Audit and Risk Committee
The Board hereby resolves to establish a Committee of the Board to be known as the Audit and Risk Committee.
1.1 The Committee shall consist of at least two members. Members shall be appointed by the Board on the recommendation of the Nominations Committee in consultation with the Chairman of the Audit and Risk Committee;
1.2 All members of the Committee shall be independent non-Executive Directors of the Company. If the Company’s Chairman is a member of the Committee he/she is only required to be independent on appointment. At least one member will have recent and relevant financial experience;
1.3 The Chairman shall be appointed by the Board but shall not be the Chairman of the Board;
1.4 Appointments should be for a period of up to three years, extendable by no more than two additional three-year periods, so long as members continue to be independent.
2. Attendance and Notice of Meetings
2.1 The Finance Director and Head of Internal Audit shall attend meetings at the invitation of the Committee;
2.2 The Chairman of the Board, the Chief Executive, other Board members and a representative of the External Auditors shall attend as and when invited by the Committee;
2.3 The Committee should, at least annually, meet the External and Internal Auditors, without management present, to discuss matters relating to its remit and any issues arising from the audit;
2.4 Meetings shall be held not less than three times a year, and should be timed to coincide with key dates in the Company’s financial reporting cycle;
2.5 Meetings of the Committee shall be called by the Secretary of the Committee at the request of any of its members or at the request of External Auditors or Internal Auditors if they consider it necessary;
2.6 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee, any other person required to attend and all other non-Executive Directors, no later than five working days before the date of the meeting. Supporting papers shall be sent to Committee members and to other attendees as appropriate, at the same time.
The Company Secretary or his or her nominee shall be Secretary of the Committee.
4. Minutes of Meetings
4.1 The Secretary shall minute the proceedings and decisions at all meetings of the Committee, including recording the names of those present and in attendance;
4.2 Draft minutes of Committee meetings shall be circulated promptly to all members of the Committee. Once approved, minutes should be made available to all other members of the Board unless it would be inappropriate to do so.
The quorum necessary for the transaction of business shall be two members and where practicable this should include the member with the recent and relevant financial experience. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise any or all of the authorities, powers and discretions vested in or exercisable by the Committee.
The Committee is authorised by the Board to:-
6.1 investigate any activity within its Terms of Reference;
6.2 seek any information that it requires from any employee of the Company and all employees are directed to cooperate with any request made by the Committee;
6.3 obtain, at the Company’s expense, outside or independent professional advice and such advisors may attend meetings as necessary;
6.4 have the right to publish in the Company’s annual report details of any issues that cannot be resolved between the Committee and the Board.
The Committee shall carry out the duties below for the parent company, any major subsidiary undertakings and the group as a whole, as appropriate.
7.1 Financial Reporting
To review and challenge where necessary, the actions and judgements of management, in relation to any of the Company’s financial statements (having regard to matters communicated to it by the Auditors), interim reports, preliminary announcements and related formal statements before submission to the Board, paying particular attention to:-
i) critical accounting policies and practices, and any changes in them;
ii) decisions requiring a major element of judgement;
iii) the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed;
iv) the clarity of disclosures;
v) significant adjustments resulting from the audit;
vi) the going concern assumption;
vii) compliance with accounting standards;
viii) the provisions of the UK Corporate Governance Code, the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other Rules, as appropriate;
ix) all material information presented with the financial statements, such as the Chairman’s Statement, Chief Executive’s Review and Financial Review and the corporate governance statement (insofar as it relates to the audit and risk management).
Where Board approval is required for other statements containing financial information (for example, summary financial statements, significant financial returns to regulators and release of price sensitive information), whenever practicable the Committee should review such statements first (without being inconsistent with any requirement for prompt reporting under the Listing Rules).
The Committee is required by the Board to review the content of the annual report and accounts and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
7.2 Internal controls and risk management systems
The Committee shall:-
i) keep under review the adequacy and effectiveness of the Company’s internal controls (financial and operational) and risk management systems;
ii) review and approve the statements to be included in the annual report concerning internal controls and risk management.
7.3 Compliance, whistleblowing and fraud
The Committee shall:-
i) review the Company’s procedures for handling allegations from whistle-blowers;
ii) review the company’s procedures for detecting fraud & prevention of bribery.
7.4 Internal Audit
The Committee shall review the effectiveness of Internal Audit by:-
i) ensuring that Internal Audit has direct access to the Board Chairman and to the Committee, and is accountable to the Committee;
ii) reviewing and assessing the Internal Audit work plan;
iii) receiving a report on the results of Internal Audit’s work on a periodic basis;
iv) reviewing and monitoring management’s responsiveness to Internal Audit’s findings and recommendations;
v) meeting with the Head of Internal Audit at least once a year without the presence of management;
vi) monitoring and assessing the role and effectiveness of the internal audit function in the overall context of the Company’s risk management.
7.5 External Audit
The Committee is the body responsible for overseeing the Company’s relations with the External Auditor and assessing their effectiveness.
The Committee shall:-
i) oversee the appointment (including the selection process), reappointment and removal of the External Auditor and make appropriate recommendations through the Board to the shareholders to consider at the AGM;
ii) investigate any issues leading to the resignation of the External Auditor and decide whether any action is required;
iii) assess independence of the External Auditor, ensuring that key partners are rotated at appropriate intervals;
iv) approve the audit fee and pre-approve the use of External Auditors for non-audit services, provided the fee for such services is not material in the context of the audit fee and does not impair the External Auditor’s independence or objectivity. If the size, nature or special conditions of non-audit services are thought to give rise to a threat to the Auditor’s independence the Committee will need to explain to shareholders how auditor objectivity and independence has been safeguarded. The Committee will also give due regard to relevant ethical guidance on the matter;
v) discuss with the External Auditor, before the audit commences, the nature and scope of the audit and to review the Auditor’s quality control procedures and steps taken by the Auditor to respond to changes in regulatory and other requirements;
vi) review any representation letter(s) requested by the External Auditor before they are signed by management;
vii) review the External Auditor’s management letter and management’s response;
viii) consider management’s response to any major External Audit recommendations;
ix) satisfy itself that there are no relationships (such as family, previous or current employment, investment, financial or business) between the Auditor and the Company (other than in the ordinary course of business);
x) meet the External Auditor at least once a year, without management being present, to discuss the Auditor’s remit and any issues arising from the audit;
xi) review and approve the annual audit plan and ensure that this is consistent with the scope of the audit engagement;
xii) annually review the effectiveness and performance of External Auditor.
8. Reporting Procedures
8.1 The Committee’s duties and activities during the year shall be disclosed in the annual financial statements.
8.2 The Committee will report to the Board on how it has discharged its responsibilities:-
i) The significant issues that it considered in relation to the financial statements and how these issues were addressed;
ii) Its assessment of the effectiveness of the external audit process and its recommendation on the appointment and re-appointment of the External Auditor;
iii) Any other issues on which the Board has requested the Committee’s opinion.
8.3 Where there is disagreement between the Audit and Risk Committee and the Board, adequate time should be made available for discussion of the issue with a view to resolving the disagreement. Where any such disagreements cannot be resolved, the Committee should have the right to report the issue to the shareholders as part of the report on its activities in the annual report.
9. Annual General Meeting
The Chairman of the Committee (or a nominee from the Committee) shall attend the AGM and shall answer questions, through the Chairman of the Board, on the Committee’s activities and its responsibilities.
10. Other Matters
The Committee shall:-
i) have access to sufficient resources in order to carry out its duties, including access to the Secretary for assistance as required;
ii) be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;
iii) be responsible for the co-ordination of the Internal and External Auditors;
iv) oversee any investigation of activities which are within its terms of reference;
v) review annually its Terms of Reference and its own effectiveness and recommend any necessary changes to the Board;
vi) consider other topics, as defined by the Board.