The Audit Committee (the "Committee") is appointed by the Board of Directors (the "Board") of hhgregg, Inc. (the "Company") to assist the Board in monitoring (1) the integrity of the financial statements, reporting processes and internal controls of the Company and its subsidiaries, (2) the compliance by the Company and its subsidiaries with legal and regulatory requirements related to the production of timely and accurate financial statements, (3) the independent auditor's qualifications and independence and (4) the performance of the Company's internal audit function and independent auditors.
The Committee shall be composed of such number of directors as appointed by the Board, each of whom satisfies the applicable independence requirements of the New York Stock Exchange, Inc. ("NYSE") and the rules and regulations of the Securities and Exchange Commission (the "Commission") at such time as the Company is subject to these requirements.
The Committee shall have a minimum of three directors appointed by the Board at its annual meeting. Each member of the Committee shall be financially literate, as determined by the Board, or must become financially literate within a reasonable period of time after his or her appointment to the Committee. At least one member of the Committee shall be a financial expert under the SEC's rules as determined by the Board. Any Committee member who is serving simultaneously on the audit committee of more than three public companies (including the Company) must immediately disclose such obligations to the Board.
Additional members of the Committee may be appointed at any time by action of the Board. Members of the Committee may be removed at any time with or without cause by action of the Board, but in no event shall the Committee have fewer than three members.
The Committee shall have the full and exclusive authority to take any actions necessary to discharge its duties under this Charter. The Committee may take any actions consistent with this Charter, the Company's By-laws and Certificate of Incorporation as the Committee or the Board deems necessary or appropriate.
The Committee shall have the independent authority to retain legal, accounting or other consultants to advise the Committee. The Company shall provide for appropriate funding, as determined by the Committee, for compensating the Company's independent auditor and any legal, accounting or other advisors retained independently by the Committee and for ordinary administrative expenses that are necessary or appropriate in carrying out its duties. The Committee may not delegate any of its responsibilities to the Company's management.
OVERSIGHT OF THE INDEPENDENT AUDITOR
The Committee shall:
- Be directly responsible for the appointment, compensation, oversight and termination of the Company's independent auditor (including resolution of disagreements between management, the independent auditor and the internal audit department regarding financial reporting). The Company's independent auditor shall report directly to the Committee.
- Ensure that the Company's independent auditor is and remains independent under all applicable rules and regulations, including establishing clear hiring policies for employees or former employees of the independent auditors.
- At least annually, obtain and review a report by the independent auditor describing:
- the firm's internal quality-control procedures;
- 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
- (to assess the auditor's independence) all relationships between the independent auditor and the Company.
- Pre-approve audit services and permitted non-audit services to be performed by the Company's independent auditor. The Committee may establish pre-approval policies and procedures. In the event the Committee pre-approves non-audit services by the Company's independent auditor, or establishes pre-approval policies and procedures, it shall notify the Board.
- Report to the Board in time for inclusion in the annual report all categories of audit fees required under SEC rules, including audit fees, audit-related fees, tax fees and all other fees.
OVERSIGHT OF THE INTERNAL AUDIT DEPARTMENT
The Committee shall:
- Be directly responsible for the oversight of the Company's internal audit department (including resolution of disagreements between management, the independent auditor and the internal audit department regarding financial reporting). The internal audit department shall report to the Committee.
- Review with management the appointment, retention, compensation and replacement of the senior internal auditing executive.
- Review any significant reports to management prepared by the Company's internal auditing staff and management's responses.
OVERSIGHT OF FINANCIAL MATTERS AND REGULATORY COMPLIANCE
The Committee shall:
- Assist the Board to ensure that management properly develops and adheres to a sound system of internal controls and that procedures are in place to objectively assess management's practices and internal controls.
- Ensure that outside auditors, through their own review, objectively assess the company's financial reporting practices and that the Company's accounting policies are consistently applied.
- Make regular reports to the Board addressing the quality and integrity of the Company's financial statements, reporting processes, internal controls, accounting principles, regulatory compliance, the performance and independence of the independent auditors, and the performance of the Company's internal audit function.
- Review with the Board and outside counsel any legal matter that could have a material impact on the Company's financial statements.
- Ensure that before filing financial statements with the SEC the independent auditor reports to the Committee, the Company's Chief Executive Officer and Chief Financial Officer: (1) all critical accounting policies and practices used by the Company, (2) all alternative accounting treatments of financial information within generally accepted accounting principles ("GAAP") that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the independent auditor, and (3) other material written communications between the independent auditor and management.
- Review the Company's quarterly and annual audited financial statements with management and the independent auditor, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," to examine the effectiveness of the Company's accounting and auditing principles and practices, disclosure controls and procedures, internal controls and disclosures made in management's discussion and analysis. The Committee shall then recommend to the Board whether the audited financial statements should be included in the Company's quarterly or annual reports.
- Review with the independent auditor any problems or difficulties the auditor may have encountered during the audit and any management letter comments relating to accounting matters or internal controls provided by the independent auditor and the Company's response to that letter. Such review should address:
- Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities, access to required information, personnel or disagreements with management.
- Any changes required in the planned scope of the audit.
- The internal audit department responsibilities, budget and staffing.
- Review the reports of the Chief Executive Officer and Chief Financial Officer (in connection with their required certifications) regarding any significant deficiencies or material weaknesses in the design or operation of internal controls, and any fraud that involves management or other employees who have a significant role in the company's internal controls.
- Review and discuss with management earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
- Discuss guidelines and policies with respect to risk assessment and risk management.
- Review and approve the appointment of any actuaries engaged by the Company to complete actuarial valuations used in preparing the financial statements.
- 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.
- Prepare a report to shareholders to be included in the Company's proxy statement for the annual meeting of stockholders as required by the Securities and Exchange Commission.
MANAGING THE AUDIT COMMITTEE
The Committee shall annually:
- Review and reassess the adequacy of this Audit Committee Charter (the "Charter") and recommend any proposed changes to the Board for approval.
- Review and assess the efficiency and effectiveness of the Audit Committee's performance and report the Committee's findings to the Board.
The Audit Committee shall meet at least quarterly, but as frequently as circumstances may require. Meetings of the Audit Committee may be held with or without notice at such time and place as may be designated from time to time in advance by the Committee ("Regular Meeting"). Meetings which are not Regular Meetings of the Committee may be called from time to time by the Committee chairman, if any, or by request from any Committee member and notice thereof shall be given to all members. Notice of meetings shall be provided in accordance with the applicable sections of the Company's By-laws.
In addition, the Committee shall meet periodically with management, the senior internal auditing executive and the independent auditor in separate executive sessions.
The Committee shall keep regular minutes of its proceedings and make reports to the Board upon request. All Committee members are expected to allocate sufficient time in their schedules to fulfill their fiduciary duties to the Company. All Committee members are expected to participate in the committee meetings regularly. They are expected to be prepared for each meeting, by reviewing the advance materials, seeking such additional information and assistance as they determine to be helpful and adequately informing themselves of matters under the Committee's consideration and otherwise to participate actively in the Committee's deliberations.
The Committee shall not act through subcommittees but may appoint subcommittees to study and report to it on any matter.