AUDIT COMMITTEE
The members of the Audit Committee are:
- Victoria Jarman, Chairman
- William Eccleshare
- Paul Harrison
- Richard Smelt
- Paul Stoneham
- Pippa Wicks
Terms of Reference
To ensure that the Company applies consistent financial reporting and internal control procedures and maintains an appropriate relationship with the Company's Auditor.
Constitution
The members of the Committee will be Independent Non-Executive Directors appointed by the board on the recommendation of the Nomination Committee. Committee membership will initially be for three years and can be subsequently extended by additional three-year periods, provided that the relevant member continues to meet the independence and, if applicable, the financial experience criteria for membership of the Committee. The Committee shall consist of at least three members and the quorum shall be two. The Chairman of the Board shall not be a member of the Committee.
At least one member of the Committee should have recent and relevant financial experience.
The Company Secretary will act as Secretary to the Committee, ensuring papers are distributed and minutes of decisions are maintained.
The Committee shall invite members of management, external Auditor and internal auditors to attend its meetings as it thinks fit.
The Committee shall hold sufficient meetings as its role and responsibilities require, which ordinarily shall not be less than three times each year, at appropriate times in the reporting and audit cycle.
Duties
With the exception of the quarterly trading statements, which are approved by a subcommittee of the board, examine all formal announcements relating to financial performance including annual and half yearly financial statements and preliminary announcements before submission to the Board including:
Considering the appropriateness and application of accounting policies, compliance with accounting standards, stock exchange, legal and regulatory requirements, including any changes in accounting standards in the period;
Considering any significant adjustments proposed by the Auditor during their review and any matters of significant disagreement between Auditor and management;
Considering and concluding on the treatment of any other major judgmental items;
Considering the appropriateness of the going concern assumption;
Reviewing the disclosure of the principal risks in the business and the associated corporate governance statement regarding internal controls and compliance with the UK Corporate Governance Code;
Reviewing the clarity and completeness of disclosures in the financial statements and considering whether the disclosures made are set properly in context; and
Considering whether the financial statements provide a true and fair view.
Recommend to the board for approval by the shareholders the appointment of the external Auditor and monitoring thereafter the relationship including:
Considering whether the audit fees for audit and non-audit work are appropriate, and whether an effective audit can be performed for this sum;
Considering any questions of resignation, dismissal and independence, including investigation of any issues arising and considering whether any action is required;
Approving their engagement letter, including any issued at the start of an audit;
Considering the nature, scope and materiality of the audit, ensuring that there are no restrictions on the audit scope;
Reviewing the external Auditor's management letter and management's response;
Agreeing with the Board a policy on the employment of former employees of the Auditor;
Monitoring the Auditor’s compliance with relevant ethical and professional guidance on the rotation of partners;
Seeking reassurance that the auditors and their staff have no financial, business, employment or family and other personal relationship with the company which could adversely affect the auditor’s independence and objectivity;
Reviewing any representation letters requested by the Auditor before they are signed by management;
Defining a formal policy specifying the types of non-audit work that the Auditor is excluded from; can be engaged without referral to the Committee; and for which a case by case decision is necessary;
Reviewing the effectiveness and objectivity of the audit process on an annual basis, the quality control procedures and consider the expertise and resources of the Auditor. The annual transparency report of the audit firm should also be considered, when published;
Meeting at least annually with the external Auditor, without management being present, to discuss their remit and any issues arising from the audit;
Considering communications from the external Auditor on audit planning and findings and on any material weaknesses in accounting and internal control systems that came to the Auditor’s attention; and
Assessing periodically the risks associated with the possible withdrawal of the Auditor from the market and consider whether any mitigating action is appropriate.
Monitoring and reviewing the company’s internal controls and risk management including:
Reviewing the internal control and risk management systems; and
Considering reports from the management on the effectiveness of the systems they have established and the conclusion of any testing carried out by internal or external auditors.
Monitoring and reviewing the effectiveness of the company's internal audit function including:
At least annually reviewing and approving the internal audit programme;
Approval of the appointment or dismissal of the Head of Internal Audit;
Considering the terms of reference for internal audit;
Reviewing internal audit reports and procedures to ensure implementation of recommendations including management responses thereto;
Assessing the adequacy of resourcing of the internal audit function;
Considering the terms of the outsourcing arrangements for the conduct of the internal audit programme; and
Meeting at least annually with the head of internal audit without management being present to discuss their remit and any issues arising from audits carried out. In addition the head of internal audit will have direct access to the Chairmen of both the Board and the Committee.
Ensure compliance with laws, regulations, ethical and other issues including:
Evaluating the effectiveness of processes for determining risks and exposures to litigation and claims and from non-compliance with laws and regulations;
Considering the appropriateness and treatment of any non-standard financing structures;
Reviewing with the group's lawyer and others any legal, tax or regulatory matter that may have a material impact on the group's operations or financial statements;
Ensure that the Company maintains adequate and secure arrangements for its employees to raise concerns, in confidence, about possible wrongdoings in financial reporting, or other matters and that these arrangements provide for independent investigation, appropriate follow up action and appropriate escalation to the Committee for its review;
Considering fraud or ethical issues;
In areas where the Audit Committee has responsibility for monitoring compliance with internal policies and procedures reviewing the relevant policies annually or when there is a significant change and assessing compliance with those policies on an annual basis; and
Considering other topics as defined by the Board.
Monitoring and evaluating the performance of the Audit Committee and making recommendations to the Board with regard to any necessary adjustments.
Reporting its activities to the Board on a regular basis and reviewing these terms of reference on an annual basis.
Prepare a report for inclusion in the Annual Report detailing:
A summary of the role of the Audit Committee;
The names and qualifications of all members of the Audit Committee during the period;
The number of Audit Committee meetings;
The way the Audit Committee has discharged its responsibilities;
How the policy for non-audit services was applied to safeguard the Auditor’s objectivity and independence; and
How the Audit Committee reached its recommendation to the board on the appointment, reappointment or removal of the Auditor, with supporting information on tendering frequency, the tenure of the incumbent Auditor and any contractual obligations that acted to restrict the Committee’s choice of external Auditor.
Adopted 20 February 2012
