AUDIT COMMITTEE TERMS OF REFERENCE
1.1 To increase shareholder confidence and to ensure the credibility and objectivity of published financial information.
1.2 To assist the Board in meeting its financial reporting responsibilities and fulfilling its oversight responsibilities.
1.3 To assist the Board in ensuring the effectiveness of the internal accounting and financial controls.
1.4 To strengthen the independent position of the Company's external auditors by providing channels of communication between them and the non-executive directors.
1.5 To review the performance of the Company's internal and external auditing functions.
1.6 In performing its duties, the Audit Committee will maintain effective working relationships with the Board, the Company's management and the external auditors. To perform his or her role effectively, each member of the Audit Committee must be familiar with these terms of reference as well as the Company's business operations and risks.
2.1 The Audit Committee shall consist of at least two members, who shall be appointed by the Board on the recommendation of the Nomination Committee in consultation with the Chairman of the Audit Committee.
2.2 All members of the Audit Committee shall be independent non-executive directors of the Company at least one of whom shall have recent and relevant financial experience ideally with a professional qualification from one of the professional accountancy bodies. The chairman of the Board may be a member of, but not chair, the Audit Committee provided he or she was considered independent on appointment as chairman.
2.3 The Chairman of the Audit Committee shall be appointed by the Board and shall be an independent non-executive director.
2.4 Appointments to the Audit Committee shall be for a period of up to three years, extendable by no more than two additional three year periods, provided the director still meets the criteria for membership of the Audit Committee including in relation to independence.
2.5 Only members of the Audit Committee shall have the right to attend meetings of the Audit Committee. However, other individuals such as the CEO and, to the extent relevant, the heads of the risk, compliance and internal audit departments of the Company may be invited to attend all or part of any meeting as and when appropriate and necessary (including calling any employee to be questioned at a meeting of the Audit Committee as and when required).
2.6 The external auditor and CFO will be invited to attend meetings of the Audit Committee on a regular basis.
3. Duties and authority
3.1 The Audit Committee is a sub-committee of the Board and, as such, exercises the powers of the Board that have been delegated to it, is answerable to the Board and will report to it on a regular basis. It is authorised to investigate any activity within its terms of reference and to seek any information which it requires from employees of the Group, all of whom are directed to co-operate with any request made by the Audit Committee.
3.2 The Audit Committee is authorised to:
3.2.1 seek any information it requires from any employee of the Company in order to perform its duties;
3.2.2 obtain, at the Company's expense, independent legal, accounting or other professional advice on any matter it believes it necessary to do so;
3.2.3 call any employee to be questioned at a meeting of the Audit Committee as and when required; and
3.2.4 have the right to publish in the Company's annual report, details of any issues that cannot be resolved between the Audit Committee and the Board.
3.3 In particular, the Audit Committee shall carry out the following duties for the Company:
3.3.1 monitor and review the integrity of the financial statements of the Company, including its half year and annual financial statements, preliminary results announcements and any other formal announcements relating to its financial performance and shall review significant financial reporting issues and/or judgments which they give rise to or are contained in them, having regard to matters communicated to it by the auditor before their submission to the Board, particularly reviewing and challenging:
(a) the consistency and appropriateness of the accounting policies and changes to them across the Group and on a year by year basis;
(b) the methods used to account for significant or unusual transactions where different approaches are possible;
(c) whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account views of the external auditor;
(d) communications with the auditor including relating to audit adjustments and items not adjusted;
(e) all material information presented with the financial statements, such as the business review and the corporate governance statement relating to the audit and to risk management;
(f) the clarity and completeness of disclosure in the Company's financial reports and the context in which statements are made;
(g) the basis for the going concern assumption;
(h) compliance with applicable regulatory and legal requirements; and
(i) anti-fraud programme and controls;
and where the Audit Committee is not satisfied with any aspect of the proposed financial reporting by the Company, it shall report its view to the Board;
3.3.2 review summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature;
Internal controls and risk management
3.3.3 keep under review the adequacy and effectiveness of the Company’s internal financial control systems and the Company’s internal control and risk management systems; and
3.3.4 review and approve the statements to be included in the annual report concerning internal controls and risk management;
3.3.5 where requested by the Board, the Audit Committee should review the content of the annual report and accounts and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and prospects, business model and strategy.
Compliance, whistleblowing and fraud
3.3.6 review the Company’s policies and procedures for preventing or detecting fraud;
3.3.7 review the Company’s systems and controls for the prevention of bribery and receive reports on non-compliance;
3.3.8 review the adequacy and security of arrangements by which employees and contractors of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters;
3.3.9 ensure that arrangements are in place for investigation of possible impropriety in matters of financial reporting or other matters, focussing particularly on:
(a) the proportionality and independence of these investigations; and
(b) the appropriateness of follow-up action by the Audit Committee,
3.3.10 review regular reports from the Company's money laundering reporting officer and the adequacy and effectiveness of the Company's anti-money laundering systems and controls;
3.3.11 review regular reports from the Company's compliance officer and keep under review the adequacy and effectiveness of the Company's compliance function.
3.3.12 approve the appointment, resignation or dismissal of the head of internal audit (if any);
3.3.13 monitor and review the effectiveness of the Company’s internal audit function in the context of the Company’s overall risk management system;
3.3.14 review and discuss with the head of internal audit (if any) the scope of work of the internal audit function and its annual internal audit plans;
3.3.15 ensure the internal auditor has direct access to the Board Chairman and to the Audit Committee Chairman, and is accountable to the Audit Committee;
3.3.16 receive a report on the results of the internal auditor's work on a periodic basis;
3.3.17 review and monitor management's responsiveness to the internal auditor's findings and recommendations;
3.3.18 meet with the head of internal audit at least once a year without the presence of management;
3.3.19 ensure that the function is adequately resourced, and has appropriate access to information to enable it to fulfil its scope of work and is equipped to perform in accordance with the appropriate professional standards for internal auditors;
3.3.20 review co-ordination between the internal and external auditors and (where relevant) the risk management department;
3.3.21 where there is no internal audit function, consider annually whether there is a need for an internal audit function and explain the reasons for absence of such function in the relevant section of the annual report;
3.3.22 consider and make recommendations to the Board to be put to shareholders for their approval at the annual general meeting in relation to the appointment, re-appointment or removal of the Company’s external auditors, the terms of engagement of the external auditors and any questions of resignation or dismissal relating to the external auditors;
3.3.23 ensure that at least once every 10 years the audit services contract is put out to tender to enable the Audit Committee to compare the quality and effectiveness of the services provided by the incumbent auditor with those of other audit firms, and in respect of such tender oversee the selection process and ensure that all tendering firms have such access as is necessary to information and individuals during the duration of the tendering process;
3.3.24 oversee the relationship with the external auditors, including, but not limited to:
(a) approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
(b) satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the external auditor and the Company (other than in the ordinary course of business) which could adversely affect the auditor's independence and objectivity;
(c) monitoring the external auditor's compliance with relevant ethical and professional guidance on the rotation or audit partner, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements;
(d) assessing annually the qualifications, expertise and resources of the external auditor and the effectiveness of the audit process, which shall include a report from the external auditor on their own internal quality procedures;
(e) approving and monitoring the implementation of the Company's policy relating to the employment of former employees of the external auditors;
3.3.25 approve the external auditors' remuneration, whether fees for audit or non-audit services, so that the level of fees is appropriate to enable an effective and high quality audit to be conducted;
3.3.26 review annually the effectiveness of the audit and the independence and objectivity of the external auditors, taking into account relevant UK professional and regulatory requirements and the external relationship with the auditors as a whole, including the provision of non-audit services;
3.3.27 seeking to ensure co-ordination with the activities of any internal audit function;
3.3.28 evaluating the risks to the quality and effectiveness of the financial reporting process;
3.3.29 meet regularly with the external auditors, including once at the planning stage before the audit, and once after the audit at the reporting stage and at least once a year, without management being present, to discuss the external auditor's remit and any issues arising from the audit;
3.3.30 review and approve the audit plan and ensure that it is consistent with the scope of the audit engagement, having regard to the security, expertise and experience of the audit team;
3.3.31 review the findings of the audit with the external auditors including, but not limited to:
(a) a discussion of any major issues which arose during the audit;
(b) any accounting and audit judgements;
(c) levels of errors identified during the audit; and
(d) the effectiveness of the audit process;
3.3.32 review any representation letter(s) requested by the external auditor before they are signed by management;
3.3.33 review the external auditors' management letter and consider the Company’s response to the external auditor's findings and recommendations.
If the auditors also supply non-audit services to the Company, the Audit Committee shall:
3.3.34 keep under review the nature and extent of the non-audit services, seeking to ensure the provision of these services does not impair the external auditor’s independence or objectivity;
3.3.35 consider whether the skills and experience of the audit firm make it the most suitable supplier of the non-audit service;
3.3.36 take into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm;
3.3.37 explain to shareholders, in the annual report, the nature of the non-audit services and how auditor objectivity and independence is safeguarded; and
3.3.38 develop and implement on the supply of non-audit services by the external auditors to avoid threat to auditor objectivity and independence, taking into account any relevant ethical guidance on the matter.
3.4 In carrying out his specific duties set out above, each member of the Audit Committee should also consider his general duties as a director of the Company, including:
3.4.1 his duty to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard to all relevant factors;
3.4.2 his duty to exercise independent judgment;
3.4.3 his duty to exercise reasonable care, diligence and skill;
3.4.4 his duty to avoid conflicts of interest, and
3.4.5 his duty to act in accordance with the Company's constitution and only exercise his powers for the purposes for which they were conferred.
4.1 In the absence of the Chairman of the Audit Committee, and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting.
4.2 The company secretary or his/her nominee shall act as secretary of the Audit Committee and will ensure that the Audit Committee receives information and papers in a timely manner to enable full and proper consideration to be given to issues.
4.3 The quorum for any decisions of the Audit Committee shall be two.
4.4 The Audit Committee shall meet not less than three times a year at appropriate intervals in the financial reporting and audit cycle, and at such other times as circumstances require.
4.5 Outside of the formal meeting programme, the Chairman of the Audit Committee will maintain a dialogue with key individuals involved in the Company's governance, including the Chairman of the Board, the CEO, the CFO, the external audit lead partner and the head of internal audit.
4.6 Meetings of the Audit Committee shall be called by the secretary of the Audit Committee at the request of any of its members or at the request of the external or internal auditor, if they consider it necessary.
4.7 Unless otherwise agreed, notice of each meeting, confirming the venue, time and date, together with an agenda of items to be discussed and supporting papers shall be forwarded to each member of the Audit Committee, any other person required or invited to attend and all other non-executive directors no later than five working days before the scheduled date of the meeting.
4.8 The company secretary shall minute the proceedings and decisions of all meetings of the Audit Committee, including details of those present or in attendance and details of any conflicts of interest notified to the Audit Committee.
4.9 Draft minutes of meetings shall be circulated promptly to all members of the Audit Committee. Once agreed, the minutes of meetings of the Audit Committee shall be made available to all members of the Board and to the external auditors promptly unless a conflict of interest exists or it would be inappropriate to do so in the opinion of the Chairman of the Audit Committee.
5.1 The Chairman of the Audit Committee shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and shall also formally report to the Board on how it has discharged its responsibilities. The report shall include:-
5.1.1 the significant issues that it considered in relation to the financial statements (required under paragraph 3.3.1) and how these were addressed;
5.1.2 its assessment of the effectiveness of the external audit process (required under paragraph 3.3.24(d)) and its recommendation on the appointment or reappointment of the external auditor; and
5.1.3 any other issues on which the Board has requested the Audit Committee's opinion.
5.2 The Audit Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
5.3 The Audit Committee shall compile a report on its activities to be included in the Company's annual report. The report should include an explanation of how the Audit Committee has addressed the effectiveness of the external audit process; the significant issues that the Audit Committee considered in relation to the financial statements and how these issues were addressed, having regard to matters communicated to it by the auditor; and all other information requirements set out in the UK Corporate Governance Code.
5.4 In compiling the reports referred to in 5.1 and 5.3, the Audit Committee should exercise judgement in deciding which of the issues it considers in relation to the financial statements are significant, but should include at least those matters that have informed the Board's assessment of whether the Company is a going concern. The report to shareholders need not repeat information disclosed elsewhere in the annual report and accounts, but could provide cross-references to that information.
5.5 The Chairman of the Audit Committee shall attend the annual general meeting of the Company to answer shareholder questions on the Audit Committee's activities
6. Other matters
6.1 The Audit Committee shall:
6.1.1 have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
6.1.2 be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;
6.1.3 give due consideration to laws and regulations, the principles and provisions contained in the UK Corporate Governance Code and the requirements of the Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules, as appropriate;
6.1.4 be responsible for coordination of the internal and external auditors;
6.1.5 oversee any investigation of activities which are within its terms of reference;
6.1.6 work and liaise as necessary with all other Board committees;
6.1.7 arrange periodic reviews of its own performance and at least once a year review its constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board;
6.1.8 ensure that these terms of reference are made available by placing them on the Company's website.
Adopted by resolution of the Board on 12 May 2016