2003 Committee Charter : COST

The Costco Wholesale Corporation Audit Committee ("Committee") shall be nominated and elected by the Board of Directors each year at the meeting of the Board of Directors held in conjunction with the Company's Annual Meeting of Shareholders.

The Audit Committee will be composed of from three to five directors, each of whom must in the judgment of the Board be "independent" as defined by the rules of the Securities and Exchange Commission ("SEC"). At least one member of the Committee shall in the judgment of the Board be an "audit committee financial expert" as defined by the SEC. Each member of the Committee shall meet the financial literacy and other applicable requirements of the NASDAQ Stock Market listing standards. Other personnel may attend meetings of the Committee at the invitation of the Committee or its Chairman.

The Committee is charged by the Board of Directors with the responsibility to:

1. Appoint and provide for the compensation of the Company's independent auditor, oversee the work of the independent auditor (including resolution of any disagreements between management and the independent auditor regarding financial reporting), evaluate the performance of the independent auditor and, if so determined by the Committee, replace the independent auditor; it being acknowledged that the independent auditor is ultimately accountable to the Board and the Committee, as representatives of the stockholders.

2. Ensure the receipt of, and evaluate the written disclosures and the letter that the independent auditor submits to the Committee regarding the auditor's independence in accordance with Independence Standards Board Standard No. 1, discuss such reports with the auditor, oversee the independence of the independent auditor and, if so determined by the Committee in response to such reports, take appropriate action to address issues raised by such evaluation.

3. Approve as required by law all professional services to be provided to the Company by its independent auditor, provided that the Committee shall not approve any non-audit services proscribed by section 10A(g) of the Exchange Act in the absence of an applicable exemption. The Committee may adopt policies and procedures for the approval of such services that may include delegation of authority to a designated member or members of the Committee to approve such services so long as any such approvals are disclosed to the full Committee at its next scheduled meeting.

4. Review and approve all related-party transactions that are required to be disclosed under SEC Regulation SK 404(a).

5. Discuss with the independent auditor the matters required to be discussed by SAS 61, as it may be modified or supplemented.

6. Instruct the independent auditor and the internal auditor to advise the Committee if there are any subjects that require special attention.

7. Instruct the independent auditor to report to the Committee on all critical accounting policies of the Company, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management and involve material items or critical accounting policies, ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the auditors, and other material written communication between the auditors and management.

8. Meet with management and the independent auditor to discuss the annual financial statements and the report of the independent auditor, and to discuss significant issues encountered in the course of the audit work, including: restrictions on the scope of activities; access to required information; the adequacy of internal financial controls; the adequacy of the disclosure of off-balance sheet transactions, arrangements, obligations and relationships in reports filed with the SEC; and the appropriateness of the presentation of any non-GAAP financial measures included in any report filed with the SEC or in any public disclosure or release.

9. Review the management letter delivered by the independent auditor in connection with the audit.

10. Following such review and discussions, if so determined by the Committee, recommend to the Board that the annual financial statements be included in the Company's annual report.

11. Meet quarterly with management and the independent auditor to discuss the quarterly earnings release and quarterly financial statements prior to the filing of the Form 10-Q; provided that this responsibility may be delegated to the chairman of the Committee or a member of the Committee who is an "audit committee financial expert."

12. Meet as deemed appropriate by the Committee in executive sessions with management, the internal auditor or the independent auditor to discuss matters that any of them or the Committee believes could significantly affect the financial statements and should be discussed in executive session.

13. Review significant changes to the Company's accounting principles and practices proposed by the independent auditor, the internal auditor or management.

14. Review the scope and results of internal audits.

15. Evaluate the performance of the internal auditor and, if so determined by the Committee, recommend replacement of the internal auditor.

16. Review and decide whether to grant any requests for waiver of the Company's Code of Ethics for Senior Financial Officers.

17. Maintain a procedure for receipt, retention and treatment of any complaints received by the Company about its accounting, internal accounting controls or auditing matters and for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

18. Provide minutes of Committee meetings to the Board, and report to the Board on any significant matters arising from the Committee's work.

19. Evaluate the performance of the Committee, review and reassess this Charter and, if appropriate, recommend changes to the Board.

20. Prepare the Committee report required by the SEC to be included in the Company's annual proxy statement.

21. Conduct or authorize such inquiries into matters within the Committee's scope of responsibility as the Committee deems appropriate.


Authority

By adopting this Charter, the Board delegates to the Committee full authority to:

1. Perform the responsibilities of the Committee described above.

2. Appoint a chair of the Committee, unless a chair is designated by the Board.

3. Engage independent counsel and other advisers as the Committee determines necessary to carry out its responsibilities.

4. Cause the officers of the corporation to provide such funding as the Committee shall determine to be appropriate for payment of compensation to the Company's independent auditor and any legal counsel or other advisers engaged by the Committee.

5. Obtain advice and assistance from internal legal or other advisors.

Such authority shall be exclusive to the Committee to the extent required by law, the SEC or the NASDAQ listing standards.


APPENDIX B

Audit Committee Preapproval Policy

I. STATEMENT OF PRINCIPLES

The Audit Committee is required to preapprove the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor's independence.1 Unless a type of service to be provided by the independent auditor has received general preapproval, it will require specific preapproval by the Committee. Any proposed services exceeding preapproved cost levels will require specific preapproval by the Committee.

The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the preapproval of the Committee. The term of any preapproval is twelve months from the date of preapproval, unless the Committee specifically provides for a different period. The Committee will annually review and preapprove the services that may be provided by the independent auditor without obtaining specific preapproval from the Committee. The Committee will revise the list of general preapproved services from time to time, based on subsequent determinations. The Committee does not delegate its responsibilities to preapprove services performed by the independent auditor to management.

II. DELEGATION

The Committee has delegated interim preapproval authority to Jill Ruckelshaus. Interim preapprovals shall be reported to the Committee at its next scheduled meeting.

III. AUDIT SERVICES

The annual Audit services engagement terms and fees will be subject to the specific preapproval of the Committee. The Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other matters.

In addition to the annual Audit services engagement specifically approved by the Committee, the Committee may grant general preapproval for other Audit services, which are those services that only the independent auditor reasonably can provide. The Committee has preapproved the Audit services listed in Appendix A. All other Audit services not listed in Appendix A must be specifically preapproved by the Committee.

IV. AUDIT-RELATED SERVICES

Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements or that are traditionally performed by the independent auditor. The Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has preapproved the Audit-related services listed in Appendix B. All other Audit-related services not listed in Appendix B must be specifically preapproved by the Committee.

V. TAX SERVICES

The Committee believes that the independent auditor can provide certain Tax services to the Company, such as tax compliance, tax planning and tax advice, without impairing the auditor's independence. However, the Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Committee has preapproved the Tax services listed in Appendix C. All Tax services involving large and complex transactions not listed in Appendix C must be specifically preapproved by the Committee.

(1) The Committee is also required to preapprove the provision of all audit services that may be provided, including provision by multiple auditors.

VI. ALL OTHER SERVICES

The Committee may grant general preapproval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services and would not impair the independence of the auditor. The Committee has preapproved the All Other services listed in Appendix D. Permissible All Other services not listed in Appendix D must be specifically preapproved by the Committee.

A list of the SEC's prohibited non-audit services is attached to this policy as Exhibit 1. The independent auditor shall not be engaged to perform any of these services. Questions about whether a proposed service is prohibited shall be referred to the Legal Department at Corporate.

VII. PREAPPROVAL FEE LEVELS

Preapproval fee levels for all services to be provided by the independent auditor will be established annually by the Committee. Any proposed services exceeding these levels will require specific preapproval by the Committee.

VIII. PROCEDURES

Requests or applications to provide services that require specific approval by the Committee will be submitted to the Committee by both the independent auditor and the Chief Financial Officer and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence.

Exhibit 1

Prohibited Non-Audit Services

  • Bookkeeping or other services related to the accounting records or financial statements of the audit client*

  • Financial information systems design and implementation*

  • Appraisal or valuation services, fairness opinions or contribution-in-kind reports*

  • Actuarial services*

  • Internal audit outsourcing services*

  • Management functions

  • Human resources

  • Broker-dealer, investment adviser or investment banking services

  • Legal services

  • Expert services unrelated to the audit