Reference to "the Committee" shall mean the Audit Committee.
Reference to "the Board" shall mean the Board of Directors of SIG plc.
1.1 Members of the Committee shall be appointed by the Board. The Committee shall comprise at least 3 members.
1.2 All members of the Committee shall be independent non-executive directors at least one of whom shall have recent and relevant financial experience. The Chairman of the Board shall not be a member of the Committee.
1.3 Only members of the Committee have the right to attend Committee meetings. However, other individuals such as the Chairman of the Board, Chief Executive, Finance Director, other directors, the head of internal audit and representatives from the finance function may be invited to attend all or part of any meeting as and when appropriate or necessary.
1.4 The external and internal auditors will be invited to attend meetings of the Committee on a regular basis.
1.5 The Board shall appoint the Committee Chairman who shall be an independent non-executive director. In the absence of the Committee Chairman, the remaining members present shall elect one of themselves to chair the meeting.
2.1 The Secretary will be appointed by the Committee and will normally be the Company Secretary.
3.1 The quorum necessary for the transaction of business shall be 2 members. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.
4. Frequency of Meetings
4.1 The Committee shall meet not less than 3 times a year and at such other times as the Chairman of the Committee shall require.
5. Notice of Meetings
5.1 Meetings of the Committee shall be summoned by the Secretary of the Committee at the request of any of its members or at the request of external or internal auditors if they consider it necessary.
5.2 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, any other person required to attend and all other non-executive directors, no later than 5 working days before the date of the meeting. Supporting papers shall be sent to Committee members and to other attendees as appropriate, at the same time.
6. Minutes of Meetings
6.1 The Secretary shall minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance.
6.2 The Secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.
6.3 Minutes of Committee meetings shall be circulated promptly to all members of the Committee and, once agreed, to all members of the Board unless a conflict of interest exists or it would be inappropriate to do so.
7. Annual General Meeting
7.1 The Chairman of the Committee shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee's activities.
The Committee should carry out the duties below for the parent company, major subsidiary undertakings and the group as a whole, as appropriate. In exercising its duties, the Committee will maintain close consultation and liaison with the Group Chief Executive and Finance Director.
8.1 Financial Reporting
8.1.1 The Committee shall monitor the integrity of the financial statements of the Company, including its annual and interim reports, interim management statements, preliminary results, announcements and any other formal announcement relating to its financial performance, reviewing and reporting to the Board on significant financial reporting issues and judgements which they contain having regard to matters communicated to it by the auditor. The Committee shall also review summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature.
8.1.2 The Committee shall review and challenge where necessary:
18.104.22.168 the consistency of, and any changes to, accounting policies both on a year on year basis and across the Group;
22.214.171.124 the methods used to account for significant or unusual transactions where different approaches are possible;
126.96.36.199 whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;
188.8.131.52 the clarity of disclosure in the Company's financial reports and the context in which statements are made; and
184.108.40.206 all material information presented with the financial statements, such as the business review and the corporate governance statement (insofar as it relates to the audit and risk management);
220.127.116.11 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.
8.2 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, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
8.3 Internal Controls and Risk Management Systems
The Committee shall:
8.3.1 keep under review the adequacy and effectiveness of the Company's internal controls and risk management systems; and
8.3.2 review and approve the statements to be included in the Annual Report concerning internal controls and risk management.
8.4 Compliance, Whistleblowing and Fraud
The Committee shall:
8.4.1 review the Company's arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action;
8.4.2 Review the Company's systems and controls for the prevention of bribery and receive reports on non-compliance.
8.5 Internal Audit
Where there is no internal audit function, the Committee shall consider annually whether there should be one and make recommendation to the Board accordingly.
Where there is an internal audit function, the Committee shall:
8.5.1 monitor and review the effectiveness of the Company's internal audit function in the context of the Company's overall risk management system;
8.5.2 approve the appointment and removal of the head of the internal audit function;
8.5.3 consider and approve the remit of the internal audit function and ensure it has adequate resources and 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 and is free from management or other restrictions;
8.5.4 review and assess the annual internal audit plan;
8.5.5 review promptly all reports on the Company from the internal auditors;
8.5.6 review and monitor management's responsiveness to the findings and recommendations of the internal auditor; and
8.5.7 meet the head of internal audit at least once a year, without management being present, to discuss their remit and any issues arising from the internal audits carried out. In addition, the head of internal audit shall be given the right of direct access to the Chairman of the Board and to the Committee.
8.6 External Audit
The Committee shall:
8.6.1 consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment and removal of the Company's external auditor. 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;
8.6.2 ensure that at least once every ten years the audit services contract is put out to tender to enable the Committee to compare the quality and effectiveness of the services provided by the incumbent auditor with those of other audit firms; and in respect of such tender oversee the selection process and ensure that all tendering firms have such access as is necessary to information and individuals during the duration of the tendering process;
8.6.3 if an auditor resigns, investigate the issues leading to this and decide whether any action is required;
8.6.4 oversee the relationship with the external auditor including (but not limited to):
18.104.22.168 approval of their remuneration, whether fees for audit or non audit services and that the level of fees is appropriate to enable an adequate audit to be conducted;
22.214.171.124 approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
126.96.36.199 assessing 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;
188.8.131.52 satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the Company (other than in the ordinary course of business) which would adversely affect the auditor's independence and objectivity;
184.108.40.206 agreeing with the Board a policy on the employment of former employees of the Company's auditor, then monitoring the implementation of this policy;
220.127.116.11 monitoring the auditor's 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;
18.104.22.168 assessing annually their qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the external auditor on their own internal quality procedures;
22.214.171.124 seeking to ensure co-ordination with the activities of the internal audit function; and
126.96.36.199 Evaluating the risks to the quality and effectiveness of the financial reporting process and consideration of the need to include the risk of the withdrawal of their auditor from the market in that evaluation.
8.6.5 meet regularly with the external auditor, including once at the planning stage before the audit and once after the audit at the reporting stage. The Committee shall meet the external auditor at least once a year, without management being present, to discuss their remit and any issues arising from the audit;
8.6.6 review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement;
8.6.7 review the findings of the audit with the external auditor. This shall include but not be limited to, the following;
a discussion of any major issues which arose during the audit,
any accounting and audit judgements, and
levels of errors identified during the audit.
review the effectiveness of the audit;
8.6.8 review any representation letters requested by the external auditor before they are signed by management;
8.6.9 review the management letter and management's response to the auditor's findings and recommendations; and
8.6.10 develop and implement a policy on the supply of non-audit services by the external auditor to avoid any threat to auditor objectivity and independence, taking into account any relevant ethical guidance on the matter.
8.7 Reporting Responsibilities
8.7.1 The Committee Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and shall also formally report to the Board on how it has discharged its responsibilities. This report shall include:
8.7.2 The significant issues that it considered in relation to the financial statements (required under paragraph 8.1.1) and these were addressed;
8.7.3 Its assessment of the effectiveness of the external audit process (required under paragraph 188.8.131.52) and its recommendations on the appointment or reappointment of the external auditor;
8.7.4 The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed; and
8.7.5 The Committee shall compile a report to shareholders on its activities to be included in the Company's Annual Report.
8.8 The Committee shall compile a report on its activities to be included in the Company's annual report. The report should include an explanation of how the Committee has addressed the effectiveness of the external audit process; the significant issues that the Committee considered in relation to the financial statements and how these issues were addressed, having regard to matters communicated to it by the auditor; and all other information requirements set out in the Code.
8.9 In the compiling the reports referred to in 8.8, the Committee should exercise judgement in deciding which of the issues it considers in relation to the financial statements are significant, but should include at least those matters that have informed the Board's assessment of whether the Company is a going concern. The report to shareholders need not repeat information disclosed elsewhere in the annual report and accounts, but could provide cross-references to that information.
8.10 Other Matters
The Committee shall:
8.10.1 have access to sufficient resources in order to carry out its duties, including access to the Company secretariat for assistance as required;
8.10.2 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;
8.10.3 give due consideration to laws and regulations, the provisions of the Combined Code and the requirements of the UK Listing Authority's Listing Prospectus and Disclosure and Transparency Rules and any other applicable Rules as appropriate;
8.10.4 be responsible for co-ordination of the internal and external auditors;
8.10.5 oversee any investigation of activities which are within its terms of reference;
8.10.6 work and liaise as necessary with all other Board Committees; and
8.10.7 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.
The Committee is authorised:
9.1 to seek any information it requires from any employee of the Company in order to perform its duties;
9.2 to obtain, at the Company's expense, outside legal or other professional advice on any matter within its terms of reference;
9.3 to call any employee to be questioned at a meeting of the Committee as and when required; and
9.4 to 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.
Reviewed July 2013