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AUDIT COMMITTEE CHARTER

CKE Inc.
Audit Committee Charter

The Board of Directors (the “Board”) of CKE Inc. (the “Company”) has adopted this Charter for the Audit Committee (the “Committee”) of the Board on July 25, 2012, to be effective as of the close of the Company’s initial public offering of common stock pursuant to the Securities Act of 1933, as amended.  This Charter supercedes all prior charters in connection with any previously existing audit committee of the Company or any of its subsidiaries.  This Charter will be made available on the Company’s website.

I.              Purposes

A.            Purposes.  The purposes of the Committee shall be to:

(i)             assist the Board with its oversight and monitoring responsibilities regarding:

  • the integrity of the Company’s financial statements;
  • the Company’s compliance with legal and regulatory requirements;
  • the qualifications and independence of the Company’s independent auditors; and
  • the performance of the Company’s internal audit function and of its independent auditors; and

(ii)          prepare the Audit Committee Report for inclusion in the Company’s Annual Proxy Statement; and
(iii)         carry out any other responsibilities delegated to it by the Board from time to time consistent with the Company’s Bylaws.

B.            Annual Performance Review.  The Committee shall, each year, in conjunction with the preparation of the Audit Committee report to the Company’s stockholders discussed below, evaluate its own performance in light of the foregoing purposes and implement any changes in its own performance suggested by this review.

II.            Powers and Authority

The powers and responsibilities delegated by the Board to the Committee in this Charter or from time to time otherwise shall be exercised and carried out by the Committee as it deems appropriate without requirement of Board approval, and any decision made by the Committee (including any decision to exercise or refrain from exercising any of the powers delegated to the Committee) shall be at the Committee’s sole discretion.  While acting within the scope of the powers and responsibilities delegated to it, the Committee shall have and may exercise all the powers and authority of the Board.  Without limiting the foregoing, the Committee shall have the authority to (i) conduct any investigation appropriate to fulfilling its responsibilities, (ii) have direct access to the Company’s independent auditors as well as to anyone else in the Company, and (iii) retain and to obtain the advice of such legal, accounting or other consultants or experts as it deems necessary in the performance of its duties, which experts need not be the same as are regularly retained by the Company to perform such functions.

III.           Composition, Meetings and Funding

A.             Composition and Qualifications.

  1.      Number.  The Committee shall be comprised of at least three directors.
  2.      Independence.  The Committee shall be comprised of members that are “independent” as required by, and within the meaning of, the Rules of the New York Stock Exchange (“NYSE”) and applicable law, subject to any applicable transition periods.
  3.      Expertise Requirement of Audit Committee Members.  All members of the Committee shall be financially literate, as determined in the business judgment of the Board, or shall meet such standard within a reasonable period of time after the director’s appointment to the Committee.  At least one member of the Committee shall have accounting or related financial management expertise, as determined by the Board in its business judgment.  Further, it is the intention of the Board that the Committee include at least one member who qualifies as an “audit committee financial expert,” within the meaning of Item 407 of Regulation S-K.
  4.      More Than Three Public Companies.  If a Committee member is serving on the audit committee of more than three public companies, the Board must determine that such service will not impair the member’s ability to effectively serve on this Committee and disclose such determination in the Company’s proxy statement or on its website.

B.             Appointment of Audit Committee Members.  Committee members shall be appointed, removed and replaced by the Board.  If a Committee Chairman is not designated by the Board or present at a meeting, the members of the Committee may designate a Committee Chairman for such meeting by majority vote of the Committee membership.

C.             Meetings.  The Committee shall meet as frequently as circumstances dictate.  The Committee Chairman shall prepare and/or approve an agenda in advance of each meeting.  The Committee should meet privately and separately in executive session at least quarterly with (i) management, (ii) the director of the internal auditing department, (iii) the independent auditors, and (iv) just committee members to discuss any matters that the Committee or any of these groups believe should be discussed.  The Committee may meet in any manner permitted by law or the Company’s Bylaws, and the Committee may establish its own rules and procedures as long as they are not inconsistent with applicable law and the Company’s Bylaws.

D.             Funding.  The Company shall provide the Committee with such funding as the Committee reasonably decides is adequate for the engagement and retention of the Company’s independent auditors and the performance of the Committee’s other functions as detailed in this Charter.

IV.          Responsibilities

A.             Independent Auditors

  1.      The independent auditors shall be directly accountable to the Committee and indirectly accountable to the Board through the Committee.  The Committee shall review the independence and performance of the auditors and annually approve the appointment of the independent auditors or approve any discharge of auditors when circumstances warrant.  The Committee shall have the sole authority to terminate the engagement of the Company’s independent auditors.
  2.      The Committee shall have the sole authority to approve the fees and other compensation to be paid to the independent auditors, and to approve any non-audit engagement.  This approval shall be delivered prior to the related services being performed.
  3.      The Committee shall be directly responsible for the resolution of disagreements between management and the Company’s independent auditors regarding financial reporting, and shall have final authority to determine the Company’s position with respect to any such disagreement.
  4.      The Committee shall annually obtain and review a report by the independent auditors describing the independent auditors’ internal quality control procedures, and any material issues raised with respect thereto by any internal review, peer review or external investigation thereof, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with such issues.
  5.      The Committee shall:  (a) on an annual basis, review and discuss with the independent auditors all significant relationships they have or are proposed to have with the Company to determine whether those relationships could impair the auditors' independence; and (b) review, on an ongoing basis, compliance with the statutory ban on the independent auditors’ provision of non-audit services, except for services pre-approved by the Committee.
  6.      In consultation with management and the Company’s internal audit staff, the Committee shall annually consider the independent auditors’ qualifications, performance and independence, and the independent auditor’s judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.
  7.      The Committee shall establish a regular schedule of meetings with the independent auditors without management present to discuss candidly any audit problems or difficulties and management’s responses to the independent auditors’ efforts to resolve such problems or difficulties.  Topics addressed in these sessions should include any adjustments proposed by the independent auditors that were rejected by management on any basis, matters referred by the independent auditors to their national offices for additional review, the contents of any management/internal control letters issued or pending by the independent auditors and the independent auditors’ candid assessment of the responsibilities, budget and staffing of the Company’s internal audit function.
  8.      The Committee shall establish formal procedures for the hiring of employees and former employees of the independent auditors with the goal of preventing the prospect of future employment with the Company from influencing the current performance of the independent auditor function.
  9.      The Committee shall periodically review the independent auditors’ audit plan, including scope, staffing, locations, reliance upon management, internal audit and general audit approach and the content of all audit-related services.

B.             Handling of Complaints Regarding Accounting Practices

The Committee shall establish procedures for:

(i)     the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters;

(ii)    the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters; and

(iii)   the dissemination of the procedures developed pursuant to clause (ii) above in a manner reasonably calculated to make them known to all Company employees.

C.             Financial Information Review Procedures

  1.      The Committee shall review the Company’s annual and quarterly financial statements prior to release.  Review should include discussion with management and independent auditors of significant issues regarding accounting policies, principles, practices, and judgments, including the assessments of financial performance and disclosures proposed to be set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  The Committee shall recommend to the Board whether the audited financial statements should be included in the Company’s Annual Report on Form 10-K.
  2.      The Committee shall review any analyses prepared by management or the independent auditors regarding significant financial reporting issues, specifically including the judgments made by management as to the application of GAAP to the Company’s financial reporting in light of potential alternative GAAP applications.
  3.      The Committee shall discuss, both internally and with the Company’s independent auditors, any earnings information or any financial information or earnings guidance provided to analysts and rating agencies prior to the release of the information.  In that connection, the Committee shall discuss certain matters required to be communicated to audit committees in accordance with AICPA SAS 61.  In lieu of the full Committee’s involvement, this function may be performed by the Chairman of the Committee or pursuant to general guidelines as to the type of information to be included in such releases and the presentation thereof.

D.             Internal Audit Department and Legal Compliance

  1.      In consultation with the management, the independent auditors, and the internal auditors, the Committee shall, on an ongoing basis, consider the integrity of the Company’s financial reporting processes and controls.
  2.      The Committee shall establish policies and procedures to ensure that management regularly assesses the Company’s major financial risk exposure and implements plans to monitor and control such risks.
  3.      The Committee shall review, as necessary, any significant changes in the Company’s selection or application of accounting principles and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of any material control deficiencies.
  4.      The Committee shall review, as necessary, the effect of regulatory or accounting initiatives, as well as any off-balance sheet structures, on the Company’s financial statements.
  5.      The Committee shall review the budget, plan, changes in plan, activities, organizational structure, and qualifications of the internal audit department, as needed.
  6.      The Committee shall, on an ongoing basis, review the appointment, performance, and replacement of the senior internal audit executive.
  7.      On at least an annual basis, the Committee shall 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.

E.             Other Audit Committee Responsibilities

  1.      The Committee shall review and reassess the adequacy of this Charter at least annually, and submit the Charter with any recommended changes to the Board for approval and have the then-current document published in accordance with applicable law and NYSE rules.
  2.      The Committee shall annually prepare a report to stockholders as required by the SEC.  The report should be included in the Company’s annual proxy statement.
  3.      The Committee shall obtain the advice and assistance, as appropriate, of independent counsel and other advisors as necessary to fulfill the responsibilities of the Committee.
  4.      The Committee shall perform any other activities consistent with this Charter, the Company’s bylaws, and governing law, as the Committee or the Board deems necessary or appropriate.
  5.      The Committee shall maintain minutes of meetings and periodically report to the Board on significant results of the foregoing activities.
  6.      The Committee shall review all related party transactions on an ongoing basis and all such transactions must be approved by the Committee.

V.            Limits of Duties

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 and applicable rules and regulations.  These are the responsibilities of management and the independent auditor.  Each member of the Committee shall be entitled to rely on the integrity of those persons within the Company and of the professionals and experts (including the Company’s internal auditor and the Company’s independent auditor) from which the Committee receives information and, absent knowledge to the contrary, the accuracy of the financial and other information provided to the Committee by such persons, professionals or experts.  In addition, the members of the Committee are not independent auditors, and the term “review” as used in this Charter is not intended to be interpreted to suggest that the Committee members can or should follow the procedures required of auditors performing reviews of financial statements.