Audit Committee Charter
As Adopted by the Board of Directors on March 29, 2004

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The executive management of SRS Labs, Inc. (the "Company") is primarily responsible for the completeness and accuracy of the Company's financial reporting and the adequacy of its internal financial and operating controls. The Company's Board of Directors (the "Board") has responsibility to oversee management's exercise of these responsibilities. To assist the Board, the Company has established, through its Bylaws, an Audit Committee (the "Committee") whose authority and responsibilities are described by this Charter.

Purpose

This Charter is created in order to define the Committee's objectives, the range of its authority, the scope of its activities and its duties and responsibilities. It is intended to give Committee members, management and external auditors a clear understanding of their respective roles. The Committee and the Board will review and assess the adequacy of this Charter annually.

The purpose of the Committee is to assist the Board in overseeing: (i) the integrity of the Company's accounting and financial reporting processes, the audits of the financial statements as well as systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; (ii) the Company's compliance with legal and regulatory requirements; (iii) the qualifications and independence of the Company's independent auditors; (iv) the Company's financial risk; and (v) the performance of the Company's internal audit function and independent auditors.

In carrying out this purpose, the Committee will maintain and facilitate free and open communication between directors, the independent auditors and the financial management of the Company.

Responsibilities

The Committee is to perform activities required by applicable law, rules or regulations, including the rules of the Securities and Exchange Commission ("SEC") and any stock exchange or market on which the Company's securities may be listed from time to time, and perform such other activities that are consistent with this Charter, the Company's Bylaws and governing laws, as the Committee or the Board deem necessary or appropriate. Without limiting the foregoing, the Committee's responsibilities are to:

A. Integrity of Financial Statements

1. direct the independent auditors to review, before filing with the SEC, the Company's interim and annual financial statements included in quarterly and annual reports on Form 10-Q and Form 10-K, respectively, using professional standards and procedures for conducting such reviews;
2. review and discuss with management and the independent auditors the quarterly unaudited financial statements and review the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operation" prior to filing with the SEC the Company's Quarterly Reports on Form 10-Q in which they are included;
3. review and discuss with management and the independent auditors the annual audit, financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operation," prior to filing with the SEC the Company's annual report on Form 10-K in which they are included; following such review, the Committee will recommend to the Board whether the audited financial statements should be included in the Company's annual report on Form 10-K;
4. discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61;
5. discuss with management earnings press releases and financial information and earnings guidance provided to analysts and rating agencies, paying particular attention to the use of "proforma" or "adjusted" non-GAAP financial information;
6. report at least quarterly to the full Board regarding any issues that arise relating to, among other things, financial reporting and compliance and auditor independence;
7. review the Company's internal audit plan and the results of any internal audit reports;
8. review any reports submitted by the independent auditor, including the report relating to (i) all critical accounting policies and practices used, (ii) all alternative treatments of financial information with 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 auditor, and (iii) other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences;
9. review major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, the effect of regulatory and accounting initiatives and off-balance sheet transactions on the financial statements and analyses prepared by management and/or the independent auditors on significant financial reporting issues and judgments;
10. inquire about the existence and substance of any significant accounting accruals, reserves, or estimates made by management that had a material impact on the financial statements;
11. inquire of management and the independent auditors if there were any significant financial accounting or reporting issues discussed during the accounting period and, if so, how they were resolved or if not resolved, inquire as to the disagreements; and
12. discuss among themselves, without management or the independent auditors present, the quality of the accounting principles applied in the preparation of the Company's financial statements and significant judgments affecting the financial statements; and the independent auditors' view of the quality of those principles and such judgments.

B. Compliance with Legal and Regulatory Requirements

1. provide a report in the Company's proxy statement in accordance with the requirements of Item 306 of Regulation S-K and Item 7(d)(3) of Schedule 14A;
2. review and update the Committee's charter, structure, processes and membership requirements as needed;
3. review management's oversight of the Company's policies and procedures regarding compliance with law (including the Foreign Corrupt Practices Act) and with significant corporate policies (including the Company's standards and codes of conduct) and make recommendations to the Board concerning these matters;
4. review, approve and monitor the Company's code of ethics for its senior financial officers; in addition, the Committee shall have the authority to waive the Company's code of ethics when necessary and warranted, provided that any such waiver is promptly disclosed to the Company's shareholders;
5. review, in conjunction with counsel, any legal matters that could have a significant impact on the Company's financial statements; and
6. review and approve all related party transactions for which audit committee approval is required by applicable law or the rules of the Nasdaq Stock Market.

C. Qualifications and Independence of Auditors

1. select, appoint, evaluate, determine funding for and, where appropriate, replace the independent auditors (including attempting to resolve disagreements between management and the independent auditors) for the purpose of preparing or issuing an audit report or related work to comply with Section 301 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and the rules and regulations promulgated by the SEC thereunder; in addition, the Committee may nominate the independent auditors to be proposed for shareholder approval or ratification in the proxy statement; the independent auditors shall report directly to the Committee;
2. review with management the performance, appointment and/or termination of the independent auditors; review and evaluate the senior members of the independent auditors' team, in particular the lead audit partner and the reviewing partners and determine whether periodic rotation of the auditing firm is appropriate;
3. give prior approval of all audit services and any non-audit services, including tax and compliance and planning, permissible pursuant to the Sarbanes-Oxley Act performed by the independent auditors for the Company at anytime (or subsequently approve non-audit services in those circumstances where a subsequent approval is necessary and permissible); in this regard, the Committee shall have the sole authority to approve the hiring and firing of the independent auditor, all audit engagement fees and terms and all non-audit engagements as may be permissible, with the independent auditor;
4. ensure that the independent auditors provide a formal written statement to the Committee setting forth all relationships between the independent auditors and the Company, consistent with the Independence Standards Board Standard No. 1;
5. discuss with the independent auditors any disclosed relationships or services which may impact the objectivity and independence of the independent auditors;
6. take, or recommend that the full Board take, appropriate action to ensure the independence of the independent auditors;
7. review with management and the independent auditors the annual audit scope and approach, critical accounting policies, audit conclusions regarding significant accounting estimates/reserves;
8. review with management and the independent auditors their assessments of the adequacy of internal controls, and the resolution of identified material weaknesses and reportable conditions in internal controls, including the prevention or detection of management override or compromise of the internal control system;
9. review with management and the independent auditors the Company's compliance with laws and regulations having to do with accounting and financial matters;
10. consider whether the independent auditors should meet with the full Board to discuss any matters relative to the financial statements and/or any potentially relevant matters, and to answer any questions that other directors may have;
11. obtain an annual report from the Company's independent auditors describing (i) the independent auditors' quality-control procedures and any material issues raised by its most recent internal quality-control review, or peer review, (ii) governmental or professional investigations during the last five years with respect to other audits carried out by the firm and (iii) all relationships between the auditors and the Company; and
12. establish hiring policies for employees or former employees of the independent auditors.

D. Private Discussions with Independent Auditors

1. meet privately with the independent auditors at least once a year to request their opinion on various matters including the quality of the Company's accounting principles as applied in its financial reporting and the quality and performance of its financial and accounting personnel; and
2. discuss privately with the independent auditors any issues required from time to time by rules of the SEC, Financial Accounting Standards Board ("FASB") and National Association of Securities Dealers ("NASD").

E. Post Audit Review

1. review with management and the independent auditors the results of each independent audit, including any qualifications of the independent auditors' opinion, any related management letter, any significant suggestions for improvements to management letter by the independent auditor, management's responses to recommendations made by the independent auditors in connection with the audit, reports submitted to the Committee by the internal auditing department that are material to the Company as a whole, and management's response to those reports;
2. the annual management letter comments and management's responses to each; and
3. ask the independent auditors what their greatest concerns were (including any serious difficulties encountered) and if they believe anything else should be discussed with the Committee that has not been raised or covered elsewhere.

F. Litigation

1. discuss/review with management, company counsel, and the independent auditors the substance of any significant issues raised by counsel concerning litigation, contingencies, claims or assessments. The Committee should understand how such matters are reflected in the Company's financial statements.

G. Financial Risk

1. inquire of management, the senior internal auditing executive, if any, and the independent auditors about significant risks or exposures and assess the steps management has taken to minimize or control the Company's exposure to such risk; and
2. discuss policies on risk assessment and risk management, the Company's major financial risk exposures and the steps that management has taken to monitor and control such exposures.

H. Performance of Internal Audit Function and Independent Auditors

1. review the appointment, replacement, reassignment, or dismissal of the senior internal auditing executive;
2. hold separate meetings at least quarterly with management and the Company's internal and independent auditors to discuss the adequacy, effectiveness and efficiency of management processes, internal financial systems and operating controls including computerized information system controls and security and any related significant findings and recommendations of the independent auditors and internal auditors together with management's responses thereto and to review before release, the disclosure regarding such system of internal controls required under SEC rules to be contained in the Company's periodic filings and the attestations or reports by the independent auditors relating to such disclosure;
3. submit to an annual performance evaluation of the Committee by the Nominating/Corporate Governance Committee;
4. consider, in consultation with the independent auditors and the senior internal auditing executive, if any, the audit scope and plan of the internal auditors and the independent auditors to assure completeness of coverage and the effective use of audit resources;
5. review annually the continuing professional education for the year of the internal audit staff members; and
6. review with the independent auditors any audit problems or difficulties and management's response, including restrictions on the scope of the independent auditor's activities or access to information and any accounting adjustments that were noted or proposed by the independent auditors but were not made.

I. Other

1. review the internal accounting function of the Company;
2. establish procedures to receive and address complaints regarding accounting, internal controls or auditing issues and employees' confidential anonymous concerns regarding accounting or auditing matters;
3. initiate and conduct the investigation of any matter within the Committee's scope of responsibility;
4. serve as a channel of communication between the independent auditors and the Board and between the senior internal auditing executives and the Board;
5. report to the Board on the Committee's review of the Company's financial statements and any disagreements or significant disputes between management and the independent auditors that arose in connection with the preparation of those financial statements;
6. meet periodically with management to provide guidance concerning major capital expenditures, infrastructure investments, financial strategies and special projects and other significant financial matters;
7. act as "qualified legal compliance committee" within the meaning of rules issued by the SEC. As the Company's Qualified Legal Compliance Committee (the "QLCC"), the Committee shall be responsible for handling reports submitted by legal counsel of evidence of a material violation of the securities laws or a breach of a fiduciary duty by the Company or any of its directors, officers, employees or agents. The QLCC shall inform the Board, Chief Executive Officer and General Counsel of any report of evidence of these violations, determine whether an investigation is necessary, and take appropriate action to address these reports. If the QLCC determines that an investigation is necessary or appropriate, it is authorized to initiate an investigation. At the conclusion of any such investigation, the QLCC shall inform the Board, the Chief Executive Officer and the General Counsel of the results of the investigation and recommend the appropriate remedial measures to be taken. The QLCC is authorized to take all other appropriate action, including notifying the SEC, if the Company fails in any material respect to implement an appropriate response recommended by the QLCC
8. perform such other duties as may be requested by the Board.

Membership, Size, Composition and Term of Appointment

The Committee shall consist of no fewer than three directors each of whom are independent as defined by the rules and regulations of the National Association of Securities Dealers, Inc and its affiliate, the Nasdaq Stock Market, Inc. (collectively, "Nasdaq") and the Sarbanes-Oxley Act. Further, no member of the Committee may own or control more than 19.9% of the voting power of the Company's Common Stock. Each member shall be financially literate and be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement and cash flow statement. In addition, at least one member shall be an "Audit Committee Financial Expert" and shall have accounting or related financial management expertise as defined by the relevant rules promulgated by the SEC, Nasdaq or other regulatory body. The Board shall appoint the Committee's Chairperson and members annually. The Chairperson shall have accounting or related financial management expertise as defined by the relevant rules promulgated by the SEC, Nasdaq or other regulatory body. No director who serves on the audit committee of three or more companies whose stock is publicly traded may serve on the Committee.

Meetings

The Committee will meet at least four times each year.

The Committee may establish its own schedule, which it will provide to the Board in advance.

The Committee will meet separately, at least quarterly with each of management, the internal auditors and the independent auditors to review the financial affairs of the Company.

The Committee Chairperson will establish an agenda for each meeting after consultation with each Committee member and management.

The Committee may designate a non-voting Secretary or Acting Secretary for the Committee, who shall assist in the administration of meetings and prepare the minutes of such meetings, as requested by the Committee.

The minutes of all Committee meetings will be prepared and distributed to all Committee members and approved at subsequent meetings. Final minutes of all Committee Meetings shall be sent to the Secretary of the Company for distribution to the full Board and placed in the records of the Company.

Authority/Oversight by the Board

The Committee derives its authority from the Bylaws of the Company. The Committee's direct reporting relationship is to the Board. The Committee is authorized to have full and unrestricted access to all personnel, records, operations, properties, and other informational sources of the Company as required to properly discharge its responsibilities.

The Committee will report its activities to the full Board on a regular basis so that the Board is kept informed of its activities on a current basis. The Committee will perform all duties determined by the Board.

The Board will determine annually that the Committee's members are independent, as defined by the relevant rules promulgated by FASB, the SEC and the NASD, and that the Committee has fulfilled its duties and responsibilities.

Outside Advisors

The Committee shall have the authority to engage independent counsel and other advisors, as it deems necessary to carry out its duties. The Company shall provide for the appropriate funding, as determined by the Committee, for payment of compensation (i) to any such counsel and other advisors engaged by the Committee and (ii) to the independent auditors employed by the Company for the purpose of rendering or issuing an audit report.

Reports

In addition to preparing the report in the Company's proxy statement in accordance with the rules and regulations of the SEC, the Audit Committee will summarize its examinations and recommendations to the Board as may be appropriate, consistent with the Committee's charter.

Delegation of Authority

The Committee may delegate to one or more designated members of the Committee who are independent directors the authority to pre-approve any transaction for which such delegation is permissible under applicable law and the rules of the Nasdaq Stock Market, provided that such pre-approved decision is subsequently presented to the full Committee at its scheduled meetings.

Compensation

Members of the Committee shall receive such fees, if any, for their service as Committee members as may be determined by the Board in its sole discretion. Such fees may include retainers, per meeting fees and fees for service as Chairperson of the Committee. Fees may be paid in such form of consideration as is determined by the Board.

Members of the Committee may not receive any compensation from the Company except the fees that they receive for service as a member of the Board or any committee thereof or as Chairperson of the Board or Chairperson of any committee of the Board.