This Audit Committee Charter (this “Charter”) has been adopted by the Board of Directors (the
“Board”) of Take-Two Interactive Software, Inc. (the “Company”).
1. Purpose; Limitations on Duties.
The purpose of the Audit Committee (the “Committee”) is to oversee the accounting and financial reporting processes of the Company and audits of the financial statements of the Company and to prepare the annual report of the Audit Committee required by applicable Securities and Exchange Commission (“SEC”) rules. In addition, the Committee shall assist the Board in its review and oversight of the Company’s key investment objectives, strategies and policies.
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles (“GAAP”) and applicable rules and regulations. These are the responsibilities of management and the independent auditor.
2. Membership; Appointment; Financial Expert.
The Committee will consist of three or more members of the Company’s Board. All members of
the Committee must be directors who meet the knowledge requirements and the independence
requirements of applicable law and the rules of the SEC and the NASDAQ in effect from time to
time, subject to any exception allowed by such rules and any waivers granted by such authorities.
No Committee member shall simultaneously serve on the audit committees of more than two
other public companies without discussion with and approval of the Chairman of the Board or
the Chairman of the Executive Committee of the Board. All members of the Committee must be
able to read and understand fundamental financial statements, including the Company’s balance
sheet, income statement and cash flow statement. No member of the Committee may participate
in the preparation of the financial statements of the Company or any current subsidiary of the
Company, or have so participated for three years prior to joining the Committee.
The members of the Committee will be appointed by and serve at the discretion of the Board,
upon the recommendations of the Company’s Corporate Governance Committee. Except as
provided in this Charter, Committee members will be appointed annually for a term of one year
or until their successors have been duly appointed and qualified. Committee members may be
removed at any time, and vacancies may be filled, by a majority vote of the directors on the
Board upon the recommendation of the Corporate Governance Committee. Unless a Chairman
of the Committee is appointed by the Board, the members of the Committee shall designate a
Chairman by majority vote of the full Committee.
A member shall promptly notify the Committee and the Board if the member is no longer an
independent director and such member shall automatically be removed from the Committee
unless the Board determines that an exception to the independence requirement is available
under the NASDAQ rules and applicable law with respect to such member’s continued
membership on the Committee and that such exception should be made.
If practicable, at least one member of the Committee must qualify as an “audit committee
financial expert” (as defined by the SEC). The Company will disclose in its annual report
required by Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) whether
or not it has at least one member who is an audit committee financial expert. In any event, the
Committee must include at least one member who has past employment experience in finance or
accounting, requisite professional certification in accounting, or any other comparable
experience or background that results in the individual’s financial sophistication, such as being
or having been a chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
3. Specific Responsibilities and Duties.
The Board delegates to the Committee the express responsibility and authority to:
3.1 Independent Auditor
Selection; Fees. Be solely and directly responsible for the appointment,
compensation, retention, evaluation and oversight of the work of any registered
public accounting firm (including resolution of disagreements between
management and the independent auditor regarding financial reporting)
engaged for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company and, where appropriate,
as determined by the Committee, the termination and replacement of such firm.
Such independent auditor shall report directly to the Committee. The
Committee has the ultimate authority to approve all audit engagement fees and
terms, with the costs of all engagements to be borne by the Company.
Rotation of Independent Auditor. Consider whether there should be regular
rotation of the independent auditor.
Scope of Audit. Review, evaluate and approve the annual engagement
proposal of the independent auditor (including the proposed scope and
approach of the annual audit).
Lead Audit Partner Review, Evaluation and Rotation. Review and
evaluate the lead audit partner of the independent auditor. Ensure that the lead
audit partner having primary responsibility for the audit and the reviewing
audit partner of the independent auditor are rotated at least every five years and
that other audit partners (as defined by the SEC) are rotated at least every
Pre-Approval of Audit and Non-Audit Services. Pre-approve all auditing
services and all permitted non-audit services performed by the Company’s
independent auditor in accordance with the Audit, Audit Related and Non-
Audit Services Pre-Approval Policy. Such pre-approval may be given as part
of the Committee’s approval of the scope of the engagement of the
independent auditor or on an engagement-by-engagement basis or pursuant to
pre-established policies. In addition, the authority to pre-approve permitted
non-audit services to be provided by the independent auditor may be delegated
by the Committee to one or more of its members, but such member’s or
members’ non-audit service approval decisions must be reported to the full
Committee at the next regularly scheduled meeting. The pre-approval
requirement is not applicable with respect to the provision of non-audit
services by the Company’s independent auditors where (i) such services were
not recognized by the Company at the time of the engagement to be non-audit
services, (ii) the aggregate amount of all such non-audit services provided to
the Company constitutes not more than 5% of the total amount paid by the
Company to the Company’s independent auditors during the fiscal year in
which the non-audit services are provided, (iii) such services are approved in
advance by a Sub-Committee consisting solely of the Chairman of the
Committee and (iv) such services are promptly brought to the attention of the
Committee and approved prior to the completion of the audit by the Committee
or a Sub-Committee. The Company shall disclose in its Annual Reports on
Form 10-K and its Quarterly Reports on Form 10-Q any approval of non-audit
services during the period covered by the applicable report.
Obtain Written Statement. At least annually, obtain and review a
formal written statement from the independent auditors delineating all
relationships between the independent auditors and the Company,
consistent with the applicable requirements of the Public Company
Accounting Oversight Board (the “PCAOB”) regarding the independent
auditors’ communications with the audit committee concerning
Engage in Active Dialogue. Actively engage in a dialogue with the
independent auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
independent auditor and take, or recommend that the Board take
appropriate action to oversee the independence of the outside auditor.
Review Problems. Review with the independent auditor any audit problems
or difficulties the independent auditor may have encountered in the course of
its audit work, and management’s responses, including: (i) any restrictions on
the scope of activities or access to requested information and (ii) any
significant disagreements with management.
Related Party Transactions. Conduct an appropriate review of all proposed
related-party transactions (which term refers to transactions that would be
required to be disclosed pursuant to SEC Regulation S-K, Item 404(a)). The
Company shall not enter into any new related party transaction unless the
Committee approves such transaction.
Material Communications. Discuss with the independent auditor any
communications between the audit team and the independent auditor’s national
office regarding auditing or accounting issues that the engagement presented.
Accounting Adjustments. Discuss with the independent auditor any
accounting adjustments that were noted or proposed by the independent auditor
but were passed on.
Internal Audit Function. Discuss with the independent auditor the
responsibilities, budget and staffing of the Company’s internal audit function
Management or Internal Control Letters. Discuss with the independent
auditor any “management” or “internal control” letter issued, or proposed to be
issued, by the independent auditor to the Company.
Hiring. Evaluate on case by case basis the permissibility of hiring employees
and former employees of the independent auditor.
3.2 Financial Reporting
Annual Financials. Review and discuss with management and the
independent auditor the Company’s annual audited financial statements,
(including the Company’s disclosures under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”), including any
unusual or non-recurring items, the adequacy of internal controls and other
matters that the Committee deems material, prior to the public release of such
information. Recommend to the Board whether to include the Company’s
financial statements in its annual report.
Quarterly Financials. Review and discuss with management and the
independent auditor the Company’s quarterly financial statements (including
the Company disclosure under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”), the results of the independent
auditor’s reviews of the quarterly financial statements, and other matters that
the Committee deems material prior to the public release of such information.
Accounting Principles. At least annually, review with management and the
independent auditor major issues regarding accounting principles and financial
statement presentations, including any material changes in the selection or
application of the principles followed in prior years and any items required to
be communicated by the independent auditor in accordance with AICPA
Statement of Auditing Standards (“SAS”) 61 and the applicable requirements
of the PCAOB.
Judgments. Review reports prepared by management or by the independent
auditor relating to significant financial reporting issues and judgments made in
connection with the preparation of the Company’s financial statements,
including an analysis of the effect of alternative GAAP methods on the
Company’s financial statements and a description of any transaction as to
which management obtained an SAS 50 letter.
Earnings Press Releases; Guidance. Discuss earnings press releases with
management (including the type and presentation of information to be included
in earnings press releases), as well as financial information and earnings
guidance provided to analysts and rating agencies, and approve the content of
earnings press releases prior to their issuance by the Company. In addition, the
Committee shall discuss with management the process pursuant to which any
earnings guidance is developed, as well as any subsequent changes to any
previously issued earnings guidance, and make a recommendation to the entire
Board of Directors with respect to such guidance. Discussions of earnings
press releases as well as financial information and earnings guidance may be
done generally (i.e. discussion of the types of information to be disclosed and
the type of presentation to be made).
Regulatory and Accounting Developments. Review with management and
the independent auditor the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the Company’s financial statements.
3.3 Internal Audit and RiskManagement.
Internal Audit. With respect to the Company’s internal audit function,
The head of Internal Audit shall report jointly to the Committee and to the
General Counsel of the Company. The principal and administrative reporting
responsibilities of the internal audit function shall be reviewed from time to
time by the Committee and the Board.
review the budget, qualifications, activities, effectiveness and
organizational structure of the internal audit function;
review and recommend to the Board action with respect to the
appointment and replacement of the head of Internal Audit;
review and approve the Internal Audit charter and any proposed
review the performance of the head of Internal Audit;
review and approve the annual internal audit plan for the upcoming year
and discuss with the head of Internal Audit, the independent auditor and
management, internal audit department responsibilities (including
reporting responsibilities), and any recommended changes in the internal
audit plan; and
review summaries of significant internal audit reports and management’s
Risk Assessment and Risk Management. Discuss policies with respect to
risk assessment and risk management periodically with the management,
internal audit staff and the independent auditor, and the Company’s plans or
processes to monitor, control and minimize such risks and exposures.
3.4 Financial Reporting Processes; CEO and CFO Certifications.
Internal and External Controls. Review with management, the Company
and the independent auditor, as appropriate, the Company’s internal controls
over financial reporting.
Consider Changes. Review major issues as to the adequacy of the
Company’s internal controls and any special audit steps adopted in light of
material control deficiencies.
Reporting Systems. Receive reports from each of (i) management, (ii) the
independent auditor and (iii) the head of Internal Audit regarding any
significant judgments made in management’s preparation of the financial
statements and the view of each as to appropriateness of such judgments.
Reports from Independent Auditor. Obtain and review timely reports from
the independent auditor regarding:
all critical accounting policies and practices to be used by the
all alternative treatments of financial information within GAAP that
have been discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by
the independent auditor; and
all other material written communications between the independent
auditor and management, including any management letter or schedule
of unadjusted differences.
Such reports may be oral or in writing, but must be provided to the Committee
before any auditor’s report is filed with the SEC.
CEO and CFO Certifications. Discuss with the Chief Executive Officer and the Chief Financial Officer the processes involved in, and any material disclosures required as a result of, the Annual Report on Form 10-K and
Quarterly Report on Form 10-Q certification process concerning deficiencies in design or operation of internal controls or any fraud involving management or employees with a significant role in the Company’s internal controls.
3.5 Legal and Regulatory Compliance
SEC Report. . Review the preparation of the annual report to be included in the Company’s proxy statement as required by the proxy rules under the Exchange Act.
Code of Conduct; Waivers. Review and approve the Company’s
Whistleblower Policy, Code of Business Conduct and Ethics and any proposed
amendments thereto; receive periodic reports from the Company’s General
Counsel regarding the Company’s monitoring of compliance with such Code;
approve in advance any waivers of such Code for senior financial officers who
are neither directors nor executive officers; and recommend to the Board for
approval any waivers of such Code for directors and executive officers.
Complaints. Establish procedures for (including pursuant to the Company’s
Whistleblower Policy, Code of Business Conduct and Ethics):
the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing
the confidential, anonymous submission by Company employees of
concerns regarding questionable accounting or auditing matters.
Investment Policy. Review and approve the Company’s investment policy
(including, without limitation, any investment guidelines with regard to
maturity, liquidity, risk and diversification) and any modifications thereto. The
Committee will also review foreign currency strategy, including the use of
Investment Objectives and Strategies. Review and advise the Board with
respect to the Company’s key investment objectives and strategies. Review of
such strategies shall be in relation to the Company’s debt and capital structure.
Management Oversight. Oversee management’s administration of the
Company’s investments to ensure compliance with its investment policies, and
periodically review the allocation and performance of the Company’s
3.7 Annual Evaluation of Committees and Charter.
Evaluation of Committee. Annually evaluate the performance of the
Committee, in cooperation with the Corporate Governance Committee.
Review and Publication of Charter. Review and reassess the adequacy of
this Charter at least annually and recommend any proposed changes to the
Board, as appropriate, and publish this Charter as required by applicable law,
in cooperation with the Corporate Governance Committee.
4. Reports to Board; Meetings, Minutes.
4.1 Recommendations; Reports. Regularly report to the Board on the Committee’s
activities, and its conclusions with respect to the independent auditor, and make
appropriate recommendations to the Board.
4.2 Executive Sessions. The Committee shall meet periodically (with such frequency as
it determines) with each of the independent auditor, head of Internal Audit (or other
personnel responsible for the Company’s internal audit function) and management in
separate executive sessions.
4.3 Other Meetings.Other meetings will be with such frequency, and at such times, as its Chairman or a majority of the Committee determines, but the Committee shall meet at least quarterly. Special meetings of the Committee may be called by the Chairman and will be called promptly upon the request of any two Committee members. The agenda of each meeting will be prepared by the Chairman and circulated, if practicable, to each member prior to the meeting date. Unless the Committee or the Board adopts other procedures, the provisions of the Company’s Bylaws applicable to meetings of Board committees will govern meetings of the Committee.
4.4 Minutes. The Committee will keep written minutes of its meetings, which minutes
shall be provided to the Board and maintained with the books and records of the
5. Subcommittees. The Committee has the power to appoint and delegate matters to
subcommittees, but no subcommittee will have any final decision-making authority on
behalf of the Board or the Committee (except as expressly permitted pursuant to Section
3.1(e) above). The Committee may delegate to any member thereof such power and
authority to execute documents and carry out actions on behalf of the Committee as the
Committee deems appropriate.
6. Advisors and Counsel; Reliance; Investigations; Cooperation.
6.1 Retention of Advisors and Counsel. The Committee has the power, in its sole discretion, to obtain advice and assistance from, and the authority to engage at the Company’s expense, such independent or outside legal counsel, accounting or other advisors and experts as it determines necessary or appropriate to carry out its duties, and in connection therewith to receive appropriate funding, as determined by the Committee, from the Company.
6.2 Determine Administrative Expenses. The Committee has the power to determine the level of ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties, which expenses shall be borne by the Company.
6.3 Reliance Permitted. The Committee may act in reliance on management, the Company’s independent auditor, head of Internal Audit, and advisors and experts, as it deems necessary or appropriate.
6.4 Investigations. The Committee has the power, in its discretion, to conduct any investigation it deems necessary or appropriate to enable it to carry out its duties.
6.5 Required Participation of Employees. The Committee shall have unrestricted access to the Company’s employees, independent auditor, internal auditors, internal and outside counsel, and may require any employee of the Company or representative of the Company’s outside counsel or independent auditor to attend meetings of the Committee or to meet with any members of the Committee or representative of the Committee’s counsel, advisors or experts.
7. Rules and Procedures. Except as expressly set forth in this Charter or the Company’s Certificate of Incorporation, Bylaws or Corporate Governance Guidelines, or as otherwise provided by law or the rules of the SEC or NASDAQ, the Committee shall establish its own rules and procedures. A majority of the members of the Committee shall constitute a quorum and the Committee may act by a majority of its members unless otherwise specified in this Charter.
This Charter is in all respects subject to the provisions of the Certificate of Incorporation and Bylaws of the Company. This Charter may be amended from time to time upon the approval of the Board.