Audit Committee

The Audit Committee is comprised of the three non-executive directors and is chaired by Amanda Aldridge. 

Amanda qualified as a chartered accountant with KPMG LLP and was a partner in that firm from 1996 until 2017. For the purposes of the code she is considered by the board to be independent and to have recent and relevant financial experience.

During the year the Audit Committee discharged its responsibilities as set out in the terms of reference and schedule of business for the year. Whilst only members of the Audit Committee are entitled to be present at meetings, the external Auditor, Chief Executive and Chief Financial Officer may attend by invitation. The Audit Committee has authority to investigate any matters within its terms of reference, access resources, call for information and obtain external professional advice at the cost of the Company. The full terms of reference of the Audit Committee, which were reviewed during 2017, can be found below.

Role of the Audit Committee

The Audit Committee is responsible for monitoring and reviewing:

  • the effectiveness of the Group’s systems of internal control and risk management and control over financial reporting;
  • updates from Executive Directors and members of the Senior Management team on key financial control matters;
  • the consistency of and any changes to the Group’s accounting policies the application of appropriate accounting standards and methods used to account for significant or unusual transactions;
  • the appointment, reappointment or dismissal of the Auditor
  • the integrity of the interim and annual financial statements, including a review of the significant financial reporting judgements contained therein;
  • the effectiveness of the audit process;
  • the external Auditor’s plan for the audit of the Group’s accounts, confirmation of the external Auditor’s objectivity and independence and of the individuals carrying out the audit, approval of the proposed audit fee, approving the audit terms of engagement, the Company’s relationship with the Auditor and management’s response to any major audit recommendations;
  • reports from management and the Auditor on the Group’s systems of internal control, including a summary of and commentary on the business risks and internal control processes, and reporting to the Board on the results of this review;
    non-audit services and fees;
  • the application of the Board’s policy on non-audit work performed by the Group’s Auditor together with the non-audit fees payable to the Auditor;
  • the appropriateness of an internal audit function;
  • the Group’s overall approach to securing compliance with laws, regulations and governance; and
  • the Group’s systems for detecting fraud, preventing bribery and allowing employees to raise concerns in a safe and confidential manner.

A description of the activities of the Audit Committee can be found in our Annual Report and Accounts.

Members

Membership
At least three members, to be exclusively independent non-executive directors, at least one of whom shall have recent and relevant financial experience
Chairman
Appointed by the board, to attend the AGM
Secretary
Company Secretary
Quorum
Two members
Attendees
By invitation, Chairman, Group Chief Executive, Group Finance Director and (a) representative (s) of the external auditors
Frequency of meetings
Normally two to three times a year and otherwise as required
Reporting procedure
Minutes to be circulated to committee members and following approval, to the board, unless it would be inappropriate to do so

Terms of reference

1.1 Authority
The Committee is authorised by the board to:

  • monitor the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them;
  • review the company’s internal financial controls and internal control and risk management systems; and
  • establish and oversee the company's relationship with the external auditor.

In fulfilling this authority, the committee is further authorised by the board to:

  • investigate or commission investigations into any activity within its terms of reference;
  • seek any information that it requires from any employee of the company and all employees are directed to co-operate with any request made by the committee;
  • have access to sufficient resources to carry out its duties including access to the Company Secretary;
  • have unrestricted access to company documents, company information and to the external auditor;
  • obtain outside legal or independent professional advice and training and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary at the company's expense on any matter within its terms of reference; 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.

1.2 Duties
Without limiting the scope of the authority set out above, the duties of the committee shall be to:

1.2.1 monitor the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them and reporting to the board:

  • review, and challenge where necessary, the actions and judgements of management, in relation to the company’s financial statements, operating and financial review, interim reports, preliminary announcements and related formal statements before submission to the board, paying particular attention to:
  • consistency of and changes to significant accounting policies and practices, and any changes in them on a year on year basis;
    significant financial reporting issues, estimates and decisions requiring a major element of judgement;
  • the extent to which the financial statements are affected by any significant or unusual transactions in the year and how they are disclosed;
  •  the clarity and completeness of disclosures and the context in which statements are made;
  • significant adjustments resulting from the audit;
  • all material information presented with the financial statements relating to the audit and risk management;
  • the going concern assumption, going concern and viability statement;
  • compliance with accounting standards;
  • compliance with regulatory and legal requirements;
  • reviewing the company’s statement on internal control and risk management prior to endorsement by the board; and
  • reporting its views to the board when it is not satisfied with any aspect of the proposed financial reporting;

1.2.2 review the company’s internal financial and risk management controls/systems:

  • review the adequacy of the company’s arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters and by which the company ensures appropriate investigation and follow-up action;
  • review the company's procedures for detecting fraud;
  • review the company's systems and controls for the prevention of bribery and receive reports on non-compliance;
  • monitor the integrity of the company’s internal financial controls, including reviewing management’s reports on the effectiveness of systems of internal financial control, financial reporting, risk management and anti-money laundering systems and controls;
  • review regular reports and keep under review the adequacy and effectiveness of the company's compliance function;
  • review the board's decision not to appoint a formal internal audit function;
  • review the steps taken to ensure that new products, operations and activities are integrated into the framework and philosophy of internal control, including consideration of the appropriateness, or not, of an internal audit function;
  • assess the scope and effectiveness of the systems established by management to identify, assess, manage and monitor financial and non-financial risks and the related internal control systems; and
  • review and recommend to the board the statements included in the annual report on internal control and management of risk.

1.2.3 establish and oversee the company’s relationships with the external auditor:

  • oversee, and make recommendations through the board to the shareholders to consider at the AGM, or at any time during the year, on the appointment, reappointment and removal of the external auditor;
  • ensure that not less than every ten years the audit services contract is tendered;
  • approve the terms of engagement and the remuneration to be paid to the external auditor in respect of audit services provided, recommending the audit fee to the board;
  • assess the qualification, expertise and resources of the external auditors annually;
  • assess the independence and objectivity of the external auditor annually;
  • monitor the external audit firm’s compliance with United Kingdom ethical guidance and its policies and procedures for maintaining independence and monitoring compliance with relevant requirements;
  • develop, recommend to the board and implement the company’s policy in relation to the provision of non-audit services by the auditor, taking into account relevant ethical guidance, and ensure that the provision of such services does not impair the external auditor’s independence or objectivity, taking into account the criteria which govern the compensation of the individuals performing the external audit;
  • ensure that the annual report adequately explains to shareholders how auditor objectivity and independence are safeguarded;
  • agree with the board and monitor the company’s policy for the employment of former employees of the external auditor;
  • monitoring the auditor's compliance with relevant ethical and professional guidance on the rotation of audit partner;
  • discuss with the external auditor, at the start of each annual cycle, the nature and scope of the audit in order to ensure that appropriate plans are in place;
  • review with the external auditors the findings of their work, including any major issues, resolved and unresolved; key accounting and audit judgements; levels of errors identified; and obtaining explanations for unadjusted errors;
  • review the audit representation letters before signature by management;
  • assess, at the end of the annual external audit cycle, the effectiveness of the external audit process, taking into account relevant UK professional and regulatory requirements; review and monitor the content of the external auditor’s management letter and other, major internal control recommendations and management’s responses to the findings and recommendations;
  • investigate the issues and consider appropriate actions in the event that the external auditor resigns;
  • develop and apply a formal process on reviewing the existing audit contract and the criteria and arrangements for re-tendering that contract;

1.2.4 oversee other matters

review the arrangements and where relevant the work and outputs of other external advisors appointed in areas that fall within or overlap the committee’s responsibilities; and consider other topics, as defined by the board.

1.3 Reporting

The Committee shall report to the board on its proceedings after each meeting on all matters within its duties and responsibilities, including how it discharged its responsibilities identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.

The secretary shall circulate the minutes of meetings of meetings to all members of the committee and once approved,to members of the board unless it would be inappropriate to do so.

The committee shall arrange for periodic reviews of its own performance, review its terms of reference and its own effectiveness and recommend any necessary changes to the board.

The role and responsibilities of the committee and the actions taken by the committee to discharge those responsibilities shall be disclosed in the annual report and accounts. The committee shall also produce a report on its activities to be included in the company's annual report.

The chairman of the committee shall attend the AGM and shall answer questions, through the chairman of the board, on the committee’s activities and their responsibilities.

The committees assessment of the effectiveness of the external audit process and its recommendation on the appointment or re-appointment of the external auditor.