The Committee shall be appointed by the Hunting PLC Board (the “Board”) and comprise at least three independent non-executive Directors of the Company. A quorum shall be two members.
At least one member shall have a professional accounting qualification and recent and relevant financial experience. Other members of the Committee should have appropriate experience from within the sector in which Hunting PLC operates. At least one member of the Committee shall also be a member of the Remuneration Committee.
The Chairperson shall be appointed by the Board.
The Company Secretary or his or her nominee shall act as the Secretary of the Committee.
Attendance at Meetings
The Finance Director and a representative of the external and internal auditors shall normally attend meetings. It is for the Audit Committee to decide if other non-members should attend a particular meeting or a particular agenda item however other board members will normally be invited to attend.
The Committee shall meet with the external auditors without executive board members present at least once per year.
The Committee shall meet with the head of internal audit without executive board members present at least once per year.
Frequency of Meetings
Meetings should be held at least three times a year. The external auditors or any Committee member may request a meeting if they consider that one is necessary.
The Committee Chairperson shall maintain dialogue with key individuals involved in the Company’s governance, including the Board Chairman, Chief Executive, Finance Director, external audit lead partner and the head of internal audit.
Annual General Meeting
The Committee chairperson should attend the annual general meeting to answer shareholder questions on the committee’s activities.
The Committee is authorised by the Board to investigate any activity within its terms of reference.
It is authorised to seek any information it reasonably requires from any employee and all employees are directed to co-operate with any request made by the Committee. In practice this information would normally be requested on behalf of the Audit Committee by the Chief Executive/Finance Director.
The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.
The Committee should carry out the duties below for the parent company and, if required, the major subsidiary undertakings and the group as a whole, as appropriate.
- The Committee shall monitor the integrity of the financial statements of the company, including its annual and half-yearly report and trading statements, reviewing and reporting to the board on significant financial reporting issues and judgements, including matters communicated to it by the auditor.
- The Committee shall review any other statements requiring board approval which contain financial information first, where to carry out a review prior to board approval would be practicable and consistent with any prompt reporting requirements under any law or regulation including the Listing Rules of Disclosure Guidance and Transparency Rules sourcebook.
- In particular, the Committee shall review and challenge where necessary:
- the consistency of, and any changes to, significant accounting policies on a year on year basis;
- the methods used to account for significant or unusual transactions where different approaches are possible;
- any exceptional items;
- whether the company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;
- the clarity and completeness of disclosure 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 business review and the corporate governance statements relating to the audit and to risk management; and
- the going concern assumption and viability statement and their periods of assessment.
- 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.
- 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.
Internal controls and risk management systems
The Committee shall:
- keep under review the adequacy and effectiveness of the company’s internal financial controls and internal control and risk management systems;
- review and approve the statements to be included in the annual report concerning internal controls and risk management.
Compliance, whistleblowing and fraud
The Committee shall:
- review 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;
- review the company’s procedures for detecting fraud;
- review the company’s systems and controls for the prevention of bribery; and
- monitor the company’s procedures for compliance to the Modern Slavery Act.
The Committee shall:
- approve the appointment or termination of appointment of the head of internal audit;
- review and approve the charter of the internal audit function and ensure the function has the necessary resources and access to information to enable it to fulfil its mandate, and is equipped to perform in accordance with appropriate professional standards for internal auditors;
- ensure the internal auditor has direct access to the board chairman and to the Committee chairperson, and is accountable to the Committee;
- ensure internal audit has unrestricted scope, the necessary resources and access to information to enable it to fulfil its mandate and ensure that the internal audit function is equipped to perform in accordance with appropriate professional standards for internal auditors;
- review and assess the annual internal audit work plan to ensure it is aligned to the key risks of the business;
- receive a report on the results of the internal auditor’s work on a periodic basis;
- review and monitor management’s responsiveness to the internal auditor’s findings and recommendations
- monitor and review the effectiveness of the company’s internal audit function, in the context of the company’s overall risk management system;
- Carry out an annual assessment of the effectiveness of the internal audit function; and as part of this assessment and determine whether it is satisfied that the quality, experience and expertise of internal audit is appropriate for the business.
The Committee shall:
- 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;
- if an auditor resigns, 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):
- develop and oversee the selection procedure for the appointment of the audit firm, ensuring that all tendering firms have access to all necessary information and individuals during the tendering process;
- recommendations on their remuneration, including both fees for audit and non-audit services, and that the level of fees is appropriate to enable an effective and high quality audit to be conducted;
- approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit;
- 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;
- 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 could adversely affect the auditor’s independence and objectivity;
- agreeing with the board a policy on the employment of former employees of the company’s auditor, and monitoring the implementation of this policy;
- monitoring the auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partner, the level of fees paid by the company compared to the overall fee income of the firm, office and partner and other related requirements;
- assessing annually the qualifications, expertise and resources of the auditor and the effectiveness of the audit process, which shall include a report from the external auditor on their own internal quality procedures; and
- 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.
- meet regularly with the external auditor (including once at the planning stage before the audit and once after the audit at the reporting stage), to discuss the auditor’s remit and any issues arising from the audit;
- discuss with the external auditor the factors that could affect audit quality and review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement, having regard to the seniority, expertise and experience of the audit team; and
- review external auditor reporting including any findings from 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;
- the auditor’s explanation of how the risks to audit quality were addressed;
- key accounting and audit judgements;
- the auditor’s view of their interactions with senior management;
- levels of errors identified during the audit; and
- the effectiveness of the audit process.
The Committee shall also:
- review any representation letter(s) requested by the external auditor before they are signed by management;
- review the management letter and management’s response to the auditor’s findings and recommendations; and
- develop and implement 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.
- The Committee chairperson 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.
- The Committee shall make whatever recommendations to the board it deems appropriate on any area within its remit where action or improvement is needed.
- 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.
The Committee shall:
- have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
- 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;
- give due consideration to laws and regulations, the provisions of the Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules, as appropriate;
- work and liaise as necessary with all other board Committees;
- 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; and
- give due consideration to the Companies Act 2006 in respect to the duties of Directors, to promote the success of the Company, with its decision making having due regard to its shareholders and stakeholders.
Approved by the Directors on 4 December 2018