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Formal terms of reference for the Audit and Risk Committee:
1. Membership
1.1 The Audit and Risk Committee, which is a Committee of the Board of the Company without executive powers except as set forth herein, shall be composed of not less than three members, all of whom are independent non-executive directors. The Chairman of the Audit and Risk Committee shall be invited to hold such position by the Board.
1.2 At least one member of the Audit and Risk Committee shall have recent and relevant financial experience as determined under relevant legal and listing requirements.
2. Proceedings
2.1 The quorum for meetings shall be any three members of the Audit and Risk Committee. The Company Secretary to the Company shall be the Secretary to the Audit and Risk Committee or, with the consent of the Chairman of the Audit and Risk Committee, such person as the Company Secretary shall nominate.
2.2 The Audit and Risk Committee will meet as it deems appropriate, but at a minimum this will be four times a year. The Audit and Risk Committee will meet at the request of the external auditor or the Group Audit Director. The external auditor and the Group Audit Director shall have access to the Chairman of the Audit and Risk Committee at any time.
2.3 By invitation of the Chairman of the Audit and Risk Committee, the external and internal auditor, the Chairman of the Board, the Group Chief Executive Officer, the Group Chief Financial Officer, other directors and representatives from the finance function and other areas of the business may attend meetings of the Audit and Risk Committee.
3. Duties
3.1 Financial reporting
The Audit and Risk Committee shall:
3.1.1 monitor and discuss with management and the external auditor the integrity of the preliminary results, the half-year information and the annual financial statements reviewing significant financial reporting judgements which they contain before reporting to the Board focusing particularly on:
3.1.1.1 the quality and appropriateness of:
· the accounting policies and practices, including without limitation critical accounting policies and practices, all alternative accounting treatments within generally accepted accounting principles for policies and procedures related to material items that have been discussed with management, ramifications of the use of such alternative treatments and the treatment preferred by the external auditor; and
· financial reporting disclosures and changes thereto, including a review of any material items of correspondence between the Company and the external auditor;
3.1.1.2 areas involving significant judgement, estimation or uncertainty in the Group’s financial results;
3.1.1.3 the extent to which the financial statements are affected by any unusual transactions or any off–balance sheet arrangements, including any disclosable guarantees, indemnification agreements or interests in unconsolidated special purpose entities, in the year and how they are disclosed;
3.1.1.4 the clarity of disclosures;
3.1.1.5 significant implemented adjustments resulting from the audit or review;
3.1.1.6 misstatements reported to the Audit and Risk Committee by the auditor that individually or in aggregate have not been corrected and management’s explanations as to why they have not been adjusted;
3.1.1.7 possible impairments of the Group’s assets;
3.1.1.8 the basis for the going-concern assumption; and
3.1.1.9 compliance with financial reporting standards and relevant financial and governance reporting requirements;
3.1.2 monitor the integrity of other formal announcements relating to the Company's financial performance, reviewing significant financial reporting judgements contained in them; and
3.1.3 monitor compliance with statutory and stock exchange requirements (for any exchange on which the Company’s securities are quoted) for financial reporting.
3.2 Internal controls and risk management systems
The Audit and Risk Committee shall:
3.2.1 consider and make recommendations to the Board on the nature and extent of the significant risks the Company is willing to take in achieving its strategic objectives;
3.2.2 review the company’s internal financial controls and internal control and risk management systems and review and report to the Board on the statements to be included in the annual report concerning internal control and risk management;
3.2.3 review arrangements for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing or other matters and for the anonymous and confidential submission and treatment of employee concerns regarding possible improprieties in matters of financial reporting or other matters;
3.2.4 have oversight of the company’s compliance with Section 404 of the US Sarbanes-Oxley Act of 2002;
3.2.5 monitor and review the scope, extent and effectiveness of the activity of the Group in relation to compliance before reporting to the Board;
3.2.6 consider management’s response to any material external or internal audit recommendations; and
3.2.7 review management’s and the internal auditor’s reports on the effectiveness of systems for internal control, financial reporting and risk management.
3.3 Internal audit
The Audit and Risk Committee shall:
3.3.1 monitor and review the scope, extent and effectiveness of the activity of the Group Internal Audit Department including the approval of the appointment or the dismissal of the Group Audit Director;
3.3.2 ensure the Group Internal Audit Department has adequate resources and appropriate access to information to perform its role effectively;
3.3.3 review and assess the annual internal audit plan; and
3.3.4 review reports addressed to the Audit and Risk Committee from the Group Audit Director covering, amongst other things, concerns over controls and the monitoring of the level of fraudulent activity in the Company.
3.4 External audit
The Audit and Risk Committee shall:
3.4.1 consider and make recommendations to the Board for it to put to the shareholders for their approval in general meeting in relation to the appointment, re-appointment and removal of the external auditor;
3.4.2 oversee the relationship with the external auditor including:
3.4.2.1 discuss with the external auditor the nature and scope of the audit (including any significant ventures, investments or operations which are not subject to audit) and ensure co-ordination if more than one audit firm is involved;
3.4.2.2 approve the audit engagement fees and terms and review annually the activities, findings, conclusions and recommendations of the external auditor which shall report directly to the Audit and Risk Committee;
3.4.2.3 review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process taking into account relevant professional and regulatory requirements including reviewing and monitoring the external auditor’s quality control procedures and steps taken by the external auditor to respond to changes in regulatory and other requirements. This review will include a review of the experience and qualifications of the senior members of the audit team, including rotational procedures;
3.4.2.4 be responsible for ensuring the resolution of any disagreements between management and the external auditor regarding financial reporting;
3.4.2.5 consider communications from the external auditor on audit planning and findings and on significant deficiencies and material weaknesses in accounting and internal control systems that come to the auditor’s attention, including a review of material items of correspondence between the Company and the external auditor; and
3.4.2.6 taking into account relevant ethical guidance to pre-approve the scope and extent of audit and non-audit services provided to the Group by any third party in the case of audit services and by the external auditor in the case of audit and permitted non-audit services. The Audit and Risk Committee may delegate to the Chairman of the Audit and Risk Committee (and in his/her absence another member) the authority to pre-approve any audit or permitted non-audit service to be provided by the external auditor provided such approvals are presented to the Audit and Risk Committee at its next scheduled meeting.
4. Authority
The Audit and Risk Committee is authorised:
4.1 to investigate any activity it deems necessary to carry out its duties;
4.2 to seek any information it requires from any employee; and
4.3 to employ the service of such advisers as it deems necessary or appropriate to fulfil its responsibilities. Such advisers may attend meetings by invitation of the Chairman of the Audit and Risk Committee.
5. Other
5.1 The Audit and Risk Committee shall:
5.1.1 report its activities to the Board on a regular basis;
5.1.2 undertake other duties as requested by the Board from time to time;
5.1.3 perform any other activities consistent with these terms of reference and appropriate governing law on behalf of Group companies that the Audit and Risk Committee deems necessary or appropriate;
5.1.4 have access to sufficient funds to fulfil its duties, including to compensate any advisers engaged by the Audit and Risk Committee and the Company’s external auditor;
5.1.5 hold separate and private discussions, as often as the Audit and Risk Committee deems necessary but on at least two occasions each year, with the external auditor, with the Group Audit Director and with management without the others being present at those discussions; and
5.1.6 annually review these terms of reference and monitor and evaluate the performance of the Audit and Risk Committee and make recommendations to the Board with regard to any adjustments that are deemed necessary.
5.2 The Chairman of the Audit and Risk Committee shall attend the Annual General Meeting of the Company and shall answer any questions on the Audit and Risk Committee’s activities and its responsibilities.
