The Board has established an Audit Committee, to assist the Board in fulfilling its oversight responsibilities.
The committee shall comprise at least two members. Members of the committee shall be appointed by the Board.
All members of the committee shall be independent non-executive directors with at least one of whom shall have recent and relevant financial experience and competence.
Only members of the committee have the right to attend committee meetings. However, it is anticipated that, the Executive Chairman, Group Financial Controller and external audit partner will be invited to attend meetings of the committee on a regular basis and other non-members may be invited to attend all or part of any meeting as and when appropriate or necessary.
The board shall appoint the committee chairman. In the absence of such an appointment, the remaining members present shall elect one of themselves to chair the meeting.
The company secretary shall act as the secretary of the committee and will ensure that the committee receives information and papers on a timely manner to enable full consideration to be given to the issues raised.
The secretary shall minute the proceedings and decisions of all meetings of the committee, including recording the names of those present and in attendance.
Draft minutes of committee meetings shall be agreed with the committee chairman prior to circulation to all members of the committee unless it would be inappropriate to do so in the opinion of the committee chairman.
Frequency of meetings
The committee shall meet at least twice a year at appropriate intervals in the financial reporting and audit cycle and more often as considered necessary.
Outside of the formal meetings, the committee chairman and other members of the committee will maintain a dialogue with key individuals involved in the company’s governance, including the Executive Chairman, Group Managing Director, and the external audit partner.
Notice of meetings
Meetings of the committee shall be convened by the secretary of the committee at the request of any of its members or at the request of the external audit partner if they consider it necessary.
Unless otherwise agreed by the committee, notice of each meeting confirming the venue, time and date together with an agenda to be discussed, shall be forwarded to each member of the committee no later than five working days before the date of the meeting. Supporting papers shall be sent if practicable to the committee members at the same time.
Notices, agenda and supporting documentation can be sent in electronic form where the recipient has agreed to receive documents in such format.
Annual General Meeting
The committee chairman should attend the annual general meeting to answer shareholder questions.
The committee is authorised to:
- Seek any information it requires from any employee of the company in order to perform its duties.
Obtain at the company’s expense, independent legal or other professional advice on any matter it believes to be necessary.
- Call any employee to be questioned at a meeting of the committee as and when required.
- Have the right to publish in the company’s annual report and accounts details of any issues that cannot be resolved between the committee and the board.
The committee should have oversight of the group and, unless required otherwise by regulation, carry out the duties below for the parent company, major subsidiary undertakings, and the group as a whole.
The committee shall monitor the integrity of the financial statements of the company, including its annual and half yearly reports, preliminary announcements and any other formal statements relating to its financial performance, and review and report to the board on significant financial reporting issues and judgements which those statements contain having regard to matters communicated to it by the auditor.
In particular, the committee shall review and challenge where necessary:
Application of significant accounting policies and any changes to them.
Methods used to account for significant or unusual transactions where different approaches are possible.
Whether the company has adopted appropriate accounting policies and made appropriate estimates and judgements, considering the external auditor’s views on the financial statements including all material information presented with the financial statements, including the strategic report and the corporate governance statements relating to the audit and risk management.
Where the committee is not satisfied with any aspect of the proposed financial reporting by the company, it shall report its views to the board.
Where requested by the board, the committee should review the content of the annual report and accounts and advise the board on whether, taken as a whole, it contains the necessary information for the shareholders to assess the company’s performance, business model and strategy as required under the relevant corporate governance code.
Internal controls and risk management systems
The committee shall:
- Keep under review the company’s internal financial controls systems that identify, assets, manage and monitor financial risks and other internal control and risk management systems.
- Review and approve the statements to be included in the annual report concerning internal control, risk management and viability statement.
Compliance, whistleblowing, and fraud
The committee shall:
- Review the adequacy and security of the company’s arrangements for its employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The committee shall ensure that these arrangements allow appropriate independent investigation and follow up actions to be taken.
- Review the company’s procedures for detecting fraud.
- Review the company’s systems and controls for the prevention of bribery and receive reports on non-compliance.
The committee shall:
- Consider the need for an internal audit department, having regard to the size and complexity of the company’s operations.
- Where no internal audit is in place, consider annually the appropriate need for an outsourced programme of internal audit and select appropriate independent provider to carry these duties out.
- Review all internal reports, monitor, and review management’s responsiveness to the findings and recommendations of the work carried out.
- If appointed meet the internal auditor at least once a year without management being present, discuss remit, issues, and way forward and adequate access to the board chairman and the committee chairman.
- Carry out an annual assessment of the effectiveness of the internal audit procedures carried out during the year along with:
- Meeting with the internal audit provider without the presence of management.
- Review and assess the annual internal audit workplan.
- Receive a report on the results of the internal audit’s work where the internal audit is carried out.
- Determine whether the quality, experience and expertise of internal audit is appropriate for the business.
- Review actions taken to implement the recommendations of the internal audit reports.
The committee shall:
- Consider and make recommendations to the board, to be put to the shareholders for approval at the annual general meeting, in relation to the appointment, re-appointment and removal of the company’s external auditor.
Develop and oversee the tendering process for the appointment of the external audit company, ensuring all appropriate necessary information is available during the tendering process.
- Need to evaluate the reasons given by the external auditors for any such resignation and take the relevant appropriate action.
- Oversee the relationship of the external auditor with the company.
- Assess, reviewing and monitor the external auditor’s independence and objectivity annually, considering relevant UK law, regulation and Ethical Standards and any other appropriate professional requirements, including the rotation of the audit partner and audit team. Monitor safeguards to any threats of the auditor’s independence and mitigate the threats as appropriate.
- Satisfy that there are no relationships between the auditor and the company, other than in the ordinary course of business, which could adversely affect the auditor’s independence and objectivity.
- Agree a policy with the board on the employment of former employees of the company’s external auditor, considering the Ethical Standard and legal requirements. Monitor and maintain the application of the policy.
- Evaluate any risks relating to the quality and effectiveness of the financial reporting process in conjunction with the external auditor’s communications with the committee.
- Consider the impact of non-audit services and any threats to the external auditors’ independence and objectivity.
Meet the external auditor at least once a year without management being present, discuss remit and any issues arising from the audit which would impact the quality of the audit. Discuss and review the audit findings to any major issues, key accounting and audit judgements and level of errors identified during the audit.
- Review representation letter provided by the external auditor prior to signing.
- Review management letter and management response to the auditor’s findings and recommendations.
The committee chairman shall report formally to the board after each meeting showing how the committee has discharged its responsibilities, including any significant issues in relation to the financial statements and assessment of the effectiveness of the external audit process.
The committee shall make recommendations to the board that it deems appropriate within its remit where action or improvement is required.
The committee shall:
- Have access to sufficient resources in order to carry out its duties.
- Be provided with appropriate and timely training, for new and existing members.
- Give due consideration to relevant laws and regulations, in particular to the corporate governance code and listing rules and any other applicable rules as appropriate.
- Work and liaise with all other board committees, taking into account the impact of risk management and internal controls delegated to those committees.
- Periodically review its own performance and terms of reference to ensure operating at maximum effectiveness and recommend any changes as necessary to the board.