BEBE STORES, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
Review and Approved May 2016
I. STATEMENT OF POLICY
This Charter specifies the scope of the responsibilities of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of bebe stores, inc.(the “Company”) and the manner in which those responsibilities shall be performed, including its structure, processes and membership requirements.
The primary purpose of the Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing and reporting to the Board on the integrity of the financial reports and other financial information provided by the Company to any governmental body or to the public, and on the Company’s compliance with legal and regulatory requirements. The Committee shall also review the qualifications, independence and performance, and approve the terms of engagement of the Company’s independent registered public accountant and have prepared and approve any reports required of the Committee under rules of the Securities and Exchange Commission (“SEC”).
The Company shall provide appropriate funding, as determined by the Committee, to permit the Committee to perform its duties under this Charter, to compensate its advisors and to compensate any registered public accounting firm engaged for the purpose of rendering or issuing an audit report or related work or performing other audit, review or attest services for the Company. The Committee, at its discretion, has the authority to initiate special investigations, and, hire special legal, accounting or other outside advisors or experts to assist the Committee, as it deems necessary to fulfill its duties under this Charter. In addition to the powers and responsibilities expressly delegated to the Committee under this Charter, the Committee may also exercise any other powers and carry out such other responsibilities delegated to it by the Board from time to time consistent with the Company’s Bylaws and applicable law.
II. ORGANIZATION AND MEMBERSHIP REQUIREMENTS
The Committee shall be comprised of three or more directors selected by the Board; provided, that if at any time there is a vacancy on the Committee and the remaining members meet all other membership requirements, then the Committee may consist of two members during the cure period set forth in and in accordance with the terms of Nasdaq Marketplace Rule 5605(c)(4)(B). Each Committee member shall satisfy the independence and experience requirements of The Nasdaq Stock Market (“Nasdaq”) and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended; provided, that if a member of the Committee ceases to be independent for reasons outside the member's reasonable control, then the member may remain on the Committee during the cure period set forth in and in accordance with the terms of Nasdaq Marketplace Rule 5605(c).
Each member of the Committee must be able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement. In addition, at least one member shall have past employment experience in finance or accounting, professional certification in accounting, or other comparable experience or background resulting in the individual being financially sophisticated, which may include being or having been a chief executive, chief financial officer or other senior officer with financial oversight responsibilities. No Committee member shall simultaneously serve on the audit committee of more than three public companies without prior disclosure to the Committee and the Board and an affirmative determination by the Board that such service does not impair the ability of such member to serve effectively on the Committee, which determination shall be disclosed in the annual proxy statement.
The members of the Committee shall be appointed by the Board and shall serve until their successors are duly elected and qualified or their earlier resignation or removal. Any member of the Committee may be removed by the Board, with or without cause. Unless a chairman is elected by the full Board, the members of the Committee may designate a chairman by majority vote of the full Committee membership.
The Committee shall meet as often as it determines, but not less frequently than quarterly. A majority of the members shall represent a quorum of the Committee, and, if a quorum is present, any action approved by a majority of the members present shall represent a valid action of the Committee. The Committee may form and delegate authority to subcommittees, or to one or more members of the Committee, when appropriate. The Committee shall meet with managementand the independent registered public accountant in separate executive sessions as appropriate. The Committee shall maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
To fulfill its responsibilities and duties, the Committee shall:
A. Oversight of the Company’s Independent Registered Public Accountant
- Be directly responsible for the appointment, compensation, retention and oversight of any independent registered public accountant (including resolution of disagreements between management and the independent registered public accountant regarding financial reporting) engaged by the Company for the purpose of preparing or issuing an audit report or related work, with each such auditor reporting directly to the Committee.
- Periodically review and discuss with the independent registered public accountant (i) the matters required to be discussed by Statement on Auditing Standards No. 114, “The Auditor’s Communication with Those Charged with Governance,” as then in effect, and (ii) any formal written statements received from the independent registered public accountant consistent with and in satisfaction of PCAOB Rule 3526, “Communications with Audit Committees Concerning Independence,” as then in effect, including without limitation, descriptions of (x) all relationships between the auditor and the Company, (y) any disclosed relationships or services that may impact the independent registered public accountant’s objectivity and independence and (z) whether any of the Company’s senior finance personnel were recently employed by the independent registered public accountant.
- Evaluate annually the qualifications, performance and independence of the independent registered public accountant, including a review of whether the independent registered public accountant’s quality-control procedures are adequate, consideration of whether the independent registered public accountant’s provision of any permitted information technology services or other non-audit services to the Company is compatible with maintaining the independence of the independent auditor, and a review and evaluation of the lead partner of the independent registered public accountant, taking into account the opinions of management and report to the Board on its conclusions, together with any recommendations for additional action.
- Consult with the independent registered public accountant to and assure the rotation of the lead audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit every five years, consider issues related to the timing of such rotation and the transition to new lead and reviewing partners, and consider whether, in order to assure continuing auditor independence, there should be regular rotation of the audit firm, and report to the Board on its conclusions.
- Approve in advance the engagement of the independent registered public accountant for all audit services and non-audit services, based on independence, qualifications and, if applicable, performance, and approve the fees and other terms of any such engagement; provided, however, that (i) the Committee may establish pre-approval policies and procedures for any engagement to render such services, provided that such policies and procedures (x) are detailed as to particular services, (y) do not involve delegation to management of the Committee’s responsibilities hereunder, and (z) provide that, at its next scheduled meeting, the Committee is informed as to each such service for which the independent registered public accountant is engaged pursuant to such policies and procedures, and (ii) the Committee may delegate to one or more members of the Committee the authority to grant pre-approvals for such services, provided that (a) the decisions of such member(s) to grant any such pre-approval shall be presented to the Committee at its next scheduled meeting and (b) the Committee has established policies and procedures for such pre-approval of services consistent with the requirements of subsections (x) and (y) above.
- Meet with the independent registered public accountant prior to the audit to discuss the planning and staffing of the audit.
- Approve as necessary the termination of the engagement of the independent registered public accountant.
- Approve policies for the hiring of employees or former employees of the independent registered public accountant who participated in any capacity in the audit of the Company, taking into account the impact of such hiring on auditor independence.
- Regularly review with the independent registered public accountant any significant difficulties encountered during the course of the audit, any restrictions on the scope of work or access to required information and any significant disagreement among management and the independent registered public accountant in connection with the audit of the financial statements. Review with the independent registered public accountant any accounting adjustments that were noted or proposed by the auditor, including those that were “passed” (as immaterial or otherwise), any communications between the audit team and the auditor’s national office respecting auditing or accounting issues presented by the engagement, any “management” or “internal control” letter or schedule of unadjusted differences issued, or proposed to be issued, by the auditor to the Company, or any other material written communication between the independent registered public accountant and the Company’s management.
- Review with the independent registered public accountant the report that such auditor is required to make to the Committee regarding (A) critical accounting policies and practices used by the Company; and (B) all alternative treatments of financial information within generally accepted accounting principles (“GAAP”) for policies and practices related to material items that the independent registered public accountant has discussed with management, including the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent registered public accountant.
B. Review of Financial Reporting, Policies and Processes
- Review and discuss with management and the independent registered public accountant, the Company’s annual audited financial statements and any certification, report, opinion or review rendered by the independent registered public accountant, and recommend to the Board whether the audited financial statements should be included in the Company’s annual report on Form 10-K.
- Review and discuss with management and the independent registered public accountant the Company’s quarterly financial statements.
- Review and discuss with management and the independent registered public accountant, as appropriate, the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q.
- Review and discuss earnings press releases and other information provided to securities analysts and rating agencies, including any “pro forma” or adjusted financial information.
- Periodically meet separately with management.
- Periodically meet separately with the independent registered public accountant.
- Review with management and the independent registered public accountant any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.
- Review with management its assessment of the effectiveness and adequacy of the Company’s internal control structure and procedures for financial reporting (“Internal Controls”), review annually with the independent registered public accountant the attestation to and report on the assessment made by management, and consider with management and the independent registered public accountant whether any changes to the Internal Controls are appropriate in light of management’s assessment or the independent registered public accountant’s attestation, and require any such changes to be implemented.
- To the extent that it deems appropriate, review with management its evaluation of the Company’s procedures and controls designed to assure that information required to be disclosed in its periodic public reports is recorded, processed, summarized and reported in such reports within the time periods specified by the SEC for the filing of such reports (“Disclosure Controls”), and consider whether any changes are appropriate in light of management’s evaluation of the effectiveness of such Disclosure Controls.
- Review and discuss with management and the independent registered public accountant any off-balance sheet transactions or structures and their effect on the Company’s financial results and operations, as well as the disclosure regarding such transactions and structures in the Company’s public filings.
- Review and discuss with management and the independent registered public accountant the effect of regulatory and accounting initiatives on the financial statements. Review any major issues regarding accounting principles and financial statement presentation, including any significant changes in selection of an application of accounting principles. Consider and approve, if appropriate, changes to the Company’s auditing and accounting principles and practices as suggested by the independent registered public accountant or management.
- Review and discuss with management and the independent registered public accountant any analyses prepared by management and/or the independent registered public accountant setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including the effects of alternative GAAP methods on the financial statements.
- Review any special audit steps adopted in light of material control deficiencies.
C. Risk Management, Related Party Transactions, Legal Compliance and Ethics
- Review with the chief executive and chief financial officer of the Company any report on significant deficiencies in the design or operation of the Internal Controls that could adversely affect the Company’s ability to record, process, summarize or report financial data, any material weaknesses in Internal Controls identified to the auditors, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s Internal Controls.
- Review and approve any “related-party transactions” (as defined by the SEC and Nasdaq) after reviewing each such transaction for potential conflicts of interests and other improprieties in compliance with Nasdaq listing requirements.
- Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. Adopt, as necessary, appropriate remedial measures or actions with respect to such complaints or concerns.
- Consider and present to the Board for adoption a Code of Conduct for all employees and directors, which meets the requirements of Item 406 of the SEC’s Regulation S-K, and provide for and review prompt disclosure to the public of any change in, or waiver of, such Code of Conduct.
- As requested by the Board, review and investigate conduct alleged by the Board to be in violation of the Company’s Code of Business Conduct and Ethics, and adopt as necessary or appropriate, remedial, disciplinary, or other measures with respect to such conduct.
- Discuss with management and the independent registered public accountant any correspondence with regulators or governmental agencies that raise material issues regarding the Company’s financial statements or accounting policies.
- Review with the Company’s general counsel or outside counsel and report to the Board on litigation, material government investigations and compliance with applicable legal requirements and the Company’s Code of Business Conduct and Ethics.
- Prepare the report required by the rules of the SEC to be included in the Company’s annual proxy statement.
- Develop and implement an annual performance evaluation of the Committee.
- Regularly report to the Board on the Committee’s activities, recommendations and conclusions.
- Review and reassess the Charter’s adequacy annually.