The Committee is chaired by Nigel Moore, who has been the chairman of the committee since March 2004. He is currently Chairman of TEG Group plc, a director of Hochschild Mining plc, JKX Oil & Gas plc, Ascent Resources plc, Intelligent Comms Limited and Production Services Network Limited. Formerly a London based partner of Ernst & Young where he was client service partner for London International plc and the UK operations of Coca Cola. The other members of the Committee are Simon Beresford-Wylie, Maria Richter and Will Wyatt. Each member of the Committee is independent. The Committee considers that its members have a wide skill set covering financial, commercial and operational matters. However, Nigel Moore has the most recent and relevant financial experience. During 2010, the Committee had three scheduled meetings and one meeting at short notice. All the members of the Committee attended all the Committee meetings, except for Simon Beresford-Wylie who was unable to attend the February 2010 meeting due to a conflicting commitment that arose at short notice. Despite this absence, Simon Beresford-Wylie provided feedback to the Committee Chairman on the meeting’s business ahead of the meeting. The Company’s external auditors, KPMG, are invited to attend meetings of the Committee on a regular basis and during 2010 they attended all meetings; in each case for part of the meeting. The Group Chief Executive, the Chief Financial Officer and the Group Risk Assurance Manager attend each meeting by invitation. Other members of the senior management team attend as required. At two of the meetings the executive directors were not present for part of the meeting so that members of the Committee could meet with the external auditors in private. The practice of the Committee meeting in private with the external auditors will continue in the future.
During 2010, the Audit Committee considered, among other matters, the financial results and accounting disclosures in connection with the full-year results for the year ended 31 December 2009 and the half-year results for the period ended 30 June 2010. The Committee further monitored ongoing performance for internal controls for the Group. The Committee received regular reports from the external auditor on accounting issues and considered the scope and associated fee for the audit in connection with the year-end audit for 31 December 2010.
Duties of the Audit Committee:
Financial Reporting
Monitoring the integrity of the financial statements of the Company, including its annual and half-yearly reports, preliminary results announcements, interim management statements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain.
The annual financial statements of the pension funds are reviewed by the Board as a whole.
Internal Controls and Risk Management Systems
Keeping under review the adequacy and effectiveness of the Company’s internal financial controls and internal control and risk management systems; and reviewing the statements to be included in the annual report concerning internal controls and
risk management.
Whistleblowing and Fraud
Reviewing the adequacy and security of the Company’s arrangements for its employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee ensures that these arrangements allow proportionate and independent investigation of such matters and appropriate follow-up action.
Reviewing the Company’s systems and controls for the prevention of bribery and receiving reports on non-compliance.
Internal Audit
Overseeing the work of the internal audit function, including the planning of its internal audits, receiving regular reports on its work and reviewing its effectiveness.
External Audit
Considering and making recommendations to the Board in relation to the appointment, re-appointment and removal of the Company’s external auditors. The Committee oversees the selection process for new auditors and, if the auditors resign, the Committee is required to investigate the issues leading to this and decide whether any action is required.
Overseeing the relationship with the external auditors including, but not limited to:
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approving its remuneration, whether fees for audit or non-audit services and checking that the level of fees is appropriate to enable an adequate audit to be conducted;
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approving its terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
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assessing annually its independence and objectivity, taking into account relevant professional and regulatory requirements and the relationship with the auditors as a whole, including the provision of any non-audit services;
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satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditors and the Company (other than in the ordinary course of business);
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agreeing with the Board a policy on the employment of former employees of the Company’s auditors, then monitoring the implementation of this policy;
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monitoring the auditors’ compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements;
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assessing annually the external auditors’ qualifications, expertise and resources and the effectiveness of the audit process, which shall include a report from the external auditors on their own internal quality procedures;
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ensuring co-ordination with the activities of the Company’s internal audit arrangements;
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meeting regularly with the external auditors, including at the planning stage before the audit and after the audit at the reporting stage. The Committee meets the external auditors at least once a year, without executive directors being present, to discuss their remit and any issues arising from the audit;
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reviewing and approving the annual audit plan and ensuring that it is consistent with the scope of the audit engagement;
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reviewing the findings of the audit with the external auditors. This includes but is not limited to the following:
- a discussion of any major issues that arose during the audit;
- accounting and audit judgements; and
- levels of errors identified during the audit.
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reviewing the effectiveness of the audit and reviewing any representation letter requested by the external auditors before it is signed by management;
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reviewing the management letter and management’s response to the auditors’ findings and recommendations; and
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reviewing and approving the policy on the supply of non-audit services by the external auditors, taking into account any relevant ethical guidance on the matter.
A policy on the use of the external auditors for non-audit services has been in place for a number of years. The use of the external auditors is subject generally to competitiveness and demonstrable competence in the relevant areas. The policy is divided into three parts:
- Work where use of the external auditors is deemed appropriate. This type of work includes corporate tax advice and planning, tax compliance, accounting advice in relation to acquisitions, dividend planning, divestments, corporate governance/risk management advice and defined audit related work and regulatory reporting.
- Work requiring Audit Committee clearance or refinement of the Vitec Group policy. The type of work includes reporting accountant services, compliance services (including fraud and money laundering), transaction work (mergers and acquisitions), valuation and actuarial services, fairness opinions and contribution in kind reports, personal tax services, management consultancy, HR or recruitment services, remuneration consultancy and legal or other professional services unrelated to an audit.
- Work from which the external auditors are excluded. This includes internal accounting or other internal financial services, design development or implementation of financial information or internal controls systems, internal audit services or their outsourcing, forensic accounting services, executive or management roles and functions, IT consultancy, litigation support services and other financial services such as broker, financial adviser or investment banking services.
Reporting Responsibilities
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The Committee Chairman reports to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
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The Committee makes whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
Other Responsibilities
The Committee has access to sufficient resources in order to carry out its duties, including access to the Group Company Secretary for assistance as required.
The Committee members are provided with training as and when required, both in the form of an induction programme for new members and on an ongoing basis for all members. This includes training provided by the Company’s auditors particularly on changes in accounting policies and standards.
The Committee may oversee any investigation of activities which are within its terms of reference and, for internal purposes, act as a court of the last resort.
At least once a year, the Committee reviews its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommending any changes it considers necessary to the Board for approval.
Authority
The Committee is authorised to seek any information it requires from any employee of the Company in order to perform its duties and to obtain, at the Company’s expense, outside legal or other professional advice on any matter within its terms of reference. It is also authorised to call any employee to be questioned at a meeting of the Committee as and when required. The Committee also has the right to publish in the Company’s Annual Report details of any issues that cannot be resolved between the Committee and the Board.