AUDIT COMMITTEE MEMBERS
Doug Robertson – Chairman
AUDIT COMMITTEE TERMS OF REFERENCE
(Reviewed and approved by the Audit Committee on 27 November 2019)
1. COMPOSITION AND AUTHORITIES
1.1 The Chairman and members of the Audit Committee (“the Committee”) shall be appointed by
the Board on the recommendation of the Nomination and Remuneration Committee.
1.2 Appointment to the Committee shall be for a period of up to three years which may be extended for two further periods of up to three years provided the Director still meets the criteria for membership of the Committee.
1.3 The Committee shall comprise at least two directors of the Company, none of whom shall hold executive responsibility in the Company and all of whom shall be independent as determined by the Board. At least one member of the Committee shall have recent and relevant financial experience.
1.4 The Company Secretary or his nominee shall act as secretary of the Committee.
1.5 The quorum necessary for the transaction of business shall be two members. A duly convened meeting of the Committee at which a quorum is present shall be authorised to exercise all or any of the powers and discretions vested in or exercisable by the Committee. In the absence of the Chairman of the Committee, the remaining members present shall elect one of themselves to chair the meeting who would qualify under these terms of reference to be appointed to that position by the Board.
1.6 The Committee shall meet at least four times a year at appropriate times in the reporting and audit cycle and otherwise as required. The external auditor or the head of internal audit may request a meeting if it considers that one is necessary. Outside of the formal meeting programme the Committee Chairman shall maintain a dialogue with the Board Chairman, the Chief Executive, the Finance Director, the external auditors and the head of internal audit.
1.7 Only Committee members shall be entitled to be present at Audit Committee meetings. A representative of the external auditor shall normally attend meetings. Other individuals such as the Chief Executive, the Group Finance Director, any other board member, senior executive, the head of internal audit and representatives from the finance function shall attend all or part of any Committee meeting at the invitation of the Audit Committee Chairman.
1.8 At least once a year the Committee shall meet with the external auditor without executive board members or management present.
1.9 The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise on any matter within its terms of reference. The Company shall meet the expense of such advice.
1.10 The Committee is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
1.11 The Committee shall be offered the opportunity to attend meetings with major shareholders by the Chairman of the Board and/or Chief Executive.
1.12 The Committee has the right to publish in the Company’s Annual Report details of any issues
that cannot be resolved between the Committee and the Board.
2.1 The responsibilities of the Committee shall be:
(a) to oversee the Company’s relations with the external auditor;
(b) to consider, and make recommendations on the appointment, re-appointment and removal of the external auditor. The Committee shall oversee the selection process for a new external auditor and if an external auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required;
(c) to approve the terms of engagement and remuneration to be paid to the external auditor in respect of audit services provided;
(d) to assess annually the qualification, expertise and resources, effectiveness, independence and objectivity of the external auditor taking into account relevant UK professional and regulatory requirements and to review the external auditor’s report on their own internal quality procedures;
(e) to develop, recommend to the Board and monitor the Company’s policy in relation to the employment of former employees or partners of the auditor and the provision of non-audit services provided by the external auditor and to ensure that the provision of such services does not impair their independence or objectivity;
(f) to satisfy itself that there are no relationships (such as family, employment, investment, financial or business) between the external auditor and the Company (other than in the ordinary course of business) which could adversely affect the external auditor’s independence and objectivity;
(g) to discuss with the external auditor before the audit commences the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;
(h) to evaluate the risks to the quality and effectiveness of the financial reporting process and consideration of the need to include the risk of withdrawal of the external auditor from the market in that evaluation.
(i) to monitor the integrity of the financial statements of the Company including its half-year and annual financial statements and, in particular, shall review and challenge where necessary before submission to the Board:
(i) the consistency of and any changes in accounting policies and practices;
(ii) key accounting and audit judgments;
(iii) the extent to which the financial statements are affected by any significant or unusual transactions in the year, and how they are disclosed, together with the method used to account for any such transactions;
(iv) the clarity and completeness of disclosures;
(v) significant adjustments resulting from the audit;
(vi) the going concern assumptions;
(vii) compliance with accounting standards; and
(viii) compliance with London Stock Exchange, Financial Services Authority and legal requirements.
(j) to discuss problems and reservations arising from the interim and final audits, and any matters the external auditor may wish to discuss without management being present;
(k) to review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement letter;
(l) to review the external auditor’s management letter and management’s response to the external auditor’s findings and recommendations;
(m) to review the external auditor’s representation letters before consideration by the Board, giving
particular consideration to non-standard issues;
(n) 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 is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy;
(o) to review and approve the Company’s statements in the Annual Report and Accounts on the Company’s internal control systems and risk management framework prior to endorsement by the Board;
(p) to assess the scope and effectiveness of the systems established by management to identify, assess, manage and monitor financial and non-financial risks;
(q) to review the internal audit programme and ensure co-ordination between internal audit and the external auditor and to ensure that the internal audit function is adequately resourced, has appropriate standing within the Company, is free from management or other restriction and is able to function effectively and in accordance with relevant professional standards;
(r) to meet the head of the internal audit at least once a year, without other management being present, to discuss their remit and any issues arising from the internal audits carried out. In addition the head of internal audit shall be given the right of direct access to the Chairman of the Board and the Committee and is accountable to the Committee;
(s) to receive reports on the results of internal audit work on a periodic basis and to review and
monitor management’s response to the internal audit findings and recommendations;
(t) to monitor and assess the role and effectiveness of the internal audit function in the overall
context of the Company’s risk management system;
(u) to approve the appointment or the removal of the head of the internal audit;
(v) to review the adequacy and security of the Company’s arrangements for its employees and contractors to raise any concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action;
(w) to review the Company’s procedures for detecting, monitoring and managing the risk of fraud.
All confirmed instances of fraud should be reported for review by the Committee;
(x) to review the Company’s systems and controls for the prevention of bribery and receive reports on non-compliance;
(y) to review the adequacy and the effectiveness of the Company’s anti-money laundering systems and controls;
(z) to consider other topics, as defined by the Board; and
(aa) to work and liaise as necessary with all other Board Committees.
3.1 The Committee Chairman shall report to the Board after each meeting of the Committee on those matters within its duties and responsibilities.
3.2 The Committee shall make whatever recommendations to the Board it deems appropriate on
any area within the Committee’s remit where action or improvement is needed.
3.3 The Committee shall prepare a report on its role and responsibilities and the actions it has taken to discharge those responsibilities for inclusion in the Company’s Annual Report. The report should include an explanation of how the Committee has addressed the effectiveness of the external audit process; any significant issues that the Committee considered in relation to the financial statements and how these issues were addressed, having regard to matters communicated to it by the auditor; and any other information requirements set out in the UK Corporate Governance Code (“the Code”);
3.4 In compiling the reports referred to in 3.3 the Committee should exercise judgment in deciding which of the issues it considers in relation to the financial statements are significant, but should include at least those matters that have informed the Board’s assessment of whether the Company is a going concern. The report to shareholders need not repeat information disclosed elsewhere in the annual report and accounts, but should provide a cross reference to that information.
3.5 The Chairman of the Committee shall attend the Company’s annual general meeting and be available to respond to any shareholders’ questions on the Committee’s activities at that or any other general meeting of the Company.
3.6 The Committee shall annually review its terms of reference and its own effectiveness and recommend any changes to the Board.
4. DUTIES OF THE SECRETARY
4.1 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 the external or internal auditor if they consider it necessary.
4.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be sent to each member of the Committee, any other person required to attend and all other non-executive directors, five working days before the meeting. Supporting papers will be sent to Committee members and to other attendees, as appropriate, at the same time or shortly thereafter.
4.3 The Secretary shall be required to keep a proper and timely record of meetings of the Committee and circulate such minutes to all members of the Committee, the Board and to the Company’s external auditor.
4.4 The Secretary shall ensure that the Committee is properly constituted within these terms of reference. Any actual or anticipated variance of these terms should be brought to the attention of the Chairman of the Committee and the Chairman of the Board as appropriate.
4.5 The Secretary shall ensure that these terms of reference are publically available.
5. OTHER MATTERS
5.1 The Committee shall:
(a) have access to sufficient resources in order that it can carry out its duties, including access to the Secretary for assistance as required;
(b) 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;
(c) give due consideration to laws and regulations, the provisions of the Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules as appropriate.