The purpose of the Audit Committee (the “Committee”) is to provide assistance
to the Board
of Directors (the “Board”) of Mattel, Inc. (the “Company”) in fulfilling the
Board’s oversight responsibilities regarding (a) the quality and integrity of
the Company’s financial reports, (b) the independence, qualifications and
performance of the Company’s independent auditor, (c) the performance of the
Company’s internal audit function and (d) the compliance by the Company with
legal and regulatory requirements. In so doing, the Committee should endeavor
to maintain free and open means of communication between the members of the
Committee, other members of the Board, the independent auditor and the
management of the Company.
The Committee’s responsibility is oversight. Management of the Company has
the responsibility for the Company’s financial statements as well as the Company’s
financial reporting process, principles and internal controls. The
independent auditor is responsible for performing an audit of the Company’s
annual financial statements, expressing an opinion as to the conformity of
such annual financial statements with generally accepted accounting
principles, reviewing the Company’s quarterly financial statements and other
procedures. It is recognized that the members of the Committee are not
engaged in the accounting or auditing profession and, consequently, are not
experts in matters involving auditing or accounting including in respect of
auditor independence. As such, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company’s financial statements fairly
present the Company’s financial position and results of operation and are in
accordance with generally accepted accounting principles and applicable laws
and regulations. Each member of the Committee shall be entitled to rely on
(i) the integrity of those persons within the Company and of the
professionals and experts (such as the independent auditor) from which it
receives information, (ii) the accuracy of the financial and other
information provided to the Committee by such persons, professionals or
experts absent actual knowledge to the contrary and (iii) representations
made by management or the independent auditor as to any information
technology services of the type described in Rule 2-01(c)(4)(ii) of
Regulation S-X and other non-audit services provided by the independent
auditor to the Company.
The Committee shall consist of at least three members of the Board. Each
Committee member shall meet the independence and experience requirements of
the New York Stock Exchange,
Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and the rules and regulations of the Securities and Exchange
Commission (the “Commission”). At least one member of the Committee shall be
an audit committee financial expert as defined by the Commission. A Committee
member shall not simultaneously serve on the audit committees of more than
two other public companies, unless the Board determines with regard to such
member that such simultaneous service would not impair his or her ability to
serve effectively on the Committee. The members of the Committee shall be
appointed by the Board on the recommendation of the Governance and Social
Responsibility Committee and the input of the Board Chair. Committee members
may only be replaced by the Board.
Committee Organization and
The members of the Committee shall appoint a Chair of the Committee by
majority vote. The Chair (or in his or her absence, a member designated by
the Chair) shall preside at all meetings of the Committee.
The Committee shall have the authority to establish its own rules and
procedures consistent with the Bylaws of the Company for notice and conduct
of its meetings, should the Committee, in its discretion, deem it desirable
to do so.
The Committee shall meet at least four times in each fiscal year, and more
frequently as the Committee in its discretion deems desirable.
The Committee shall meet periodically with management, the internal auditors
and the independent auditor in separate executive sessions. The Committee may
request any officer or employee of the Company or the Company’s outside
counsel or independent auditor to attend a meeting of the Committee or to
meet with any members of, or consultants to, the Committee.
Authority and Responsibilities
The Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to shareholder ratification).
The Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including resolution of
disagreements between management and the independent auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report
or related work. The independent auditor shall report directly to the
The Committee shall pre-approve all auditing services,
internal-control-related services and permitted non-audit services (including
the terms thereof) to be performed for the Company by its independent
auditor, subject to the de minimus exceptions for non-audit services
described in Section 10A(i)(1)(B) of the Exchange Act which are approved by
the Committee prior to the completion of the audit. The Committee may form
and delegate to subcommittees consisting of one or more members, when
appropriate, the authority to grant preapprovals of audit and permitted
non-audit services, provided that decisions of such subcommittee to grant
preapprovals shall be presented to the full Committee at its next scheduled
The Committee may, in its discretion, utilize the services of the Company’s
regular corporate legal counsel with respect to legal matters. The Committee
shall have the authority, to the extent it deems necessary or appropriate, to
retain independent legal, accounting or other advisors. The Company shall
provide for appropriate funding, as determined by the Committee, for payment
of compensation to the independent auditor for the purpose of rendering or
issuing an audit report and to any advisors employed by the Committee.
The Committee shall make regular reports to the Board. The Committee shall
review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval. The Committee shall annually
review the Committee’s own performance.
In performing its functions, the Committee shall undertake those tasks and
responsibilities that, in its judgment, would most effectively contribute to
and implement the purposes of the Committee. In addition to the general tasks
and responsibilities noted above, the following are the specific functions of
the Committee, to be performed as the Committee deems necessary or
Financial Statement and Disclosure
1. Review and discuss with management and the independent auditor the annual
audited financial statements, including the Company’s disclosures under
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations”, and recommend to the Board whether the audited financial
statements should be included in the Company’s Form 10-K.
2. Review and discuss with management and the independent auditor the
Company’s quarterly financial statements including the Company’s disclosures
under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and the results of the independent auditor’s review of
the quarterly financial statements, prior to the filing of its Form 10-Q.
3. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of the
Company’s financial statements, including any significant changes in the
Company’s selection or application of accounting principles, any major issues
as to the adequacy of the Company’s internal controls and any special steps
adopted in light of material control deficiencies.
4. Review and discuss reports from the independent auditors on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within generally
accepted accounting principles and practices related to material items that
have been discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by the
(c) Other material written communications between the independent auditor and
management, such as any management letter or schedule of unadjusted
5. Discuss with management the Company’s earnings press releases, including
the use of “pro forma” or “adjusted” non-GAAP information, as well as
financial information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of discussing the
types of information to be disclosed and the types of presentations to be
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives, as appropriate, as well as off-balance
sheet structures on the Company’s financial statements.
7. Discuss with management the Company’s major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company’s risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
9. Review and discuss with management, including the Vice President-Audit and
with the independent auditor, the Company’s required internal controls report
and the independent auditor’s attestation of the report, any special steps
adopted in light of material weaknesses in internal controls and the adequacy
of disclosures about changes in internal controls over financial reporting
prior to the filing of the Company’s Form 10-K.
10. The Committee shall discuss with the independent auditor and with
management any management letter provided by the independent auditor and any
other significant matters brought to the attention of the Committee by the
independent auditor as a result of its annual audit. The Committee should
allow management adequate time to consider any such matters raised by the
11. Review disclosures made to the Committee by the Company’s CEO and CFO
during their certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal controls over
financial reporting or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the Company’s
internal controls over financial reporting.
Oversight of the Company’s
Relationship with the Independent Auditor
12. Review and evaluate the lead partner of the independent auditor team.
13. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor’s internal quality-control procedures,
(b) 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, (c) any steps taken
to deal with any such issues, and (d) all relationships between the
independent auditor and the Company. Evaluate the qualifications, performance
and independence of the independent auditor, including considering whether
the auditor’s quality controls are adequate and the provision of permitted
non-audit services is compatible with maintaining the auditor’s independence,
and taking into account the opinions of management and internal auditors. The
Committee shall present its conclusions with respect to the independent
auditor to the Board.
14. Ensure the rotation of the audit partner as required by law. Consider
whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent auditing firm on a
15. Set policies for the Company’s hiring of employees or former employees of
the independent auditor who participated in any capacity in the audit of the
16. Discuss with the independent auditor issues on which the national office
of the independent auditor was consulted by the Company’s audit team, to the
extent such issues were deemed to be material by the independent auditor.
17. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
18. The Committee shall discuss at least annually with the Vice
President-Audit the activities and organizational structure of the Company’s
internal audit function and the qualifications of the primary personnel
performing such function. The Committee shall make recommendations to the
Board with regard to the appointment and replacement of the Vice President -
19. Review the significant issues reported to management by the internal
auditing department and management's responses.
20. The Committee shall, at its discretion, meet with the Vice
President-Audit, the independent auditor and management to discuss the
internal audit department responsibilities, budget and staffing and any
recommended changes in the planned scope of the internal audit, and any
issues identified by them or any other matters brought to the attention of
21. The Vice President-Audit shall be granted unfettered access to the
22. Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act has not been implicated.
23. Obtain from the independent auditor reports of any fraud involving senior
management and any fraud (whether caused by senior management or other
employees) that causes a material misstatement of the financial statements.
24. Obtain reports from management and the Company’s senior internal auditing
executive that the Company and its subsidiary/foreign affiliated entities are
in conformity with applicable legal requirements and the Company’s Code of
Conduct. Review reports and disclosures of insider and affiliated party
transactions. Advise the Board with respect to the Company’s policies and
procedures regarding compliance with applicable laws and regulations and with
the Company’s Code of Conduct.
25. Establish 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 concerns regarding questionable accounting or auditing matters.
26. Discuss with management and the independent auditor, in the discretion of
the Committee, any correspondence with regulators or governmental agencies
and any known published reports which raise material issues regarding the
Company’s financial statements or accounting policies.
27. Discuss with the Company’s General Counsel legal matters that may have a
material impact on the financial statements, the Company’s compliance
policies or internal controls over financial reporting.
28. Annually review the results of the Internal Auditor’s examination of
officers’ travel and entertainment reports.
Audit Committee Report
29. The Committee shall prepare the report required by the rules of the
Commission to be included in the Company’s annual proxy statement.