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- The Committee shall be appointed by the Board and shall normally consist of not less than two members. The members shall be independent non-executive directors and may include as a member (but not as Chairman of the Committee) the Chairman of the Board*. A quorum shall be two members.
- The Chairman of the Committee shall be appointed by the members of the Committee.
- The Finance Director and other Board members shall attend only at the invitation of the Committee. Representatives from the auditors shall be invited to attend at the discretion of the Committee. The Committee shall meet the auditors without executive directors being present after every meeting at which they attend.
- The Secretary of the Committee shall be the Company Secretary.
- Meetings should normally be held at least two times per annum.
- The Committee is authorised by the Board to investigate any activity within its terms of reference and to seek any information it requires from any employee. The Board will ensure that employees co-operate fully with the Committee.
- The Committee is authorised by the Board to obtain outside legal or other independent professional advice up to a maximum of £10,000 in any one financial year. Spend above this level will require further advance authorisation by the Board.
- The duties of the Committee shall be:
- To consider the appointment of the auditors, the co-ordination between joint or subsidiary auditors, the scope and planning of the audit, the audit fee and any questions of resignation or dismissal of the auditors. Specifically, but not exclusively, the Committee shall include in their review the following matters:
- the application of materiality to the audit approach;
- the approach to the amount of and reliance on internal controls;
- any limitation in the audit scope;
- the quality assurance procedures operated by the auditors;
- the objectivity and effectiveness of the audit process.
- To review the half-year and annual financial statements before submission to the Board, focusing particularly on:
- changes in accounting policy and practices;
- major judgemental areas;
- any unusual transactions and how they have been accounted for;
- significant audit adjustments;
- going concern issues;
- compliance with accounting standards;
- compliance with Stock Exchange and legal requirements.
- To review and consider reports form the auditors including any matters arising in the following areas:
- unadjusted mis-statements
- material weaknesses in the accounting and internal control systems
- the auditors’ views on the quality of the company’s accounting practices and financial reporting;
- expected modifications to the auditors’ report;
- any differences of opinion or judgement with management.
- To review the audit management letter and management response.
- To review the Company’s statement on internal control systems prior to endorsement by the Board and regularly review the effectiveness of these systems.
- To prepare an annual report to the Board which will set out the Terms of Reference of the Committee, outline the policies and procedures which it applies and operates and outline any matters of significance which have arisen during the year, together with the steps the Committee has taken to resolve them.
- To consider other topics as defined by the Board.
- In carrying out its responsibilities in accordance with these Terms of Reference, the Committee shall take due consideration of and, where it deems appropriate, seek relevant advice pertaining to the differing legal, accounting and financial market regulations applying in the UK.
- The internal audit functions of the Company shall be carried out through an independent third party appointed to undertake a review (in parallel with the Company’s auditors) of the Company’s financial controls and procedures.The programme will be set by the Committee and shall report directly to the Chairman of the Committee in addition to any other internal reporting lines.
- The Chairman of the Committee and the Senior Non-Executive Director shall be the designated contact for all employees with regard to the “whistle-blowing” arrangements put in place by the Company. The Committee shall keep the effectiveness of the Company’s procedures in this area under review at all times.
- The Committee shall require the auditors to receive approval in advance from the Committee before undertaking any assignment that does not fall within the scope of their audit work. The Committee does not anticipate that any non-audit work would be carried out by the auditors under any of the areas listed in the attached appendix as, prima facie, the Committee considers that such work could create an environment whereby audit independence may be compromised.
- At all times, the Committee shall keep under review the independence of the auditors and shall require the auditors to report at each Committee meeting upon any matters where they have carried out work at the request of the Company which is not included in the scope of their audit work detailing the nature and extent of such other work and the fees related. The Committee shall ensure that the key partners rotate at appropriate intervals to ensure that audit independence is not compromised.
- After their approval by the Chairman of the Committee, the Secretary shall circulate the minutes of meetings of the Committee to all members of the Board and to the auditors.
December 2009
*Note on Combined Code 2008 provides that for Smaller Companies the Audit Committee may consist of two independent non-executives. A Smaller Company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.
Appendix to Terms of Reference of the Audit Committee: NON-AUDIT WORK
The following areas of non-audit work, which are regarded as illustrative and not limiting, are regarded by the Audit Committee as being areas of work which, prima facie, may compromise the independence of the auditors.
- Internal accounting or other internal financial services
- Design, development or implementation of financial information or internal control systems
- Internal audit services or their outsourcing
- Compliance services (including those related to fraud and money laundering)
- Forensic Accountant services
- Transaction work (mergers / acquisitions / disposals / schemes of arrangement etc)
- Valuation services
- Fairness opinions and contribution-in-kind reports
- Actuarial services
- Personal tax services
- Executive or ‘management’ roles and functions
- Management consultancy
- HR or recruitment services
- Remuneration consultancy
- IT consultancy
- Other financial services (eg broker, financial advisor or investment banking services)
- Legal services and other professional services unrelated to the audit.
Additionally, the Committee will specifically require, in advance, a clear understanding of the scope of any work proposed to be carried out by the auditors in the areas of Regulatory Compliance, Reporting Accountant services and Corporate Taxation, whether planning or compliance, to ensure that audit independence will not be compromised.
U: Board Committees: 2009:
Audit Committee December 21 2009
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