Audit Committee

Audit Committee Charter Quicklinks


I. Audit Committee Purpose

The Audit Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) of Chinos Holdings, Inc., Chinos Intermediate Holdings A, Inc., Chinos Intermediate Holdings B, Inc., Chinos Intermediate, Inc. and J. Crew Group, Inc. (each, a “Company” and collectively the “Companies”), in accordance with the terms of the Amended and Restated Principal Investors Stockholders Agreement, dated as of July  13, 2017, by and among each Company and certain stockholders party thereto (the “ Amended PI Stockholders Agreement”), to assist the Board in fulfilling its oversight responsibilities relating to corporate accounting and reporting practices and the quality and integrity of the financial statements of each Company.  The Committee’s primary duties and responsibilities are to:

  • Monitor the integrity of the Companies’ financial statements and financial reporting process and systems of internal controls regarding finance and accounting.
  • Monitor the compliance of the Companies with legal and regulatory requirements and standards of business ethics.
  • Evaluate the Companies’ independent auditors’ qualifications, independence and performance.
  • Monitor the performance of the Companies’ internal audit function.
  • Provide an avenue of communication among the independent auditors, management, the internal auditors and the Board.
  • Fulfill the other responsibilities set out herein.

While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements are presented in accordance with generally accepted accounting principles and its disclosures are complete and accurate. These are the responsibilities of the independent auditors and management.

The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent auditors and internal auditors, as well as any other individual in each Company.  The Committee has the sole and direct authority to select, retain, terminate, and approve the fees and other retention terms of independent legal, accounting, or other consultants it deems necessary or appropriate in the performance of its duties without seeking approval of the Board or management. The Companies will provide appropriate funding for that purpose and for ordinary administrative expenses as determined by the Committee.

II. Committee Composition and Meetings

Subject to the terms and provisions of the Amended PI Stockholders Agreement, the Committee shall be comprised of one or more directors, as determined by the Board.  All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements.

Subject to the terms and provisions of the Amended PI Stockholders Agreement, Committee members shall be appointed by the Board on an annual basis; members shall serve until their successors shall be duly elected and qualified.  If a Committee Chair is not designated or present, the members of the Committee may designate a Chair by vote of the majority voting power of the Committee membership.

The Committee shall meet at least four times annually or more frequently as circumstances dictate.  The Committee Chair shall prepare and/or approve an agenda in advance of each meeting.  In addition, the Committee, or its Chair, shall communicate with management and the independent auditors quarterly to review the Companies’ financial statements and significant findings based upon the auditors’ limited review procedures.  In planning the annual schedule of meetings, the Committee shall ensure that sufficient opportunities exist for its members to meet separately with the independent auditors and/or the internal audit function, without management present; to meet separately with management, without the independent auditors and/or the internal audit function present; and to meet in private with only the Committee members present.

III. Audit Committee Responsibilities and Duties

Review Procedures

  1. Review the Companies’ annual audited financial statements and quarterly financial results, including disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations,” with management, the independent auditors and the internal audit function prior to filing or distribution.  Review should include discussion of significant issues regarding accounting principles, practices, and judgments.  Discuss any significant changes in each Company’s accounting principles and any items required to be communicated by the independent auditors in accordance with generally accepted auditing standards.
  2. Review annually with management the independent auditors and the internal audit function and the integrity of each Company’s financial reporting processes and controls.  Discuss policies with respect to risk assessment and risk management, significant risk exposures (whether financial, operating, reputational or otherwise) and the steps management has taken to monitor and control such exposures.  Review significant findings prepared by independent auditors and internal auditors together with management’s responses.

Independent Auditors

  1. The independent auditors of the Companies are ultimately accountable to the  Committee and the Board.  The Committee shall be solely and directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors (including resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.  The Committee shall review the independence and performance of the independent auditors and, where appropriate, replace the independent auditors. 
  2. Approve the annual audit fees to be paid to the independent auditors.  The Committee shall have the sole authority to pre-approve all auditing services, internal control related services and all permitted non-audit services provided by the independent auditors.   Approval may be made by one or more members of the Committee, as designated by the Committee.  The designated member(s) shall report all approved non-audit services to the Committee at the next scheduled meeting.
  3. On an annual basis, the Committee should review and discuss with the independent auditors all significant relationships they have with each Company that could impair the auditors’ independence. 
  4. Review the independent auditors’ audit plan for the current year – discuss scope, staffing, locations, reliance upon management and internal audit and general audit approach.
  5. Review annually with the independent auditors matters required to be discussed by Auditing Standard No. 16, as it may be modified or supplemented, or other professional standards, relating to the conduct of the audit, including any problems or difficulties encountered in the course of the audit work and management’s response, any restrictions on the scope of activities or access to requested information  any significant disagreements with management the independent auditors’ evaluation of the quality of the Company’s financial reporting, and information relating to significant unusual transactions and the business rationale for such transactions.
  6. Consider the independent auditors’ judgments about the quality and appropriateness of each Company’s accounting principles as applied in its financial reporting.  At least annually, obtain and review a report by the independent auditor describing:  (a) the audit firm’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, and (c) any steps taken to deal with any such issues.
  7. Approve clear guidelines for the engagement or hiring by each Company of any individual either currently employed by the independent auditors or employed by the independent auditors at any time within the one year period preceding the proposed hire date.
  8. Receive and review reports of the independent auditors discussing (i) all critical accounting policies and practices used in the preparation of a Company’s financial statements, (ii) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and (iii) other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.

Internal Audit and Legal Functions:

  1. Annually review and approve the internal audit charter of responsibilities and authority.  Review the budget, audit plan, activities, organizational structure and staffing as needed.
  2. Review the appointment, compensation and replacement of the chief internal auditor.  If a Company uses an outside professional services firm to support the entire internal audit function, review the compensation of such outside firm.
  3. Annually evaluate the internal audit function.  Determine that the internal audit function (including any assistance provided by outside parties) has the requisite independence and objectivity to carry out its responsibilities and that the internal audit function has adequate training, skills and competencies to carry out its responsibilities.
  4. Review significant reports prepared by the internal audit function together with management’s response and follow-up to these reports.
  5. Establish and review annually the procedures for: (i) the receipt, retention, and treatment of complaints received regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
  6. On behalf of the Board, on an annual basis, review with the Companies’ general counsel any legal matters that could have a significant impact on the Companies’ financial statements, the Companies’ compliance with applicable laws and regulations and any material reports or inquiries received from regulators or governmental agencies.

Other Committee Responsibilities

  1. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
  2. Advise the Board with respect to each Company's policies and procedures regarding compliance with such Company's Code of Ethics and Business Practices.
  3. Review each Company’s use of derivative instruments, the purpose and risks of such use and the impact on the financial statements.
  4. Perform any other activities consistent with this Charter, such Company’s by-laws, and governing law, as the respective Committee or the Board deems necessary or appropriate.
  5. The Committee shall review with both management and the independent auditors all related party transactions or dealings between parties related to each Company and approve such transactions where appropriate.
  6. Maintain minutes of meetings and report on a regular basis to the Board on significant results of the foregoing activities.

Effective November 2019
  • Member
  • Chair
  • Financial Expert
  • Independent Director