The Audit and Risk Committee is responsible for:
- Monitoring the integrity of financial reporting and reviewing the Group’s risk management systems on behalf of the Board, including reviewing the work of Group Internal Audit;
- Overseeing the statutory audit process:
- Monitoring quality of the audit process and resultant findings;
- Recommending appointments to the Board;
- Monitoring independence and objectivity, including monitoring auditor rotation and developing policy on non-audit services provided;
- Approving auditor remuneration and terms of engagement; and
- Overseeing the audit tender process, if applicable.
Members of the Audit and Risk Committee (the Committee) are as follows:
- Mark Butcher (Chairman)
- John Pattullo
- John Davies
The Code requires that at least one member of the Committee should have recent and relevant financial experience: currently, the Chairman of the Committee fulfils this requirement. All members of the Committee are expected to be financially literate.
The Committee is required to meet at least three times a year. Due to the cyclical nature of its agenda, which is linked to events in the Group’s financial calendar, the Committee generally meets four times a year. The other directors, together with the Group Head of Internal Audit and the external auditor, are normally invited to attend all meetings.
- To monitor the integrity of the financial statements of the Company, including its annual and interim reports, preliminary results announcements and any other formal statements which include financial information or which relate to its financial performance.
- To review and advise the Board as to whether, taken as a whole, the annual report and accounts is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
- To report to shareholders, in a separate section of the annual report and accounts, on the work of the Committee in discharging its responsibilities, including:
- the significant issues that the Committee considered in relation to the financial statements and how these issues were addressed.
- an explanation of how it has assessed the effectiveness of the external audit process and the approach taken to the appointment or reappointment of the external auditor and information on the length of tenure of the current audit firm and when a tender was last conducted.
- an explanation of how auditor objectivity and independence is safeguarded in the context of any non-audit services provided by the external auditor.
- Internal controls and risk management
- To monitor the integrity of the Group’s internal controls and risk management systems.
- To review arrangements by which the Group’s employees may raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters and to ensure that such matters are independently investigated and follow-up action, if appropriate, is taken.
- To monitor and review the activities of the internal audit department.
- To approve the appointment and removal of the head of the internal audit function.
- To ensure that the internal audit function has adequate resources and is sufficiently independent to properly fulfill its role.
- To ensure that the head of internal audit has direct access to the Chairman of the Board and to all members of the Committee and is accountable to the Committee.
- To meet with the head of internal audit at least once a year without management being present.
- To review and monitor management’s responsiveness to the internal auditors findings and recommendations.
- To consider and make recommendations to the Board on the appointment, reappointment and removal of the external auditor.
- To approve the terms of engagement and the remuneration to be paid to the external auditor.
- To assess the qualification, expertise and resources, effectiveness and independence of the external auditor annually.
- To agree with the Board, and monitor the application of, a policy for the employment of former employees of the external auditor.
- To recommend to the Board, and monitor the implementation of, a policy in relation to the provision of non-audit services by the external auditor so as to ensure that the provision of such services does not impair the external auditors’ independence and objectivity
- In connection with the annual audit:
- To review and approve the audit plan, before the commencement of the audit process.
- To review the findings of the audit with the external auditor, in the absence of management where necessary.
- To review the management letter and monitor management’s response to any recommendations made by the external auditor.
- To review, prior to signature, any letter of representation requested by the external auditor.
- At the end of the audit, to assess the effectiveness of the audit process.
- To review the results of the external auditors’ review of the interim financial statements and any issues arising therefrom.
- To meet with the external audit partner at least once a year without management being present.
- To investigate any other matter of a financial or accounting nature delegated by the Board.
- To advise the Board on the Group’s risk appetite, tolerance and strategy, taking account of the current and prospective macroeconomic and financial environment and drawing on such external authoritative sources as may be relevant to the Group’s risk policies.
- To monitor and advise the Board on the Group’s risk exposures, including the identification of new risk types.
- To keep under review the Group’s risk assessment methodology and processes.
- To advise the Board on the risk implications for the Group of proposed strategic transactions, including acquisitions and disposals.
- To review the Group’s procedures for the detection of fraud and the prevention of bribery.
- To keep under review the effectiveness of the Group’s business continuity, disaster recovery and emergency response plans.
- To review reports on any material breaches of risk limits and the adequacy of management’s response and any proposed remedial action.
- To recommend to the Board procedures and parameters to manage and monitor key business KPIs, such as gearing and ROCE, in both growth and recession scenarios.
- To report to the Board annually on how the Committee has discharged its responsibilities, including the significant issues that it considered in relation to the financial statements and how those issues were addressed and any other issues on which the Board requested the Committee’s opinion.
- The Committee shall, at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
- The Chairman of the Committee (or, if he is unable to be present, another member designated for the purpose) shall attend the Annual General Meeting and be prepared to respond to any shareholder questions on the Committee’s activities.