POLO RALPH LAUREN CORPORATION
2003 Committee Charter : RL
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors (the "Board") of Polo Ralph Lauren Corporation
(the "Corporation"), by resolutions dated February 4, 2003, has adopted this Audit Committee
Charter, which supersedes the charter previously adopted on June 23, 2000. The Audit
Committee of the Board (the "Audit Committee") shall review and reassess this charter annually
and recommend any proposed changes to the Board for approval.
The primary objective of the Audit Committee is to assist the Board in fulfilling its oversight
responsibilities with respect to (a) the Corporation's financial statements, (b) the Corporation's
compliance with legal and regulatory requirements, (c) the independent auditors' qualifications
and independence, and (d) the performance of the Corporation's internal audit function and
Although the Audit Committee has the powers and responsibilities set forth in this Charter, the
role of the Audit Committee is oversight. The members of the Audit Committee are not full-time
employees of the Corporation and may or may not be accountants or auditors by profession or
experts in the fields of accounting or auditing and, in any event, do not serve in such capacities.
Consequently, it is not the duty of the Audit Committee to conduct audits or to determine that the
Corporation's financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent auditors.
The Audit Committee shall consist of three or more directors, each of whom shall satisfy the
independence, financial literacy and experience requirements of Section 10A of the Securities
Exchange Act, the New York Stock Exchange and any other regulatory requirements. The
members of the Audit Committee shall be appointed by the Board.
The Audit Committee may form and delegate authority to subcommittees when appropriate.
The Audit Committee shall meet at least four times per year on a quarterly basis, or more
frequently as circumstances require. As part of its job to foster open communication, the Audit
Committee shall meet periodically with management, the chief internal auditor and the
independent auditors in separate executive sessions to discuss any matters that the Audit
Committee or any of these groups believe should be discussed privately.
The members of the Audit Committee shall select a chairperson who will preside at each meeting
of the Audit Committee and, in consultation with the other members of the Audit Committee,
shall set the frequency and length of each meeting and the agenda of items to be addressed at
each upcoming meeting. The chairperson shall ensure that the agenda for each upcoming
meeting of the Audit Committee is circulated to each member of the Audit Committee in
advance of the meeting.
The chairperson of the Audit Committee will appoint someone to act as Secretary of each
meeting who will prepare minutes of the meeting. After approval by the Audit Committee
members, the Secretary of the Corporation will maintain files of the minutes. Copies will be
furnished to each Director of the Corporation who is not a member of the Audit Committee.
IV. Authority and Responsibilities
The Audit Committee shall have the sole authority and responsibility to select, evaluate and,
where appropriate, replace the independent auditors (or to nominate the independent auditors for
stockholder approval), and shall approve all audit engagement fees and terms and all significant
non-audit engagements with the independent auditors. The Audit Committee shall consult with
management and the internal audit group but shall not delegate these responsibilities.
To fulfill its responsibilities, the Audit Committee shall:
With respect to the independent auditors:
1. Be directly responsible for the appointment, compensation and oversight of the work of
the independent auditors (including resolution of disagreements between management
and the independent auditors regarding financial reporting and reviewing with
management and the independent accountants instances where management has obtained
"second opinions" from other accountants) for the purpose of preparing the audit report
or related work.
2. Inform the independent accountants and management that the Audit Committee will
maintain open communication with the independent accountants at all times, and that the
Audit Committee Chairman may call a special meeting with them whenever
3. Have the sole authority to review in advance, and grant any appropriate pre-approvals of
(a) all auditing services to be provided by the independent auditors and (b) all non-audit
services to be provided by the independent auditors as permitted by Section 10A of the
Securities Exchange Act, and in connection therewith to approve all fees and other terms
of engagement. The Audit Committee shall also review and approve disclosures required
to be included in Securities and Exchange Commission periodic reports filed under
Section 13(a) of the Securities Exchange Act with respect to non-audit services.
4. Review on an annual basis the performance of the independent auditors.
5. Ensure that the independent auditors submit to the Audit Committee on an annual basis a
written statement consistent with Independent Standards Board Standard No. 1, discuss
with the independent auditors any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors, and satisfy itself as to the
independent auditors' independence.
6. At least annually, obtain and review an annual report from the independent auditors
describing (a) the independent auditors' internal quality control procedures and (b) any
material issues raised by the most recent internal quality control review, or peer review,
of the independent auditors, 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 independent auditors, and any steps taken to deal
with any such issues.
7. Confirm that the lead audit partner, the concurring partner and the other audit partners
have not performed audit services for the Corporation in contravention of the rotation
requirements of Rule 2-01(c)(b) of Regulation S-X.
8. Review all reports required to be submitted by the independent auditors to the Audit
Committee under Section 10A of the Securities Exchange Act.
9. Review, based upon the recommendation of the independent auditors and the chief
internal auditor, the scope and plan of the work to be done by the independent auditors.
With respect to the annual financial statements:
10. Review and discuss with management and the independent auditors the Corporation's
annual audited financial statements, including disclosures made in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
11. Discuss with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61, as amended, relating to the conduct of the audit.
12. Recommend to the Board, if appropriate, that the Corporation's annual audited financial
statements be included in the Corporation's annual report on Form 10-K for filing with
the Securities and Exchange Commission.
13. Prepare the report required by the Securities and Exchange Commission to be included in
the Corporation's annual proxy statement and any other reports of the Audit Committee
required by applicable securities laws or stock exchange listing requirements or rules.
With respect to quarterly financial statements:
14. Review and discuss with management and the independent auditors the Corporation's
quarterly financial statements, including disclosures made in "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
15. Discuss with management and the independent auditors any major issues relating to the
accounting principles used in the preparation of the Corporation's financial statements,
including any significant changes in the Corporation's selection or application of
accounting principles. Review and discuss analyses prepared by management and/or the
independent auditors 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 approaches under GAAP on the financial statements.
16. Periodically review separately with management and the independent auditors (a) any
significant disagreement between management and the independent auditors or the
internal audit group in connection with the preparation of the financial statements and (b)
any difficulties encountered during the course of the audit, including any restrictions on
the scope of work or access to required information.
Discussions with management:
17. Discuss with management the Corporation's earnings press releases, including the use of
non-GAAP financial measures (as defined in Regulation G), as well as financial
information and earnings guidance provided to analysts and rating agencies. This may be
done generally (i.e., discussion of the types of information to be disclosed and the type of
presentation to be made); the Audit Committee need not discuss in advance each earnings
release or each instance in which the Corporation may provide earnings guidance.
18. Review and discuss with management the Corporation's major risk exposures and the
steps management has taken to monitor, control and manage such exposures, including
the Corporation's risk assessment and risk management guidelines and policies.
With respect to the internal audit function and internal controls:
19. Review, based upon the recommendation of the independent auditors and the chief
internal auditor, the scope and plan of the work to be done by the internal audit group and
the responsibilities, budget and staffing needs of the internal audit group.
20. Review on an annual basis the performance of the internal audit group.
21. In consultation with the independent auditors, review major issues as to the adequacy of
the Corporation's internal controls and any special audit steps adopted in light of material
deficiencies in controls.
22. Establish procedures for (a) the receipt, retention and treatment of complaints received by
the Corporation regarding accounting, internal accounting controls or auditing matters
and (b) the confidential, anonymous submission by employees of the Corporation of
concerns regarding the questionable accounting or auditing matters.
23. Review (i) the internal control report prepared by management, including management's
assessment of the effectiveness of the Corporation's internal control structure and
procedures for financial reporting and (ii) the independent auditors' attestation, and
report, on the assessment made by management.
24. Review and approve (a) any change or waiver in the Corporation's code of ethics for the
chief executive officer, the chief operating officer and senior financial officers and (b)
any public disclosure of such change or waiver.
25. Establish a policy addressing the Corporation's hiring of employees or former employees
of the independent auditors who were engaged on the Corporation's account.
26. Review and reassess the adequacy of this Charter annually and recommend to the Board
any changes deemed appropriate by the Audit Committee.
27. Review its own performance annually.
28. Report regularly to the Board and review with the full Board any issues that may arise
with respect to the quality or integrity of the Corporation's financial statements, its
compliance with applicable legal and regulatory requirements, the performance and
independence of the independent auditors and the performance of the internal audit
29. Perform any other activities consistent with this Charter, the Corporation's by-laws and
governing law as the Audit Committee or the Board deems necessary or appropriate.
The Audit Committee shall have the authority to retain independent legal, accounting and other
consultants to advise the Audit Committee. The Audit Committee shall determine the extent of
funding necessary for payment of compensation to any independent legal, accounting and other
consultants retained to advise the Audit Committee. The Audit Committee may request any
officer or employee of the Corporation or the Corporation's outside counsel or independent
auditors to attend a meeting of the Audit Committee or to meet with any members of, or
consultants to, the Audit Committee.