COLDWATER CREEK INC.
Charter of the Audit
Committee of the Board of Directors
Revised June 10, 2005
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors
to assist the Board in fulfilling its oversight responsibilities. The Audit
Committee shall strive to set the “tone at the top” for quality financial
reporting and sound internal controls. The Audit Committee's primary duties and
responsibilities are to:
- Monitor the integrity
of the Company's financial reporting process and systems of internal
controls regarding finance, accounting, and legal compliance.
- Review and monitor the
independence of the Company's independent auditors.
- Oversee the audit of
the Company's financial statements.
- Monitor the
performance of the Company's independent auditors and internal auditing
- Provide an avenue of
communication among the independent auditors, management, the internal
auditing department, and the Board of Directors.
- Make regular reports to
the Board concerning Audit Committee activities.
While the Audit Committee has the responsibilities and
duties set forth in this Charter, it is not the responsibility of the Audit
Committee to plan and conduct the audits or to determine that the Company's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. The Audit Committee's responsibility
in this regard is one of oversight and review.
The Audit Committee has the authority to conduct any
investigation appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the organization. The
Audit Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or experts it deems necessary in the
performance of its duties.
II. Audit Committee Composition and Meetings
The Audit Committee will be comprised of three or more
directors as determined by the Board. The members of the Audit Committee will
meet the independence requirements of the Securities and Exchange Commission
and the Nasdaq National Market with allowed
exceptions (as determined by the Board). The members of the Audit Committee
will meet the experience and financial literacy requirements of the Nasdaq National Market. Members of the Audit Committee
shall have a basic understanding of finance and accounting and be able to read
and understand fundamental financial statements, and at least one member of the
Audit Committee shall have accounting or related financial management expertise
as required by the listing standards of the Nasdaq
National Market and applicable law.
Audit Committee members and the Audit Committee Chair shall
be appointed annually by the Board at which time the Board shall reassess the
independence and financial expertise of the members to be appointed to the
Audit Committee for the following year.
The Audit Committee shall meet at least four times
annually, or more frequently as circumstances dictate. The Audit Committee
Chair shall approve the agenda for each meeting. The Audit Committee will meet
privately in executive session at least annually with management, the director
of the internal auditing department, the independent auditors, and as a
committee to discuss any matters that the Audit Committee or each of these
groups believe should be discussed. The Audit Committee shall encourage
executive sessions at each of its meetings in order to assist in providing a
regular forum for candid discussion. In addition, the Audit Committee will
communicate with management and the independent auditors quarterly to review
the Company's financial statements and significant findings based upon the
auditors' limited review procedures.
III. Audit Committee Responsibilities and Duties
- Review and reassess
the adequacy of this Charter at least annually. Submit the Charter to the
Board of Directors for approval and have the document published at least
every three years in accordance with Securities and Exchange Commission
- Review the Company's
annual audited financial statements prior to filing or public disclosure.
Review should include discussion with management and independent auditors
of significant issues or disagreements regarding accounting principles,
practices, and judgments, including critical accounting policies,
alternative accounting treatments under GAAP (including the ramifications
of such alternative treatments and the treatment preferred by the
auditors), and review all management letters and other material written
communication between the auditors and management.
- In consultation with
management, the independent auditors, and the internal auditors, consider
the integrity of the Company's financial reporting processes and controls.
Discuss significant financial risk exposures and the steps management has
taken to monitor, control, and report such exposures. Review the
significant findings prepared by the independent auditors and the internal
auditing department together with managements' responses, including the
status of previous recommendations.
- Review with financial
management and the independent auditors the Company's quarterly financial
results prior to the release of earnings and/or the Company's quarterly
financial statements prior to filing or distribution. Discuss any
significant changes to the Company's accounting principles and any items
required to be communicated by the independent auditors in accordance with
Statement of Auditing Standards (SAS) 61 as amended by SAS 90.
- Review the Company's
stock exchange certification and proxy statement disclosures related to
the audit committee.
- The independent
auditors shall report directly to the Audit Committee. The Audit Committee
shall review annually the independence of the auditors, and shall have
sole authority for the evaluation, appointment, funding, oversight
(including resolution of any disagreements between management and the
independent auditors regarding financial reporting) and, when
circumstances warrant, the discharge of the independent auditors.
- The Audit Committee
shall approve in advance all audit, review or
attest engagements and any non-audit services (to the extent permitted
under applicable law) and the audit fees and all other compensation to be
paid to the independent auditors. The following non-audit services are not
to be provided by the independent auditors: (1) bookkeeping or other
services related to the accounting records or financial statements of the
audit client; (2) financial information systems design and implementation;
(3) appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (4) actuarial services; (5) internal audit
outsourcing services; (6) management functions; (7) human resources; (8)
broker-dealer, investment adviser or investment banking services; (9)
legal services; or (10) expert services unrelated to the audit. The Audit
Committee may adopt pre-approval policies and procedures that are detailed
as to the particular service or delegate pre-approval responsibility to a
member of the Audit Committee. The Audit Committee shall be promptly
informed of all services approved pursuant to any pre-approval policies
and procedures or by a member delegated with pre-approval authority.
- On an annual basis,
the Audit Committee should review and discuss with the independent
auditors all significant relationships they have with the Company that
could impair the auditors' independence and obtain a formal written
statement delineating all relationships between the auditors and the
Company consistent with Independence Standards Board Standard No. 1.
- Review the independent
auditors audit plan and engagement letter - discuss scope, staffing,
locations, reliance upon management, and internal audit and general audit
- Prior to releasing the
year-end earnings, discuss the results of the audit with the independent
auditors. Discuss certain matters required to be communicated to audit
committees in accordance with American Institute of Certified Public
Accountants (AICPA) SAS 61 as amended by SAS 90.
- Consider the independent
auditors' judgments about the quality and appropriateness of the Company's
accounting principles as applied in its financial reporting. Discuss with
management and the independent auditors the quality of the accounting
principles and underlying estimates used in the preparation of the
Company's financial statements.
Internal Audit Department and Legal Compliance
- Review the budget,
plan, changes in plan, activities, organizational structure, independence
and authority of its reporting obligations, and qualifications of the
internal audit department, as needed.
- Review the
appointment, performance, and, if necessary, replacement of the senior
internal audit executive.
- Review and oversee the
bonus compensation program for internal audit personnel and other
designated finance and accounting personnel.
- Review significant
reports prepared by the internal audit department together with
management's response and follow-up to these reports.
- On at least an annual
basis, review with the Company's counsel, any legal matters that could
have a significant impact on the organization's financial statements, the
Company's compliance with applicable laws and regulations, and inquiries
received from regulators or governmental agencies. Review all reports
concerning any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal
controls, or regulatory noncompliance that occurs at the Company. This
review should include consideration of the internal controls that should
be strengthened to reduce the risk of a similar event in the future.
Other Audit Committee Responsibilities
- Annually prepare a
report to shareholders as required by the SEC. The report should be
included in the Company's annual proxy statement.
- Maintain minutes of
meetings and periodically report to the Board of Directors on significant
results of the foregoing activities.
- Review financial and
accounting human resources and succession planning within the Company.
- Establish procedures
for the confidential submission, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing matters.
These procedures must allow for the confidential, anonymous submission of
complaints by employees regarding any questionable accounting or auditing
- Perform any other
activities consistent with the Charter, the Company's by-laws, and
governing law, as the Audit Committee or the Board deems necessary or
- Review and approve any
related party transactions in which the Company's officers or directors
have an interest and that are required to be disclosed by the Company in
SEC filings pursuant to the rules and regulations of the SEC.