1. Constitution 1.1 The Board hereby resolves to establish a committee of the Board, to be known as the Audit Committee (“the committee”).
2. Membership 2.1 The committee shall be appointed by the Board. All members of the committee shall be non-executive directors of the Company. The committee shall consist of not less than three members. Two members shall comprise a quorum at any meeting of the committee.
2.2 The chairman of the committee shall be appointed by the Board from amongst the independent non-executive directors.
3. Attendance at Meetings 3.1 Other Board members and a representative of the external auditors shall attend meetings at the invitation of the committee. The Finance Director and Chief Executive will attend every meeting unless specifically requested to be absent.
3.2 There should be at least one committee meeting, or part of a meeting, each year where the external auditors attend.
3.3 The company secretary shall be secretary to the committee.
4. Frequency of Meetings 4.1 Meetings shall be held not less than three times each year and, where appropriate, shall coincide with key dates in the Company’s financial reporting cycle.
4.2 Additional meetings shall be held as required, and any member of the committee, the Company secretary or the external auditors may request a meeting if they consider that one is necessary.
5. Authority The Committee is authorised by the Board: -
To investigate any activity within its terms of reference.
To seek any information that it requires from any employee (and all employees are directed to co-operate with any request made by the Committee).
To obtain external legal or other independent professional advice and request advisers to attend meetings as necessary
6. Responsibilities The responsibilities of the Committee shall be: -
To consider the appointment of the external auditor and assess the independence of the external auditor, ensuring that key partners are rotated at appropriate intervals.
To oversee the process of selecting the external auditor and make appropriate recommendations, through the Board, to the shareholders for consideration at the annual general meeting.
To recommend the audit fee to the Board and approve any fees in respect of non-audit services provided by the external auditor, and to ensure that the provision of non-audit services does not impair the independence or objectivity of the external auditor.
To develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provisions of non-audit services by the external auditor.
To discuss with external auditor, before the audit commences, the nature and scope of the audit, and any additional assurance or reporting that may be required, and to review the auditor’s quality control procedures and the steps taken to respond to changes in regulatory and other requirements.
To review the external auditor’s management letter and management’s response.
To monitor and review the effectiveness of the Company’s financial accounting processes.
To ensure that the management is responsive to the recommendations of the external auditor.
To review the Company’s procedures for handling allegations from whistleblowers.
To review reports from management on the effectiveness of the systems for internal financial control, financial reporting and risk management.
To monitor the integrity, review, and challenge where necessary, the financial statements relating to the Company’s financial performance, 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 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 accounting standards; and
compliance with UK Listing authority, stock exchange or other requirements.
To review the Company’s statements on compliance with the Combined Code, going concern and the review of the effectiveness of the Company’s system of internal control prior to endorsement by the Board, and in particular to review: -
the policies and processes for identifying and assessing business risks and the management of those risks to the Company;
the Company’s policies for ensuring compliance with relevant legal and regulatory requirements;
the Company’s policies for the prevention and detection of fraud; and
the effectiveness of such policies and procedures in practice.
To discuss any problems and reservations arising from the external audit and any matters that the external auditors may wish to discuss (in the absence of management where necessary).
To consider other topics and issues as defined by the Board.
7. Reporting Procedures 7.1 The Secretary shall circulate the minutes of the meeting of the Committee to all members of the Board.
7.2 The Chairman of the Committee or another member of the Committee, shall attend the Board Meeting at which the annual accounts and reports are approved.
7.3 The committee’s responsibilities and activities during the year shall be disclosed in the Annual Report and Accounts.
7.4 The Chairman of the Committee or another member of the Committee, shall attend the Annual General Meeting and answer questions, through the Chairman of the Board, on the Committee’s responsibilities and activities.
8. Self-Assessment and Appraisal The Committee shall conduct an annual review of its work and terms of reference, and an annual assessment of its own effectiveness and make recommendations to the Board.