Constitution

The Board has established a Committee of the Board to be known as the Audit Committee.

Membership

The Committee shall be appointed by the Board. All members of the Committee shall be independent non-executive directors of the Company, at least one of whom shall have recent and relevant financial experience. The Committee shall consist of not less than three members. The Chairman of the Board shall not be a member of the Committee.

Attendance at meetings

Although only members of the Committee have the right to attend Committee meetings, others such as the Chairman of the Board, the Executive Directors, the Head of Operational Audit, the Group Risk Manager and representatives from the Group Finance function and the external auditors shall attend meetings at the invitation of the Committee.

Chairman

The Chairman of the Committee shall be appointed by the Board from amongst the independent non-executive directors.

Secretary

The Company Secretary shall act as the secretary of the Committee.

Quorum

A quorum shall be two members.

Frequency of meetings

Meetings will be held not less than three times a year. The meeting dates for the financial year will be agreed by the Committee prior to the commencement of the year.

The Secretary will call additional meetings of the Committee if so requested by any member, the Chief Executive Officer, the Finance Director, the Head of Operational Audit or the external auditors.

Authority

The Committee is authorised by the Board to investigate any activity within its Terms of Reference. In the performance of its duties, the Committee is granted full access to Company information and can seek that information from any employee of the business. It shall have access to sufficient resources to carry out its duties, including access to the Company Secretariat for assistance as required.

The Committee is further authorised, at the Company’s expense, to obtain outside legal or other independent professional advice.

Committee members may undertake appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members.

Duties

The duties of the Committee shall be:

1 Financial Reporting

  • To monitor the integrity of all financial statements of the Company, including its half-yearly and annual reports, interim management statements, preliminary results’ announcements and any other formal announcement relating to its financial performance before submission to the Board.
  • The Committee shall review and challenge where necessary:
    • The consistency of any accounting policies and practices (year on year and across the Group) and any changes to them;
    • Whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;
    • The extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed;
    • The clarity of disclosures in the Company’s financial reports and the context in which statements are made;
    • All material information presented with the financial statements, such as the operating and financial review and the corporate governance statement (insofar as it relates to the audit and risk management);
    • Significant adjustments resulting from the audit;
    • The going concern assumption;
    • Information from the annual financial statements of the Group pension funds;

2 Internal Controls and Risk Management Systems

The Committee shall:

  • keep under review the effectiveness of the Group’s internal financial and operational controls and risk management processes; and
  • review and approve the Company's statements to be included in the annual report and other financial reports concerning internal control systems and risk management.

3 Operational Audit

The Committee shall:

  • consider and approve the remit of the operational audit function, to ensure that the function is adequately resourced and has appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards. The committee shall also ensure the function has adequate standing within the Company and is free from management or other restrictions.
  • review and assess the annual operational audit plan;
  • review all summaries and reports submitted by Operational Audit
  • review and monitor management’s responsiveness to any significant findings and Operational Audit recommendations.
  • monitor and review on an annual basis the effectiveness of the of the Company’s Operational Audit function in the context of the Company’s overall risk management system;
  • approve the appointment or dismissal of the Head of Operational Audit;
  • meet the Head of Operational Audit at least once a year, without management being present, to discuss their remit and any issues arising from       the operational audits carried out. In addition, the Head of Operational Audit shall be given the right of direct access to the Committee and to its Chairman.

4 External Audit

The Committee shall:

  • oversee the process for the appointment, re-appointment and removal of the Company’s external auditor and make appropriate recommendations to the   Board for eventual approval by the shareholders at the AGM. The Committee shall oversee the selection process for new auditors and if an auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required.
  • oversee the relationship with the external auditor including (but not limited to)
  • recommendation of their remuneration to the Board, approval of the policy in respect of fees for non-audit services provided by the external auditor and ensuring that the provision of the non-audit services does not impair their independence or objectivity.
  • approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
  • assess annually their independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services and rotation of audit partners;
  • assess annually their qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the external auditor on its own quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements;
  • ensure co-ordination with the activities of the operational audit function;
  • consider the risk of the withdrawal of the Company’s current auditor from the market
  • meet regularly with the external auditor, including once at the planning stage before the audit and once after the audit at the reporting stage and at least once a year, without management being present, to discuss its remit and any issues arising from the audit carried out;
  • review and approve the annual audit plan and ensure it is consistent with the scope of the audit engagement
  • review the effectiveness of the audit including:
  • the external auditor’s highlights memorandum and any response by management to the auditor’s findings and recommendations;
  • the representation letters requested by the external auditor, before they are signed by management

5 Whistleblowing and Fraud

The Committee shall

  • review the Company’s arrangements by which employees can raise concerns about matters of financial reporting, control and or other topics;
  • ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action;
  • review the Company’s procedures for detecting fraud.

6 Other Matters

The Committee shall:

  • oversee any investigation of activities which are within its terms of reference and act for internal purposes as a court of the last resort
  • 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.

Reporting procedures

The Chairman of the Committee will update the Board on all matters within its duties and responsibilities at the earliest reasonable opportunity.

The Secretary to the Committee shall circulate the minutes of the Committee meetings to all members of the Board and the external auditors.

The Committee shall report to shareholders on its activities during the year and this report shall be included in the Company’s annual financial statements.

The Chairman of the Committee shall attend the AGM and shall answer questions on the Committee’s activities and its responsibilities.