Audit Committee

Terms of reference

Membership

The Audit Committee (‘the Committee’) shall consist of at least two non-executive directors of the Company. The Chairman of the Company shall not be a member of the Committee.

Committee appointments shall be made by the Board on the recommendation of the Nomination Committee and in consultation with the Committee Chairman.

The Board shall ensure that there is always at least one Committee member who has recent and relevant financial experience.

The Chairman of the Committee shall be Ian Brindle or such other member as may be appointed from time to time by the Board.

Meetings

Meetings will be held at least three times per annum and a quorum for each meeting shall be two members.

The Finance Director, the Head of Group Internal Audit and a representative of the external auditors shall attend meetings at the invitation of the Committee. Other Board members shall attend if invited by the Committee. At least once a year the Committee will convene a meeting, or part thereof, where the external auditors and internal auditors attend without management present.

The Company Secretary or the Deputy Company Secretary shall be the Secretary of the Committee and shall ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration to be given to the issues.

Authority

The Committee shall be authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees shall be directed to co-operate with a request by the Committee.

The Committee shall be authorised by the Board to obtain outside legal, financial or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

Relationship with the Board

The Board shall determine the role of the Committee and review its authority, terms of reference and scope of activity.

The Board shall review the effectiveness of the Committee on an annual basis.

Where there is a disagreement between the Committee and the Board, adequate time should be made available for discussion of the issue with a view to resolving the disagreement. Where any such disagreements cannot be resolved, the Committee shall have the right to report the issue to the shareholders as part of the report on its activities in the annual report.

Role and Responsibilities

The role and responsibilities of the Committee shall be:

• to review, and challenge where necessary, the actions and judgements of management, in relation to the interim and annual financial statements before submission to the Board, paying particular attention to:
  • critical accounting policies and practices, and any changes in them;
  • decisions requiring a major element of judgement;
  • the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed;
  • the clarity of disclosures;
  • significant adjustments resulting from the audit;
  • the going concern assumption;
  • compliance with accounting standards;
  • compliance with stock exchange and other legal requirements; and
  • reviewing the Company’s statement on internal control systems prior to endorsement by the Board and to review the policies and process for identifying and assessing business risks and the management of those risks by the Company.
• To monitor and review the effectiveness of the internal audit programme and ensure that it has adequate resources and appropriate standing to fulfil its role.
• To consider management’s response to any major internal audit recommendations.
• To approve the appointment or dismissal of the head of internal audit.
• To consider and recommend to the Board the appointment, re-appointment and removal of the external auditor and to consider and approve the audit fee and terms of engagement of the external auditor.
• To assess, review and monitor the external auditor’s independence and objectivity, including the rotation of key partners at appropriate intervals when necessary.
• To assess, review and monitor the effectiveness of the external audit.
• To discuss with the external auditor, before the audit commences, the nature and scope of the audit and to review the auditors’ quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements;
• To review the external auditor’s representation/management letter and management’s response
• To assess management’s response to any major external audit recommendations
• Develop, implement and review the policy on the engagement of the external auditor regarding the provision of non-audit services, ensure that the provision of non audit services does not impair the external auditor’s independence or objectivity and report to the Board on any matters which require consideration or improvement with the recommended steps to be taken to rectify such matters. Ensure that a statement appears in the annual report describing how auditor objectivity and independence is achieved when non-audit services are carried out by the current external auditor.
• To assess and review the Company’s procedures for handling allegations from whistleblowers including ensuring that sufficient resources are made available, that the results of any independent investigations are reported to the Board along with any follow-up actions.

Reporting Procedures

The Secretary shall prepare the agenda and minutes of meetings of the Committee for circulation to all members of the Board, and the Chairman of the Committee or, as a minimum, another member of the Committee, shall attend the Board Meeting at which the accounts are approved.

The Committee members shall conduct an annual review of their work and these terms of reference and make recommendations to the Board.

The Committee’s duties and activities during the year shall be disclosed in the annual financial statements.

The Chairman of the Committee shall attend the AGM and shall answer questions, through the Chairman of the Board, on the Committee’s activities and their responsibilities.