2003 Audit Charter: ZQKQUIKSILVER, INC.
CHARTER FOR AUDIT COMMITTEE
(AMENDED AND RESTATED DECEMBER 17, 2002)
The Board of Directors of Quiksilver, Inc. (the "Corporation") has
established the Audit Committee pursuant to Section 141(c)(2) of the Delaware
General Corporation Law and Article III of the Corporation's Bylaws. In carrying
out its duties pursuant to this Charter, the Audit Committee shall have the
- To engage independent counsel and other advisers, as it determines to be
necessary to carry out its duties; and
- To authorize such expenditures by the Corporation as it shall determine
necessary for payment to: (1) the independent auditor employed by the
Corporation for the purpose of rendering or issuing an audit report; and
(2) any advisers employed by the Audit Committee.
The Audit Committee shall be comprised of not less than three members of
the Corporation's Board of Directors. Subject to the foregoing, the exact number
of members of the Audit Committee shall be fixed and may be changed from time to
time by resolution duly adopted by the Board of Directors. The qualifications of
each member of the Audit Committee shall be as follows:
- No member shall have any relationship to the Corporation that, in the
determination of the Board of Directors, may interfere with his or her
exercise of independence from management and the Corporation.
- Each member shall be "financially literate" as determined by the Board of
Directors. A director shall be considered "financially literate" if by
reason of his or her educational, professional or business background,
the director is able to read and understand fundamental financial
statements, including a company's balance sheet, income statement and
statement of cash flows.
- At least one member of the Audit Committee must have accounting or
related financial management expertise and, to the extent reasonably
possible, otherwise satisfy the standards of a "financial expert" as
defined in the rules adopted by the Securities and Exchange Commission
(the "SEC"). Until such rules are adopted, a member shall be considered
to have such expertise if he or she: (1) has a graduate degree in
accounting or business; (2) is a certified public accountant or has
similar professional certification in accounting; or (3) has served as
chief executive officer, chief financial or principal accounting officer,
controller or other senior officer of a company with similar financial
- No member of the Audit Committee shall be an employee or non-employee
executive officer of the Corporation or any of its affiliates. A former
employee or former executive officer shall not be eligible to serve as a
member of the Audit Committee until three years following termination of
his or her employment or status as an officer.
- Other than in his or her capacity as a member of the Audit Committee, no
director who accepts any consulting, advisory, or other compensatory fee
from the Corporation shall be eligible to serve as a member of the Audit
- A director who (1) has a direct business relationship with the
Corporation or (2) is a partner, controlling shareholder, or executive
officer of any organization that has a business relationship with the
Corporation shall not be eligible to serve as a member of the Audit
Committee unless the Board of Directors determines in its business
judgment that the business relationship does not interfere with the
director's exercise of independent business judgment. In making this
determination, the Board of Directors shall consider, among other things,
the materiality of the relationship to the Corporation, the director and,
if applicable, the organization with which the director is affiliated.
Business relationships can include commercial, industrial, banking,
consulting, legal, accounting and other relationships. No determination
of the Board of Directors shall be required after three years following
the termination of such relationship.
- No director shall be eligible to serve as a member of the Audit Committee
if he or she is employed as an executive of another organization if any
of the Corporation's executives serve as a member of the compensation
committee of such other organization.
- No director who is an "immediate family member" of an individual who is
an executive officer of the Corporation or any of its affiliates is
eligible to serve on the Audit Committee until three years following
termination of such employment relationship. An "immediate family member"
includes a person's spouse, parents, children, siblings, mothers-in-law
and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than employees) who shares such
- No director who is an "affiliated person" of the Corporation as defined
by the SEC under Section 10A of the Securities Exchange Act of 1934 (the
"Exchange Act") shall be eligible to serve as a member of the Audit
For purposes of this Article II, the term "executive officer" means a
company's president, principal financial officer, principal accounting officer
(or, if there is no such accounting officer, the controller), any vice-president
in charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the company. Officers of a company's parent(s) or subsidiaries shall be deemed
executive officers of that company if they perform such policy-making functions
for the company. In addition, when a company is a limited partnership, officers
or employees of the general partner(s) who perform policy-making functions for
the limited partnership shall be deemed executive officers of the limited
partnership. When a company is a trust, officers or employees of the trustee(s)
who perform policy-making functions for the trust are deemed executive officers
of the trust.
The Audit Committee shall be directly responsible for the appointment,
compensation and oversight of the work of any independent auditors employed by
the Corporation for the purpose of preparing or issuing an audit report or
related work. Any such independent auditors shall report directly to the Audit
Committee. The Audit Committee shall:
A. PRE-APPROVAL OF AUDITOR SERVICES
- All audit services, including the provision of comfort letters in
connection with securities offerings, and non-audit services provided to
the Corporation by the Corporation's auditors shall be approved in
advance by the Audit Committee, except with respect to non-audit services
- The aggregate amount of all such non-audit services provided to the
Corporation constitute less than 5% of the total amount of revenues paid
by the Corporation to its auditor during the fiscal year in which the
non-audit services are provided;
- The services were not recognized by the Corporation at the time of the
engagement to be non-audit services; and
- The services are promptly brought to the attention of the Audit
Committee and approved prior to the completion of the audit by the Audit
Committee or by 1 or more members of the Audit Committee to whom
authority to grant such approvals has been delegated by the Audit
If the Audit Committee approves an audit service within the scope of
engagement of the independent auditor, the audit service shall be deemed to
have been preapproved for purposes of this Article III, A. The Audit
Committee may delegate to one or more of its members the authority to grant
pre-approvals. Any decision by a member to whom such authority has been
delegated shall be presented to the Audit Committee at its next meeting.
- Following the registration of the Corporation's independent auditor with
the Public Company Accounting Oversight Board, the independent auditor
and any person associated with the independent auditor (to the extent
determined appropriate by the SEC) shall not provide contemporaneously
with the audit, and the Audit Committee shall not approve, any of the
- Bookkeeping or other services related to the accounting records or
financial statements of the Corporation;
- Financial information systems design and implementation;
- Appraisal or valuation services, fairness opinions, or
- Actuarial services;
- Internal audit outsourcing services;
- Management functions or human resources;
- Broker or dealer, investment adviser, or investment banking services;
- Legal services and expert services unrelated to the audit; and
- Any other service that the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
B. OVERSIGHT OF INDEPENDENT AUDITING SERVICES
- Meet with the independent auditors to review and approve the plan and
scope for each audit of the Corporation's financial statements and
related services, including proposed fees to be incurred with respect
- Review and recommend action with respect to the results of each
independent audit of the Corporation's financial statements, including
problems encountered in connection with such audit and recommendations of
the independent auditors arising as a result of such audit.
- Discuss with the Corporation's independent auditors the matters required
to be communicated pursuant to Statement on Auditing Standards No. 61
("SAS 61"), as may be amended or supplemented.
- At least annually, discuss with the independent auditors their
independence and receive each of the following in writing:
- Disclosure of all relationships between the auditors and their related
entities and the Corporation and its related entities that in the
auditors' professional judgment may reasonably be thought to bear on
- Confirmation that, in the auditors' professional judgment, they are
independent of the Corporation within the meaning of the federal
- Discuss with the Corporation's independent auditors any relationships or
services disclosed by the independent auditors that may impact the
objectivity and independence of the independent auditors
and recommend to the Board of Directors any actions in response to the
independent auditors' disclosures to satisfy itself of the independent
- Evaluate the performance of the Corporation's independent auditors and
recommend to the Board of Directors any proposed discharge of the
Corporation's independent auditors.
- Obtain and review the reports of the Public Company Accounting Oversight
Board with respect to the Corporation's independent auditors when such
reports are made publicly available.
C. FINANCIAL STATEMENTS
- Resolve any disagreements between management and the independent auditors
regarding financial reporting.
- Receive the report of the independent auditor that performs for the
Corporation any audit required by the Exchange Act with respect to each
of the following:
- All critical accounting policies and practices to be used;
- All alternative treatments of financial information within Generally
Accepted Accounting Principles that have been discussed with management
officials of the Corporation, the ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by
the independent auditor; and
- Other material written communications between the independent auditor
and the Corporation such as any management letter or schedule of
- Review and discuss with the Corporation's independent auditors and
management the Corporation's audited financial statements.
- Based on (1) its review and discussions with management of the
Corporation's audited financial statements; (2) its discussion with the
independent auditors of the matters to be communicated pursuant to SAS
61; and (3) the written disclosures from the Corporation's independent
auditors regarding independence, recommend to the Corporation's Board of
Directors whether the Corporation's audited financial statements should
be included in the Corporation's Annual Report on Form 10-K for the last
fiscal year for filing with the SEC.
- Review and discuss with the Corporation's independent auditors and
management the Corporation's quarterly reports on Form 10-Q.
D. INTERNAL CONTROLS
- Review with the Corporation's independent auditors and financial
management the adequacy and effectiveness of the Corporation's system of
internal accounting controls, including the adequacy of such controls to
expose any payments, transactions or procedures that might be deemed
illegal or otherwise improper.
- Prior to the Corporation's filing of any Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, receive the following disclosures from the
Corporation's principal executive officer and principal financial officer
with respect to the following:
- All significant deficiencies in the design or operation of internal
controls which could adversely affect the Corporation's ability to
record, process, summarize and report financial data;
- All material weaknesses in internal controls identified by such officers
to the Corporation's independent auditors; and
- Any fraud, whether material or not material, that involves management of
the Corporation or other employees who have a significant role in the
Corporation's internal controls.
- Obtain the attestation and report of the Corporation's independent
auditors on the assessment made by the Corporation's management in the
Corporation's Annual Report on Form 10-K of the effectiveness of the
Corporation's internal control structure and procedures for financial
- Review the scope and results of the Corporation's internal auditing
procedures and practices and oversee the effectiveness thereof.
E. MANAGEMENT CONDUCT POLICIES
- Establish procedures for:
- The receipt, retention and treatment of complaints received by the
Corporation regarding accounting, internal accounting controls, or
auditing matters; and
- The confidential, anonymous submission by employees of the issuer of
concerns regarding questionable accounting or auditing matters.
- Adopt and review from time to time a code of ethics for senior financial
officers of the Corporation which includes those standards that the Audit
Committee has determined to be reasonably necessary to promote:
- Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
- Full, fair, accurate, timely, and understandable disclosure in the
periodic reports required to be filed by the Corporation under the
Exchange Act; and
- Compliance with applicable governmental rules and regulations.
- Make interpretations from time to time as to the scope and application of
the Corporation's management conduct policies.
- Review and approve or disapprove proposed transactions between the
Corporation and its employees or directors.
- Receive any report required to be made by the Corporation's attorneys
pursuant to the standards adopted by the SEC for professional conduct of
attorneys appearing and practicing before the SEC.
F. OTHER DUTIES
- At least annually, review the adequacy of this Charter and recommend to
the Corporation's Board of Directors any changes to this Charter that the
Audit Committee deems necessary or desirable.
- Perform such other specific functions as the Corporation's Board of
Directors may from time to time direct, and make such investigations and
reviews of the Corporation and its operations as the Chief Executive
Officer or the Board of Directors may from time to time request.
The Audit Committee shall keep regular minutes of its meetings. Meetings
and actions of the Audit Committee shall be governed by, and held and taken in
accordance with, the provisions of Article III of the Corporation's Bylaws
(other than Section 12), with such changes in the context of those Bylaws as are
necessary to substitute the Audit Committee, the Chairman of the Audit Committee
and its members for the Board of Directors, the Chairman of the Board and its
members. Regular meetings of the Audit Committee may be held at such time and
such place as the Audit Committee determines from time to time.