Memorandum and Articles of Association

Admission document

AUDIT COMMITTEE - TERMS OF REFERENCE

Constitution

The board hereby resolves to establish a Committee of the board to be known as the Audit Committee. This constitution replaces all previous constitutions of the Committee.

Membership

The Committee shall be appointed by the board on the recommendation of the Nominations Committee. The Committee shall comprise of the non executive director, the Chairman of the Board and the Chief Executive. A quorum shall be two members;

The chairman of the Committee shall be appointed by the board from amongst the non executive directors. In the absence of the chairman, the remaining members present shall elect one of themselves to chair the meeting;

Secretary

The secretary of the Committee shall be nominated by the members of the Committee.

Attendance at meetings

No one other than the Audit Committee members shall be entitled to attend Audit Committee meetings;

The Finance director, a representative of the external auditors, or other persons shall attend meetings at the invitation of the Committee;

There should be at least one meeting a year, or part thereof, where the Audit Committee meets the external auditors without executive board members present.

Frequency of meetings

Meetings shall be held not less than twice a year to coincide with key dates in the company’s financial reporting cycle;

External auditors or the Chairman of the Audit Committee may request a meeting if they consider that one is necessary.

Authority

The Committee is authorised by the board to:

investigate any activity within its terms of reference;
Seek any information that it requires from any employee of the company and all the employees are directed to cooperate with any request made by the Committee;
Obtain outside legal or independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

Duties

The duties of the Committee shall be:

Internal financial control and risk management
to monitor the integrity of the company’s internal financial controls;
to assess the scope and effectiveness of the systems established by the Executive and management to identify, assess, manage and monitor financial and non financial risks;
to review management’s report on the effectiveness of the systems for internal financial control, financial reporting and risk management;

Internal audit

to monitor and assess the requirement for an internal audit function in the overall context of the company’s risk management system;

External audit – process

to consider, and make recommendations on the appointment, reappointment and removal of the external auditor;

to recommend to the Board the terms of engagement and the remuneration to be paid to the external auditor in respect of audit services provided;

to assess the qualification, expertise and resources, effectiveness and independence of the external auditor every five years;to devise procedures to ensure the independence and objectivity of the external auditor annually, taking into consideration relevant professional and regulatory requirements;

to seek reassurance that the auditors and their staff have no family, financial, employment, investment or business relationship with the company other than in the normal course of business;

to seek from the audit firm, on an annual basis, information about policies and processes for maintaining independence and monitoring compliance with relevant requirements, including current requirements regarding the rotation of partners and staff;

to monitor the external audit firm’s compliance with applicable ethical guidance relating to the rotation of the audit partners, the level of fees that the company pays in proportion to the overall fee income of the firm, office and partner and other relation regulatory requirements;

to agree with the board and monitor the company’s policy for the employment of former employees of the external auditor;

to consider the criteria which govern the compensation of the individuals performing the audit;

following a briefing with the Executive, the Audit Committee will discuss with the external auditor, before the audit commences, the nature and scope of the audit;

to review with the external auditors, the findings of their work including any major issues that arose during the course of the audit and have subsequently been resolved and those issues that have been left unresolved; key accounting and audit judgements; levels of errors identified during the audit, obtaining explanations from management and, where necessary the external auditors, as to why certain errors might remain unadjusted;

to review the audit representation letters before signature by management and give particular consideration to matters where representation has been requested that relate to non-standard issues;

to assess, at the end of the audit cycle, the effectiveness of the audit process by:

review whether the auditor has met the agreed audit plan and understand the reasons for any changes, including changes in perceived audit risks and the work undertaken by the external auditors to address those risks;

consideration of the robustness and perceptiveness of the auditors in their handling of the key accounting and audit judgements identified and in responding to questions from the Audit Committees, and in their commentary, where appropriate, on the systems of internal control;

obtaining feedback about the conduct of the audit from key people involved;

to review and monitor the content of the external auditor’s management letter, in order to assess whether it is based on a good understanding of the company’s business and establish whether recommendations have been acted upon and, if not, the reasons why they have not been acted upon;

External audit – non audit

to ensure compliance of the board’s policy in relation to the provision of non-audit services by the auditor and ensure that the provision of such services does not impair the external auditor’s independence or objectivity;
to consider whether the skills and experience of the audit firm make it a suitable supplier of the non-audit services;
to consider whether there are safeguards in place to ensure that there is no threat to objectivity and independence in the conduct of the audit resulting from the provision of such services by the external auditor;
to consider the nature of the non-audit services, the related fee levels and the fee levels individually and in aggregate relative to the audit fee;
to set and apply a formal policy specifying the types of non-audit work: from which the external auditors are excluded, for which the external auditors can be engaged without referral to the audit Committee, and for which a case-by-case decision is necessary.

Relationship with the Board

to review, and challenge where necessary, the actions and judgements of management, in relation to the company’s financial statements, operating and financial review, interim reports, preliminary announcements and related formal statements before submission to the auditors and board, paying particular attention to:
critical accounting policies and practices, and any changes in them;
decisions requiring a significant 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 the accounting standards;
compliance with stock exchange and other legal requirements;
reviewing the company’s statements on internal control and risk management;
to consider other topics, as defined by the board

Whistle blowing

to review the company’s procedures for whistle blowing and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters.

Reporting

The Secretary shall circulate the minutes of meetings of the Committee to all members of the board, and the chairman of the Committee shall, as a minimum, attend the board meeting at which the accounts are approved.

The Audit Committee shall annually review its performance and terms of reference and recommend any necessary changes to the board.

The role and responsibilities of the Audit Committee and the actions taken by the Audit Committee to discharge those responsibilities shall be disclosed in the annual report and accounts. Such a report should specifically include:

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, and
the way the Audit Committee has discharged its responsibilities.

Where disagreements between the Audit Committee and the board cannot be resolved, the Audit Committee shall report the issue to the shareholders as part of the report on its activities in the company’s annual report.

If the board does not accept the Audit Committee’s recommendation regarding the appointment, reappointment and removal of the external auditors, the Audit Committee shall include a statement explaining its recommendation and reasons why the board has taken a different stance in the annual report.

The Audit Committee chairman shall attend the AGM and shall answer questions, through the chairman of the board, on the Audit Committee’s activities and their responsibilities.

Appendix A

Audit Committee meeting timetable

March

Review of preliminary announcement
Review of annual report and accounts
Review of external audit findings
Meeting with external auditors without management

August

Review of half year results
Agreement of external audit strategy and scope
Requirement for an internal audit function

Standing agenda items

Minutes from previous meeting
Relevant updates on corporate governance, financial reporting and auditing
Progress on actions taken by management in response to Audit Committee recommendations as well as those from external auditors.
Discussions with external auditors without the presence of executive management if needed.
These schedules assume that the Group’s year end remains as 31 December