Discuss legal, regulatory, and compliance matters that may
have a material impact on the financial statements with
Morningstar’s Chief Legal Officer.
21. Review Material Pledges of Morningstar Shares.
Annually, or as frequently as appropriate, review any
arrangement in which an employee or board member pledges
Morningstar shares as collateral or holds such shares in a
margin account, that could pose a significant risk to the
Company or its shareholders.
22. Review Other Matters.
Review other matters relating to the accounting, auditing,
tax, and financial reporting practices and procedures, as well
as internal controls over financial reporting, of Morningstar
as the Audit Committee may, in its own discretion, deem
desirable in connection with the review functions described
above.
Report its activities to the Board in a manner and frequency
the Audit Committee deems appropriate, but no less than once a
year. The report will include the Audit Committee’s
conclusions of its evaluation of the independent registered
public accounting firm.
24. Audit Committee Report.
With the assistance of management, the independent registered
public accounting firm, and outside legal counsel, prepare and
approve the Audit Committee report to be included in
Morningstar’s annual proxy statement.
25. Review Audit Committee Performance.
Prepare and review with the Board an annual performance
evaluation of the Audit Committee, which compares the
performance of the Audit Committee with the requirements of
this Charter, and set forth the goals and objectives of the
Audit Committee for the upcoming year. The performance
evaluation may be conducted as the Audit Committee deems
appropriate. The resulting report to the Board may take the
form of an oral report by the Chair of the Audit Committee or
any other member of the Audit Committee.
26. Other Duties and Responsibilities.
Perform such other duties and responsibilities, consistent
with this Charter, delegated to the Committee by the Board.
This Charter may be amended or modified only with the approval of
the Board. Amended and restated as of May 10, 2024.