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Audit Committee

The Audit Committee is comprised of the three independent Non-executive Directors and is chaired by Amanda Aldridge.

Members:

Amanda Aldridge (Committee Chair)

Keith Edelman

Alison Littley

Headlam Group plc (the “Company”)

Audit Committee - Terms of Reference

Constitution and meetings

The members of the Audit Committee (the “Committee”) will be appointed by the board of directors of the Company (the “Board”) on recommendation by the Nomination Committee, in consultation with the Chair of the Committee. The Committee will consist of a minimum of three members, all to be independent non-executive directors (at least one of which has recent and relevant financial experience) and may not include the Company Chair. The Committee as a whole shall have competence relevant to the sector in which the Company operates. The Board will appoint the Chair of the Committee. In the absence of the Chair of the Committee at any specific meeting, the remaining members present shall elect one of themselves to chair the meeting.

Meetings will normally be held at least three times per year at appropriate intervals in the financial reporting and audit cycle and otherwise as required. Meetings may be held by video conference, telephone or by any other manner permitted in the Company’s constitution. Outside of the formal meeting programme, the Committee Chair will maintain a dialogue with key individuals involved in the Company’s governance, including the Company Chairman, the Chief Executive, the Chief Financial Officer and the external audit lead partner.

The Company Secretary will be the secretary to the Committee and will ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration. Meetings of the Committee shall be called by the Secretary of the Committee at the request of the Committee Chair, its members, or the external audit lead partner. Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee and any other person required to attend no later than 5 working days before the meeting.

A quorum at meetings of the Committee will be two. Only members of the Committee will have the right to attend Committee meetings. However, the Chair of the Board, Chief Executive, Chief Financial Officer and the external audit partner will be invited to attend meetings of the Committee on a regular basis and other non-members may be invited to attend all or part of any meetings when appropriate.

The Secretary shall minute the proceedings and decisions of all Committee meetings, including the names of those present and in attendance. Draft minutes will be circulated to members of the Committee for approval and, following approval, to the Board unless the Committee Chair considers that it would be inappropriate to do so.

Engagement with Shareholders

The Committee Chair should attend the Annual General Meeting to answer any shareholder questions on the Committee’s activities. In addition, the Committee Chair should seek engagement with shareholders on significant matters related to the Committee’s areas of responsibility where it is considered appropriate to do so.

Role and responsibilities

The Committee should have oversight of the Group as a whole and, unless required otherwise by legislation, carry out the duties below for the parent company, major subsidiary undertakings and the group as a whole, as appropriate. The Committee shall:

1. Financial Reporting

Monitor the integrity of the financial statements of the Company including its annual and half yearly reports, preliminary announcements and any other formal announcements relating to its financial performance and review and report to the Board on significant financial reporting issues and judgements which those statements contain, having regard to the matters communicated to it by the auditor.

In particular, the Committee will review and challenge where necessary:

1.1. the application of significant accounting policies and any changes to them;

1.2. the methods used to account for significant or unusual transactions;

1.3. whether the Company has adopted appropriate accounting policies and made appropriate estimates and judgements;

1.4. the clarity and completeness of disclosures in the financial statements and the context in which statements are made; and

1.5. all material information presented with the financial statements relating to audit and risk management.

Where the Committee is not satisfied with any aspect of the proposed financial reporting by the Company, it shall report its views to the Board.

2. Narrative Reporting

Where requested by the Board, the Committee should review the content of the annual report and accounts and advise the board on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

3. Internal controls and risk management

The Committee shall:

3.1. keep under review the Company’s internal financial control systems that identify, assess, manage and monitor financial risks, and other internal control and risk management systems;

3.2. monitor the activities of, and review assurance provided by, the Executive Risk Committee, including over any non-financial internal controls and management systems requested by the Board; and

3.3. review and approve the statements to be included in the annual report concerning internal control and risk management together with the viability statement prior to approval by the Board as a whole.

4. External Audit

4.1. Make recommendations to the Board (for shareholder approval in general meeting) on the appointment, re-appointment and removal of the external auditor and develop and oversee the selection procedure for appointment of the audit firm in accordance with applicable Code and regulatory requirements.

4.2. Oversee the relationship with the external auditor including:

4.2.1. reviewing and monitoring the external auditor’s expertise, independence and objectivity, and the quality and effectiveness of the audit process (including the handling of key judgements by the auditor), taking into consideration relevant UK legal, professional and regulatory requirements;

4.2.2. approval of the auditor’s remuneration and terms of engagement and monitoring the level of fees paid by the Company compared to the overall fee income of the firm, office and partner;

4.2.3. meeting regularly with the external auditor and at least once a year without management being present;

4.2.4. discussing with the external auditor the factors which could affect audit quality, and reviewing and approving the audit plan;

4.2.5. reviewing the findings of the audit including, but not limited to, a discussion of the major issues which arose during the audit, the auditor’s explanation of how the risks to audit quality were addressed, key accounting and audit judgements, the auditor’s view of their interactions with senior management, and the level of errors identified during the audit;

4.2.6. reviewing any representation letter requested by the auditors before signature by management; and

4.2.7. reviewing the management letter and management’s response to the auditor’s recommendations.

4.3. Develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant regulations and ethical guidance regarding the provision of non-audit services by the external audit firm.

5. Internal Audit

Consider annually whether there is a need for an internal audit function and make a recommendation to the Board as to whether one is required, providing justification or explanation if the determination is that one is not required.

6. Compliance

6.1. Review the Company’s procedures for detecting fraud and its controls for the prevention of bribery and receive reports on any non-compliance.

6.2. Review the adequacy and security of the company’s arrangements for its employees, contractors and external parties to raise concerns, in confidence, about possible wrong doing in financial reporting or other matters.

Other matters

The Committee shall:

  • have access to sufficient resources in order to carry out its duties, including access to the Company Secretary for assistance as required;
  • 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;
  • oversee any investigation of activities which are within its terms of reference;
  • work and liaise as necessary with all other Board Committees ensuring interaction between committees and with the board is reviewed regularly, taking particular account of the impact of risk management and internal controls being delegated to different committees;
  • arrange for periodic reviews of its own performance; and
  • at least annually, 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.

Reporting Responsibilities

After each meeting, the Committee Chair will report to the Board, identifying any matters arising in Committee meetings or within the remit of the Committee and in respect of which it considers that action or improvement is needed as well as making recommendations as to the steps to be taken for action or improvement and to report to the Board on how the Committee has discharged its responsibilities.

The Committee shall prepare an annual report describing the work of the Committee, including:

  • the significant issues that the Committee considered relating to the financial statements and how these issues were addressed;
  • an explanation of how it has assessed the independence and effectiveness of the external audit process and the approach taken to the appointment or re-appointment of the external auditor, information on the length of tenure of the current audit firm, when a tender was last conducted and advance notice of any retendering plans;
  • in the case of the Board not accepting the Committee’s recommendation on the external auditor appointment, re-appointment or removal, a statement from the Committee explaining its recommendation and the reasons why the Board has taken a different position (this should also be supplied in any papers recommending appointment or re-appointment);
  • where there is no internal audit function, an explanation for the absence, how internal assurance is achieved, and how this affects the work of the external audit; and
  • an explanation of how auditor independence and objectivity are safeguarded, if the external auditor provides non-audit services.

Authority

The Committee is authorised to:

  • seek any information it requires from any employee of the Company in order to perform its duties;
  • obtain, at the Company’s expense, independent legal, accounting or other professional advice on any matter it believes it necessary to do so;
  • call any employee to be questioned at a meeting of the Audit Committee as and when required; and
  • have the right to publish in the Company’s annual report, details of any issues that cannot be resolved between the Committee and the Board.

Approved and adopted on 23 October 2020