(1) The Audit Committee (the “Committee”) will assist the Board of Directors to fulfill its responsibility for oversight of the quality and integrity of the financial reports of the Company, its financial policies, procedures and reporting process, the audit process, and the Company’s system of financial and operating controls.





The Committee shall consist of a minimum of three outside Directors, one of whom shall be the Chairperson of the Committee. Members of the Audit Committee may not receive any compensation from the Company except the fees that they receive for service as a member of the Board of Directors or any committee thereof. All members shall satisfy the independence requirements of the Sarbanes-Oxley Act of 2002 and The Nasdaq Stock Market, Inc. as such requirements are interpreted by the Board of Directors in its business judgment. Each member of the Committee shall not have participated in the preparation of the financial statements of the company at any time during the past three years. Members shall have a working understanding of finance and accounting practices and the duties and responsibilities of the Committee, and at least one member shall be designated as the “financial expert,” as defined by applicable legislation and regulation.  Members should serve on the Committee for at least three consecutive years before being reassigned. Committee appointments will be submitted to the Board of Directors for approval.


The Committee shall meet at least four times per year on dates generally coinciding with Board of Directors meetings and shall report regularly to the Board of Directors. The Committee shall meet separately periodically with management, Internal Audit, and the independent auditor to discuss issues and concerns warranting Committee attention. The Committee shall provide sufficient opportunity for Internal Audit and the independent auditor to meet privately with the members of the Committee. The Chairperson of the Committee is authorized to call a meeting and set the agenda as necessary to effectively carry out the Committee’s responsibilities. Charlotte Russe management shall be a participant in scheduled meetings of the Committee unless otherwise instructed.





The Committee is an integral part of the corporate structure.  As a standing committee of the Board of Directors, it shall provide assistance to the Board of Directors in fulfilling their oversight responsibilities to the stockholders, potential stockholders, investment community and others relating to the Company’s financial statements, financial reporting process, and systems of internal controls.


The Committee is empowered to appoint, compensate, oversee, and replace, if necessary, the public accounting firm employed by the organization to conduct the annual audit.  This firm will report directly to the Committee.


The Committee is empowered to engage and compensate independent counsel and other advisers, as it deems necessary to carry out its duties.


In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company, in addition to open and direct access to the directors, independent auditors and financial management of the Company. The Committee may delegate authority to subcommittees, including the authority to pre-approve all auditing and permitted non-audit services, providing that such decisions are presented to the full Committee at its next scheduled meeting.


The Committee shall determine, and the Company shall provide for, the appropriate funding for the payment of ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.




The primary responsibility for the Company’s financial reporting and internal operating controls is vested in senior operating management, as overseen by the Board of Directors.  The Committee serves as the representative of the Board of Directors for the general oversight of Company affairs in the area of financial reporting and internal operating controls.  In carrying out its responsibilities, the Committee believes that its policies and procedures should remain flexible, in order to react to changing conditions and circumstances.  The Committee shall take the appropriate actions to set the overall corporate “tone” for quality financial reporting, sound business risk practices and ethical behavior.


In meeting its responsibilities, the Committee is expected to:

·        Approve or pre-approve all auditing services (including comfort letters and statutory audits) and all permitted non-audit services by the independent auditor. 

·        Provide independent and direct communication between the independent auditor and the Board of Directors.

·        Confer with the independent auditor, management, and Internal Audit regarding the scope of their recurring examinations of the books and records of the Company and direct special attention of the auditors to specific matters or areas deemed by the Committee or the auditors to be of special significance.  Such discussion shall include inquiries of the adequacy and effectiveness of the accounting and financial controls.

·        Discuss with management, Internal Audit, and the independent auditor the adequacy and effectiveness of the accounting and financial controls, including the Company’s policies and procedures to assess, monitor, and manage business risk, and legal and ethical compliance programs (e.g., Company’s code of conduct).

·        Receive and review reports of the independent auditor discussing 1) all critical accounting policies and practices to be used in the firm's audit of the Company's financial statements, 2) all alternative treatments of financial information within generally accepted accounting principles (“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 3) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.

·        Discuss with the independent auditors any disclosed relationships or services that may impact the objectivity or independence of the independent auditors.

·        Review management’s assertion on its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the independent auditor’s report on management’s assertion.

·        Confer with the independent auditor, management, and Internal Audit, if appropriate, regarding the scope of any supplemental reviews of audits, as the Committee may deem desirable.

·        Review the financial statements contained in the quarterly (Form 10-Q) and annual reports (Form 10-K) prior to filing them with the Securities and Exchange Commission.  Consider whether the information contained in these documents is reasonable and consistent, and discuss the results of the quarterly reviews, annual audits, and any other matters required to be communicated by the independent auditor under generally accepted auditing standards.

·        Review the Company’s audited financial statements and annual report, along with the independent auditor’s opinion rendered with respect to such financial statements, including judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements.

·        Prepare information and reports as may be required for inclusion in the Company’s annual proxy statement.

·        Review and discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.

·        Review 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.

·        Review Committee charter on an annual basis, recommending any change to the Board of Directors.

·        Review and evaluate the Committee’s composition and performance at least annually.




Internal Audit


The Committee shall review with management and Internal Audit the charter, plans, activities, staffing, and organizational structure of the internal audit function.  It will ensure there are no unjustified restrictions or limitations, and review and concur in the appointment, replacement, or dismissal of the Director of Internal Audit.  The Committee shall review the effectiveness of the internal audit function.  On a regular basis, it will meet separately with Internal Audit to discuss any matters that the Committee or Internal Audit believes should be discussed privately.





The Committee shall be directly responsible for the appointment, retention, and termination of the independent auditor, and the independent auditor must report directly to the Committee.  It shall review the independent auditor’s proposed audit scope and approach, including coordination of audit effort with Internal Audit.  On a regular basis, it will meet separately with the independent auditor to discuss any matters that the committee or auditors believe should be discussed privately.  The Committee will also review the performance of the independent auditor, and exercise final approval on the appointment or discharge of the auditor.


Employees or former employees of the independent auditor are eligible for hire by the company if they have no influence over the accountings firm’s operations or financial policies; has no capital balances in the accounting firm; has no financial arrangement with the accounting firm; and has not been a member of the audit engagement team within a one year period preceding the employment date.


At least annually, the Committee shall 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.  The Committee shall also review, evaluate and discuss formal reports, at least annually, from the independent auditor regarding the auditor’s independence including a description of all relationships between the independent auditor and the Company and recommend to the Board of Directors actions to satisfy the Board of the independence of the auditor.


In the course of its review, the Committee shall review and evaluate the lead partner of the independent auditor, ensure the rotation of the lead audit partner every five years and other audit partners every seven years, and consider whether there should be regular rotation of the audit firm itself.  The Committee shall present its conclusions with respect to the independent auditor to the full Board of Directors.



Revised - February ‘04

Ropes & Gray review – March ‘04

Audit Committee approved 4.8.04

Board of Directors approved 4.14.04