The Audit Committee is comprised of the four independent 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 2018, can be found below.
Role of the Audit Committee
The Audit Committee is responsible for monitoring and reviewing:
A description of the activities of the Audit Committee can be found in our Annual Report and Accounts.
At least three members, to be exclusively independent non-executive directors, at least one of whom shall have recent and relevant financial experience
Appointed by the board, to attend the AGM
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
Minutes to be circulated to committee members and following approval, to the board, unless it would be inappropriate to do so
Constitution and meetings
The members of the Audit Committee will be appointed by the board of directors of the Company (the “Board”) on recommendation by the Nominations Committee, in consultation with the Chair of the Audit Committee. The Audit 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 Audit Committee as a whole shall have competence relevant to the sector in which the Company operates. The Board will appoint the Chair of the Audit Committee.
Meetings will normally be held at least three times per year.
The Company Secretary will be the secretary to the Audit Committee and will ensure that the Audit Committee receives information and papers in a timely manner, and at least 7 days before the date of the proposed meeting.
A quorum at meetings of the Audit Committee will be two. Only members of the Audit Committee will have the right to attend Audit Committee meetings. However, the Chair of the Board, Chief Executive Officer, Chief Financial Officer and the external audit partner will be invited to attend meetings of the Audit Committee on a regular basis and other non-members may be invited to attend all or part of any meetings when appropriate.
Draft minutes will be circulated to members of the Audit Committee for approval and, following approval, to the Board unless the Audit Committee Chair considers that it would be inappropriate to do so.
Role and responsibilities
The main role and responsibilities of the Audit Committee are to:
1. Monitor the integrity of the financial statements of the Company including its annual and half yearly report and any formal announcements relating to its financial performance and reviewing significant financial reporting issues and judgements contained in them. In particular, the Audit Committee will review and challenge where necessary (taking into account the view of the external auditor):
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. all material information presented with the financial statements relating to audit and risk management.
2. Review the Company’s internal financial controls, and:
2.1. to monitor and review assurance provided via the Executive Risk Committee, including over any non-financial internal controls and management systems requested by the Board;
2.2. to review the Company’s internal control and risk management systems; and
2.3. to 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.
3. Make recommendations to the Board (for shareholder approval in general meeting) on the appointment, re-appointment and removal of the external auditor and at least every ten years undertake a tender process for the appointment of the external auditor.
4. Oversee the relationship with the external auditor including:
4.1. review and monitoring the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK legal, professional and regulatory requirements;
4.2. approval of the auditor’s remuneration and terms of engagement;
4.3. meeting regularly with the external auditor and at least once a year without management being present;
4.4. discussing with the external auditor the factors which could affect audit quality, and reviewing and approving the audit plan;
4.5. reviewing the findings of the audit including, but not limited to, a discussion of the major issues which arose during the audit and key accounting and audit judgements;
4.6. reviewing any representation letter requested by the auditors before signature by management; and
4.7. reviewing the management letter and management’s response to the auditor’s recommendations.
5. Develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant the regulations and ethical guidance regarding the provision of non-audit services by the external audit firm.
6. Review the level of resource, composition and qualifications of the finance team.
7. 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.
8. Review the Company’s procedures for detecting fraud and its controls for the prevention of bribery and receive reports on any non-compliance and take appropriate action with regard to non-compliance.
9. Prepare an annual report describing the work of the Audit Committee, including:
9.1. the significant issues that the Audit Committee considered relating to the financial statements and how these issues were addressed;
9.2. 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;
9.3. in the case of the Board not accepting the Audit Committee’s recommendation on the external auditor appointment, re-appointment or removal, a statement from the Audit 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)
9.4. 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
9.5. an explanation of how auditor independence and objectivity are safeguarded, if the external auditor provides non-audit services.
10. Where requested by the Board, provide advice 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 position and performance, business model and strategy.
The Audit Committee shall:
• have access to sufficient resources in order to carry out its duties, including access to the Company Secretary for assistance as required;
• 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.
11. After each meeting, the Audit Committee will report to the Board, identifying any matters arising in Audit Committee meetings or within the remit of the Audit 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 Audit Committee has discharged its responsibilities.
The Audit 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 Audit Committee and the Board.
Approved and adopted on 21 September 2018