This Audit Committee Charter (this “Charter”) has been adopted by the Board
of Directors (the “Board”) of Take-Two Interactive Software, Inc. (the
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 financial
sophistication 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 under the listing standards of the
NASDAQ, the SEC rules and applicable law (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 listing standards of the NASDAQ, SEC 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
3.1 Independent Auditor
Be solely and directly responsible for the appointment,
compensation, retention, evaluation and oversight of the work of
any registered public accounting firm engaged (including resolution
of disagreements between management and the independent auditor
regarding financial reporting) 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. Each
such firm 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
Rotation of Independent Auditor.
Consider whether there should be regular rotation of the
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 seven years.
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 auditor 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 auditor during the fiscal year in which the
non-audit services are provided, (iii) such services are approved
in advance by a subcommittee consisting solely of the Chairman of
the Committee (a “Sub-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
Obtain Written Statement.
At least annually, obtain and review a formal written statement
from the independent auditor delineating all relationships between
the independent auditor and the Company, consistent with the
applicable requirements of the Public Company Accounting Oversight
Board (the “PCAOB”) regarding the independent auditor’s
communications with the audit committee concerning independence.
Engage in Active Dialogue.
Actively engage in a dialogue with the independent auditor 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 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
Related Party Transactions.
Conduct an appropriate review and oversight 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)) for potential conflict of interest situations on an
ongoing basis. The Company shall not enter into any new related
party transaction unless the Committee approves such transaction.
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.
Discuss with the independent auditor any accounting adjustments
that were noted or proposed by the independent auditor but were
Internal Audit Function.
Discuss with the independent auditor the responsibilities, budget
and staffing of the Company’s internal audit function (see below).
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.
Evaluate on case by case basis the permissibility of hiring
employees and former employees of the independent auditor.
3.2 Financial Reporting
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 audited financial statements in its annual
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.
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.
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 (for example, through 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 any off-balance
sheet structures, on the Company’s financial statements.
3.3 Internal Audit and Risk Management.
With respect to the Company’s internal audit function,
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
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.
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,
including without limitation risks related to data privacy, data
security, and cybersecurity.
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
Review major issues as to the adequacy of the Company’s internal
controls and any special audit steps adopted in light of material
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
Reports from Independent Auditor.
Obtain and review timely reports from the independent auditor
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
Review the preparation of the annual report to be included in the
Company’s proxy statement as required by the proxy rules under the
Code of Conduct; Waivers.
Review and approve the Company’s Whistleblower Policy and 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.
Establish procedures for (including pursuant to the Company’s
Whistleblower Policy and Code of Business Conduct and Ethics):
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 Company employees of
concerns regarding questionable accounting or auditing matters.
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 hedging instruments.
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.
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 investments.
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.
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 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.
The Committee has the power, in its discretion, to conduct any
investigation it deems necessary or appropriate to enable it to carry out
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.