Audit Committee – Terms of Reference
1. Membership and attendance
- The Committee shall be appointed by the Board, on the recommendation of the Nominations Committee, and shall comprise a chairman and at least two other members.
- All members of the Committee shall be independent Non-Executive Directors, with at least one member having recent, relevant financial knowledge to meet the appropriate definition of 'financial expert' within the Committee. The Chairman of the Board shall not be a member of the Committee.
- Care should be taken to minimise the risk of any conflict of interest that might be seen to give rise to an unacceptable influence.
- The Board, on the recommendation of the Nominations Committee, shall appoint the Committee's chairman. In the absence of the Committee's chairman and/or an appointed deputy, the remaining members present shall elect one of their number present to chair the meeting.
- The Finance Director, Director of Corporate Assurance and a senior partner from the Company's external auditors shall be invited and will normally attend meetings. Other directors, senior financial managers and members of the Company's external auditors may also be requested to attend as judged appropriate by the chairman of the Committee. Invitees have no right to attend.
- The Committee shall meet the Company's external auditors without any executive management or directors being present, at least once a year and may also call for meetings with the external auditors, without the presence of any executive director at such other times as they think necessary. The Committee should also, at least once a year, meet the Director of Corporate Assurance without any executive management or director being present.
- The Company Secretary or his/her nominee shall act as the Secretary of the Committee.
- The quorum necessary for the transaction of business shall be two members present in person, or linked by telephone or video conference facilities. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.
- A resolution in writing signed by all the Committee members for the time being shall be as valid effective as if the same had been passed at a duly convened meeting of the Committee and may consist of two or more documents in like form each signed by one or more members of the Committee.
4. Frequency of Meetings
- The Committee shall meet at least three times a year and at such other times as the chairman of the Committee shall require.
- Meetings will be arranged to tie in with the publication of the Company's financial statements.
- Meetings can be requested by the external auditors or the Director of Corporate Assurance if they consider this is necessary.
5. Notice of Meetings
- Meetings of the Committee shall be summoned by the Secretary of the Committee at the request of any member thereof.
- 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 fewer than three working days prior to the date of the meeting.
6. Minutes of Meetings
- The Secretary shall minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance.
- The Secretary should ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.
- Minutes of Committee meetings shall be circulated to all members of the Committee and to the chairman and all other members of the Board, unless it would be inappropriate to do so.
7. Annual General Meeting
- The Chairman of the Committee shall attend the Annual General Meeting and be prepared to respond to any shareholder questions on the Committee's activities.
Internal Control and Risk Assessment
- The Committee shall assist the Board in meeting the risk management and internal control provisions of the UK Corporate Governance Code by keeping under review the effectiveness of the Company's internal controls over financial reporting, in addition to reviewing the overall internal control policies, procedures and systems for the identification, assessment, management and reporting of risks.
Corporate Assurance Function
- The Committee shall at least annually consider and approve the terms of reference of the Corporate Assurance Function and the annual audit plan. The Committee shall also be advised of actual performance against the plan and the reasons for any change or delay in the programme.
- The Committee shall review the management of financial matters and focus upon the freedom allowed to the Corporate Assurance Function.
- The Committee shall review promptly all reports on the Company from the Corporate Assurance Function.
- The Director of Corporate Assurance shall be given the right of direct access to the chairman of the Committee.
- The Committee shall formally approve any appointment or termination of appointment to the role of Director of Corporate Assurance.
- The Committee shall consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, as regards the appointment, re-appointment, removal and/or remuneration of the Company's external auditors, and shall ensure that key partners within the appointed firm are rotated, in line with the requirements set out in the Company's Policy on Auditor Independence.
- The Committee shall meet with the external auditors at least twice each year, once at the planning stage where the scope of the audit will be considered and once post audit at the reporting stage, and shall ensure that any auditor's management letters and management's responses are reviewed.
- Review any representation letter(s) requested by the external auditor before they are signed by management.
- The Committee shall keep under review the relationship with the external auditors including (but not limited to):
- approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
- the independence and objectivity of the external auditors;
- any non-audit services provided by the auditors;
- the consideration of audit fees which should be paid as well as any other fees which are payable to auditors in respect of non-audit activities; and
- discussions with the external auditors concerning such issues as compliance with accounting standards.
In addition, each year, the Committee shall formally review Auditor Independence and document its position on this matter.
- The Committee shall keep under review the consistency of accounting policies both on a year to year basis and across the Group.
- The Committee shall receive a report from the Company's external auditors prior to the publication or filing of the Company's financial statements. In conjunction with this report, the Committee shall review and challenge where necessary the Company's financial statements taking into account:
- critical accounting policies used;
- decisions requiring a major element of judgement;
- the extent to which the financial statements are affected by any unusual transactions;
- the clarity of disclosures, including any observations from the Disclosure Committee with regard to verification activities;
- significant adjustments resulting from the audit;
- any material written communication between the external auditors and the management of the Company;
- the going concern assumption;
- compliance with accounting standards;
- compliance with stock exchange, UK Listing Authority and other legal and regulatory requirements; and
- reviewing the Company's statement on internal control systems prior to endorsement by the Board and to review the policies and processes for identifying and assessing business and financial risks and the management of those risks by the Company.
- The Committee or its chairman shall meet formally with the Board at least once a year to discuss such matters as the Annual Report and the relationship with the external auditors.
- In the light of its other duties, the Committee shall make whatever recommendations to the Board it deems appropriate.
- The Committee has no executive powers with regard to its recommendations and does not relieve the directors of their responsibilities for financial reporting and corporate control.
- The Committee shall give due consideration to the requirements of the UK Listing Authority.
- The Committee will review the Company's procedures for handling allegations from whistleblowers and similar matters reported under the Group's Code of Conduct.
- The Committee shall oversee any investigation of activities which are within its terms of reference and act as a court of the last resort
- The Committee should, annually, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness.
The Committee is authorised:
- to seek any information it requires from any employee of the Company (all of whom are directed to co-operate fully with any request made by the Committee) in order to perform its duties;
- to obtain, at the Company's expense, outside legal or other professional advice on any matters within its terms of reference;
- to call any member of staff to be questioned at a meeting of the Committee as and when required;
- to institute special projects or investigations on any matter within the Committee's terms of reference as it sees fit and to consider whether from time to time any special remit should be referred to the Company's external auditors or to any other external body; and
- To ensure co-ordination between the Corporate Assurance Function and external auditors.
Date of issue: 01 May 2012