Review/Issue Date: April 22, 2018
Previous Review/Issue Date: April 27, 2017
The Audit & Risk Management Committee is a committee of the Board of Directors. It shall provide assistance to the Board in fulfilling the Board’s oversight functions relating to the quality and integrity of the Company’s financial reports; monitor the Company’s financial reporting process and internal audit function; monitor the independent public accounting firm’s (the “outside auditing firm”) qualifications, independence and performance; review and assess the Company’s significant business and financial risks and processes to manage the same; compliance with legal and regulatory requirements; and perform such other activities consistent with this Charter and the Company’s By-Laws as the Committee or the Board deems appropriate. It shall have such additional functions as are required by the New York Stock Exchange, the Securities and Exchange Commission (the “Commission”) and federal securities laws.
The Audit & Risk Management Committee shall be composed of three or more directors. The members of the Committee shall meet the independence and experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations of the Commission. At least one member of the Committee shall be an “audit committee financial expert” as defined by the Commission. Committee members shall not simultaneously serve on the audit committees of more than two other public companies unless the Board determines, prior to a member’s acceptance of an additional audit committee appointment beyond the other two committees, that such simultaneous service would not impair the ability of such member to effectively serve on the Committee. Any such determination shall be disclosed in the Company’s proxy statement for its annual meeting of stockholders. The Nominating, Governance & Management Development Committee of the Board of Directors shall recommend to the Board the directors to be elected to this Committee, including designating one to serve as Chairman.
The members of the Committee shall be elected by the Board of Directors at the annual organizational meeting of the Board and shall serve until the next annual organizational meeting or until their respective successors shall be duly elected and qualified; provided, however, that members of the Committee may be removed by the Board at any time with or without cause.
The Audit & Risk Management Committee shall meet at least four times annually. In addition to other matters considered at such meetings, (a) at four meetings, the Committee shall review the quarterly and annual financial statements and reports with management and the independent auditor (including disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations) prior to their inclusion in a report on Form 10-Q or 10-K filed with the Commission; (b) at three meetings, the Committee shall confer with the outside auditing firm and management to review the Company’s interim financial results prior to their public announcement; and (c) the Committee shall do each of the following at no less than one meeting per year: (i) review the audit plan of the internal auditing staff, (ii) review the audit plan of the outside auditing firm, (iii) review the post-audit findings of the outside auditing firm, and (iv) meet in separate executive sessions with each of the outside auditing firm, the internal auditing staff and the Company’s General Counsel to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee. A quorum for any meeting shall be a majority of the members, except for the meetings referred to in clause (b), where a quorum shall be one of the members. The Committee may meet, and members and other participants may take part in meetings, via telephone conference calls.
The Committee may also hold any special meetings as may be called by the Chairman of the Committee, a majority of the members of the Committee or at the request of the outside auditing firm or the internal auditing staff or management.
Members of senior management, the outside auditing firm, the internal auditing staff and others may attend meetings of the Committee at the invitation of the Committee and shall provide pertinent information as necessary.
The Chairman of the Committee shall consult with management on the preparation of the agenda for each meeting and use reasonable efforts to cause management to distribute the agenda and supporting materials to the Committee members prior to each meeting. The Chairman shall ensure the inclusion on the agenda of any appropriate matter requested by the Company’s outside auditing firm. The Chairman will also cause minutes of each meeting to be prepared and circulated to the Committee members. Meeting agendas and minutes shall also be distributed to the directors who are not members of the Committee. The Committee may meet via telephonic or video conferencing facilities.
The Committee shall report regularly to the Board of Directors as to its activities.
IV. Relationship with Outside Auditing Firm
The outside auditing firm is ultimately accountable to the Board of Directors and the Audit & Risk Management Committee, as representatives of the Company’s stockholders, but shall report directly to the Committee. The Committee shall be directly responsible for the appointment, compensation and oversight of the work of the outside auditing firm (including resolution of disagreements between management of the Company and the outside auditing firm regarding financial reporting), for the purpose of preparing and issuing an audit report or related work. All auditing services and non-audit services provided to the Company by the outside auditing firm shall be pre-approved by the Committee, such pre-approval to be subject to the Committee’s Pre-Approval Policy. The Committee may delegate, subject to any rules or limitations it may deem appropriate, to one or more designated members of the Committee the authority to grant such pre-approvals; provided, however, that the decisions of any member to whom authority is so delegated to preapprove an activity shall be presented to the Committee at its next meeting.
The Audit & Risk Management Committee’s primary functions are to:
- Review and assess the adequacy of this Charter and the Committee’s Pre-Approval Policy at least annually.
- Review all earnings press releases and other press releases that provide information in the nature of earnings guidance updates, guidance reconfirmations or results prior to any release to the public or investors, including the use of “proforma” or “adjusted” non-GAAP information.
- Review all financial information and earnings guidance provided to analysts and rating agencies. The Committee’s review may be general in nature (i.e., a review of the types of information to be disclosed and the type of presentation to be made) and need not take place in advance of each instance in which the Company may provide such financial information or earnings guidance. No review shall be required of the various presentations provided to analysts, investors or rating agencies if the financial information or earnings guidance contained therein has been previously reviewed by the Committee.
- Meet to review and discuss all quarterly and annual financial statements and reports with management and the outside auditing firm (including disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations) prior to their inclusion in a report on Form 10-Q or 10-K filed with the Commission.
- Recommend to the Board of Directors that the audited financial statements be included in the Company’s annual report on Form 10-K for filing with the Commission.
- Review and approve the disclosure required by Item 407(d)(3)(i) of Regulation S-K to be included in the Audit Committee Report in the Company’s proxy statement in connection with the annual stockholders meeting.
- Review and evaluate disclosures made to the Committee by the Company’s Chief Executive Officer (or other person serving as principal executive officer) and Chief Operating & Financial Officer (or other person serving as principal financial officer) during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls.
Outside Auditing Firm
- Review (a) all relationships the outside auditing firm has with the Company to determine their independence and obtain and review a report from the outside auditing firm concerning the auditors’ internal quality control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, 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 firm, and any steps taken to deal with any such issues (and the outside auditing firm shall annually provide to the Committee a written report delineating all such matters), and (c) the qualifications, performance, and independence of the outside auditing firm, including an evaluation of the lead partner of the outside auditing firm.
- Review the annual audit plan of the outside auditing firm and evaluate their performance.
- Review the experience and qualifications of the senior members of the outside auditing firm team.
- Obtain and review a report from the outside auditing firm at least annually as to (a) all critical accounting policies to be used, (b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management of the Company, the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the outside auditing firm, and (c) other material written communications between the outside auditing firm and management of the Company detailing any audit problems or difficulties or significant disagreements with management.
- Discuss with the national office of the outside auditing firm any issue on which the national office was consulted by the Company’s audit team and any other issue that the Committee reasonably deems appropriate, in each case at the Committee’s discretion and upon its request.
- Require the rotation of the “audit partners” (as defined in the Exchange Act) on a regular basis in accordance with the requirements of the Exchange Act.
- Establish clear Company hiring policies for the Company’s hiring of employees or former employees of the outside auditing firm who participated in any capacity in the audits of the Company.
Financial Reporting Processes
- Consult with the outside auditing firm concerning the completeness and accuracy of the Company’s financial statements.
- Consult with the outside auditing firm concerning the quality of the Company’s accounting principles as applied in its financial statements and reporting.
- Review any significant judgments made in management’s preparation of the financial statements and the view of the outside auditing firm as to the appropriateness of such judgments.
- Review any significant difficulties encountered during the course of the outside auditing firm’s performance of its annual audit services, which include the reviews of the first three quarters of each fiscal year, such as any restrictions on the scope of the outside auditing firm’s work or access to reviewed information.
- Review any disagreements between management and the outside auditing firm in connection with any public announcements of financial results and quarterly and annual financial statements and reports.
- Review changes to the Company’s accounting principles as recommended by the outside auditing firm or management.
- Review with the outside auditing firm and internal auditing staff the adequacy of the Company’s system of internal controls and disclosure controls and procedures, including computerized information system controls and security, and any related significant findings and recommendations of the outside auditing firm, together with management’s responses thereto.
- Review with the outside auditing firm and Company management, the internal audit department’s annual audit plan, organizational structure, performance, budget and staff qualifications and any recommended changes in the scope of audits planned.
- Review periodically with the Company’s General Counsel, legal and regulatory matters that could have a significant effect on the Company’s financial statements.
- Discuss with management and the outside auditing firm the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.
- Review any correspondence with regulators or governmental agencies and any published reports which raised issues regarding the Company’s financial statements, financial disclosure or accounting policies.
Assess and discuss with management the Company’s significant risk exposures (including financial and financial reporting risks, information security and technology risks, and privacy and data protection risks) and management’s program to assess, monitor and manage such exposures, including the Company’s risk assessment and risk management policies.
Assess the adequacy of the Company’s overall control environment, including controls in selected areas representing financial reporting, disclosure, compliance, and significant financial or business risk.
- Review with the Board of Directors any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s outside auditing firm or the performance of the internal audit function.
- Review periodically the Company’s compliance with its Conflict of Interest policy.
- Review and approve related party transactions that will, or are reasonably likely to, be disclosed in a registration statement, proxy statement or other filing by the Company pursuant to Item 404 of Regulation S-K.
- Establish procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
- Perform an annual evaluation of the Committee.
- Investigate any other matter brought to its attention within the scope of its duties which it deems appropriate for investigation.
- Receive and review, no less than annually, and more frequently if appropriate, reports regarding (a) the Company’s enterprise risk management program, (b) information security and technology risks to the Company, (c) reports involving allegations of fraudulent conduct and (d) the Company’s compliance program, including information on reports made through the tell PVH hotline and website.
The Committee shall have the authority to engage outside legal, accounting or other advisors as it determines necessary to carry out its functions, and the Company shall provide adequate funding for the same.
Limitation of Audit & Risk Management Committee’s Role
The Audit & Risk Management Committee has only the functions set forth in this Charter. It is not the duty of the Committee to plan or conduct audits or reviews, to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations or to establish and operate the Company’s system of internal controls and disclosure controls and procedures. The responsibility to plan and conduct audits and reviews, and to express an opinion on the financial statements based on its audit or review, is that of the outside auditing firm. The Company’s management has the responsibility to determine that the Company’s disclosures and financial statements are complete and accurate and in accordance with generally accepted accounting principles and applicable rules and regulations as well as to establish and operate the Company’s system of internal controls and disclosure controls and procedures. It is also not the duty of the Committee to assure the Company’s compliance with laws and regulations or compliance with the Company’s Code of Business Conduct and Ethics. The primary responsibility for these matters rests with the Company’s management.