Responsibility

The PacificNet Inc. ("PacificNet") Audit Committee ("Committee") was established to assist the Board of Directors in carrying out its oversight responsibilities that relate to PacificNet's accounting and financial reporting processes, audits of PacificNet's financial statements, internal controls, and compliance with laws, regulations and ethics. This policy reaffirms that the Committee's duties are oversight in nature and that the primary responsibility for financial reporting, internal control, and compliance with laws, regulations, and ethics standards rests with PacificNet's executive management and that PacificNet's external auditors are responsible for auditing PacificNet's financial statements. The foregoing notwithstanding, the Committee, in its capacity as the Audit Committee of the Board of Directors, has direct responsibility for the appointment, compensation and oversight of the work of any registered public accounting firm employed by PacificNet (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The Committee does not provide any expert or special assurances as to PacificNet's financial statements or any professional certification as to the external auditors work.

The Committee has the power to conduct or authorize investigations into any matters within the Committee's scope of responsibilities and to establish procedures concerning the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and confidential, anonymous employee submissions of concerns regarding questionable accounting or auditing matters. The Committee is empowered to retain independent counsel, accountants, or others to assist it in the conduct of any investigation. The President, the Chief Financial Officer or the Corporate Secretary of PacificNet shall provide, or arrange to provide, such other information, data and services as the Committee may request. The Committee shall conduct such interviews or discussions as it deems appropriate with personnel of PacificNet, and/or others whose views would be considered helpful to the Committee.

The Committee's prior approval is required for all auditing services and non-audit services. However, in the event the aggregate amount of non-audit services constitutes 5% or less of the total revenues paid by PacificNet to its external auditor during the fiscal year in which non-audit services are provided, and PacificNet did not recognize that these services were non-audit services at the time of the engagement and the Committee is promptly notified of this fact by PacificNet; provided the Committee (or one or more members of the Committee who are also members of the Board of Directors to whom approval authority has been delegated by the Committee) approves such non-audit services prior to their completion.

The Committee believes its policies and procedures should remain flexible in order to best react to changing conditions and that the following duties of the Committee are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate given the circumstances:

A: Financial Reporting

Committee procedures shall include:

Selection of Outside Auditors

The Committee has the ultimate authority and responsibility to select, evaluate, and where appropriate, replace the outside auditor. The outside auditors are ultimately accountable to the Audit Committee and the entire Board for such auditors' review of the financial statements and controls of PacificNet. On an annual basis, the Audit Committee should review and discuss with the auditors all significant relationships they have with PacificNet to determine their independence. The Committee shall submit its recommended appointment (or reappointment) or termination of outside auditors to the Board of Directors.

The Committee's review shall include:

• Review and prior approval of all audit services and non-audit services. (In the event the Committee approves an audit service within the scope of an auditor's engagement, that audit service shall be deemed to have been pre-approved.)
• Opinions on the performance of the outside auditors by appropriate management.
• Inquiring if the outside auditors face any significant litigation or disciplinary actions by the Securities and Exchange Commission ("Commission") or others.
• Inquiring whether the chief executive officer of PacificNet's outside auditors was employed by a registered independent public accounting firm and participated in any capacity in PacificNet's audit during the one-year period preceding the commencement of an audit of PacificNet.
• Receiving from the auditors, on a periodic basis, a formal written statement delineating all relationships between the auditors and PacificNet consistent with Independence Standards Board Statement 1 ("ISB No. 1").
• Obtaining written disclosure from the outside auditors describing all relationships between the outside auditors and PacificNet that bear on independence and objectivity.
• Discussing auditor independence with its outside auditors and recommending that the Board of Directors take appropriate action regarding any independence issues.
• Discussing with PacificNet's Chief Executive Officer and Chief Financial Officer certifications in PacificNet's periodic reports concerning disclosures of significant control deficiencies and any fraud by management.
• Auditor engagement letters and estimated fees.
• Consideration of the report of the outside auditors' latest peer review conducted pursuant to a professional quality control program.
• Review of management's letter of representation and consideration of any significant operational or reporting issues that may affect the financial statements.
• Review of proposed non-audit services and consideration of the possible effect that these services could have on the independence of the outside auditors.
• Facilitating and maintaining an open avenue of communication with PacificNet's outside auditors.
• Ensuring the Committee is informed in a timely manner by PacificNet's outside auditors of (1) all critical accounting policies and practices the outside auditors intend to use for the audit; (2) discussion with PacificNet's management of all alternative treatments of financial information within generally accepted accounting principles ("GAAP"), the ramifications of the use thereof and the outside auditors' preferred treatment; and (3) other material written communications between the outside auditors and PacificNet's management to include any management letter or schedule of audit adjustments.
• Meeting with PacificNet's general counsel, if any, and outside counsel when appropriate, to discuss legal matters that may have a significant impact on PacificNet's financial statements.

• Regarding PacificNet's financial statements, the Committee will:

• Review PacificNet's audited annual financial statements and outside auditors' opinions with respect to the statements, including the nature of any changes in accounting principles or their application.
• Review PacificNet's interim quarterly financial statements and outside auditors' views with respect to the statements, including the nature of any changes in accounting principles or their application.
• Review significant accounting policies, policy decisions and changes, along with significant accounting, reporting or operational issues.
• Review the financial statements to be issued with management and with the outside auditors to determine whether the outside auditors are satisfied with the disclosure and content of the financial statements to be presented to the shareholders prior to the release of the quarterly financial report to shareholders.
• Make a recommendation to the Board of Directors regarding the inclusion of interim and annual financial statements in PacificNet's SEC filings based on its review of such financial statements with management and the outside auditors.
• Ensure that management maintains reliability and integrity of accounting policies and financial reporting and that management establishes and maintains processes to assure adequate systems of internal control.
• Disclose in PacificNet's annual proxy or information statement, the existence of the Committee and the Committee charter and the extent to which the Committee has satisfied its responsibilities during the prior year in compliance with its charter.
• Disclose the Committee's approval of any non-audit services in PacificNet's periodic reports filed with the Commission.
• Review the management letter issued by the outside auditors and management's response.
• Review fees paid for audit and consulting services, respectively.
• Annually review and examine those matters which relate to a financial review of PacificNet's Investment Policies.
• Submit findings of importance, conclusions, recommendations, and items that require follow-up or action to the Board of Directors.
• Annually review and update the Audit Committee Charter and submit the Charter to the full Board of Directors for approval.
• Maintain minutes or other records of meetings and activities of the Committee.

B: Monitoring of Internal Controls

The Committee is responsible for obtaining and understanding PacificNet's key financial reporting risk areas and internal control structure. The Committee monitors the internal control process by reviewing information provided in the Business Conduct Questionnaire and Annual Certification reporting made by each PacificNet employee, discussions with the chief financial and accounting officers and such other persons as the Committee deems appropriate, and discussions with and reports issued by outside auditors.

C: Compliance with Laws, Regulations, and Ethics

The Committee shall review reports and other information to gain reasonable assurance that PacificNet is in compliance with pertinent laws and regulations, is conducting its affairs ethically, and is maintaining effective controls against conflict of interest and fraud.

Committee procedures shall include:

• Review PacificNet's policies relating to compliance with laws, regulations, ethics, and conflict of interest.
• Review significant cases of conflict of interest, misconduct, or fraud and the resolution of such cases.
• Review PacificNet's policies and processes for compliance with U.S. and foreign country export control's,ã??laws and regulations.
• Review PacificNet's policies and processes for compliance with the Foreign Corrupt Practices Act and the USA Patriot Act.
• Review compliance reports received from regulators and consider legal and regulatory matters that may have a material impact on the financial statements.
• Review outside auditors' reports that relate to the monitoring of compliance with PacificNet's policies on business ethics.
• Review policies and procedures covering officers' expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by internal or outside auditors.
• Review the disclosure included in PacificNet's periodic reports concerning whether at least one member of the Committee is a "financial expert" (as defined in Part III below) and, if no member of the Committee is a "financial expert", why no such expert has been appointed to the Committee.

Oversight of Outside Auditor Functions

The Committee shall schedule meetings as necessary to receive and discuss reports from staff, other committees, and consultants. Particular emphasis will be given by the Committee to significant control deficiencies, and actions taken by management to correct them. The Committee may request through the Chief Financial Officer that the outside auditors perform special studies, investigations, or other services in matters of interest or concern to the Committee.

The Committee's oversight of outside audit coverage is covered under section I.A. above.

Committee Membership

The Committee shall be composed of three or more Directors, each of whom shall be independent. To be considered independent, a Committee member may not (other than in his capacity as a member of the Committee, the Board or another committee of the Board) accept any consulting, advisory or other compensatory fee from PacificNet or be an affiliated person of PacificNet or any of its subsidiaries. Each member shall comply with the requirements promulgated by The Nasdaq Stock Market, Inc. and the Commission, and shall be free of any relationship that, in the opinion of the Board of Directors, would interfere with his or her exercise of independent judgment. All members of the Committee will have a general understanding of basic finance practices and accounting practices and policies, and at least one member must have the requisite accounting or related financial management expertise to be deemed a "financial expert", as that term is defined by the Commission, having through education and experience as a public accountant, or auditor or a principal financial officer, comptroller or principal accounting officer or a position performing similar functions, an understanding of GAAP and financial statements, experience in the preparation or auditing of financial statements of generally comparable issuers and the application of such principles in connection with the accounting for estimates, accruals and reserves, and experience with internal accounting controls and an understanding of audit committee functions. The Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by PacificNet or an outside consultant. The Chairman and other members of the Committee shall be appointed by the Board of Directors.

Vacancies occurring in the Committee may be filled by appointment of the Chairman of the Board, but no member of the Committee shall be removed except by vote of a majority of Directors present at any regular or special meeting of the Board.

The Secretary of the Committee shall be appointed by the majority vote of the Committee. The Secretary of the Committee shall prepare minutes of the meetings, maintain custody of copies of data furnished to and used by the Committee, and generally assist the Committee in connection with preparation of agendas, notices of meetings and otherwise.

Conduct of Business

All meetings require the presence of a majority of the members of the Committee to conduct business. Each Committee member shall have one vote. All actions or determinations by the Committee must be by majority vote of the members present. The Board of Directors shall have overall authority over all Committee actions.

Compensation

The compensation of members of the Committee may be determined from time to time by resolution of the Board of Directors. Members of the Committee shall be reimbursed for all reasonable expenses incurred in attending such meetings.

Time and Place of Meetings

Committee meetings shall be held quarterly or more frequently as necessary at an agreed upon location. The Committee may ask members of management or others to attend the meeting and to provide pertinent information as necessary. As part of its job to foster open communication, the Audit Committee should meet at least annually with management, the director of the internal auditing department and the outside auditors separately to discuss any matters that the Audit Committee or each of these groups believe should be discussed privately. In addition, the Audit Committee or at least its Chairperson should meet with the outside auditors and management quarterly to review PacificNet's financial statements consistent with the Audit Committee's duties and responsibilities set forth herein.

Presentation of Reports to the Board of Directors

The Committee shall make an annual presentation to the Board of Directors within three months after the receipt of the outside auditors opinion on PacificNet's financial statement. The presentation shall provide an overview of the Committee's activities, findings of importance, conclusions, recommendations, and items that require follow-up or action by the Board. Presentations may be made at more frequent intervals if deemed necessary by the Committee or as requested by the Board of Directors.