Terms of Reference for the Audit Committee

The board of directors of the Company (the “Board”) has resolved to establish a committee of the Board to be known as the Audit Committee.

2.1    The committee shall comprise at least two members.  Members of the committee shall be appointed by the Board from amongst the non-executive directors of the Company on the recommendation of the nomination committee.  The chairman of the Board shall not be a member of the committee.  

2.2    The chairman of the committee shall be appointed by the Board and shall be an independent non-executive director. In the absence of the committee chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting.

2.3    The majority of members shall be independent non-executive directors and free of any business or other relationship (including without limitation, cross-directorships or day to day involvement in the management of the business) that could interfere with the exercise of their judgement.

2.4    Appointments shall be for a period of up to three years, extendable for further periods of up to three years, provided the director still meets the criteria for membership of the committee.

2.5    At least one member of the committee is required to have significant and relevant financial experience, preferably supported by a professional accounting qualification.

2.6    The committee shall ensure that new members of the committee are subjected to a formal induction programme to include meeting with the external auditors, and that each member is provided with such training as may be considered appropriate subject to prior formal approval of the Board.

The quorum necessary for the transaction of business shall be two 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.

4.1    Only members of the committee have the right to attend committee meetings. However, other individuals such as the chairman of the Board, chief executive officer, chief financial officer, other directors, the heads of risk, compliance and internal audit and one or more representatives from the finance function may be invited to attend all or part of any meeting as and when appropriate and necessary.  

4.2    The external auditor will be invited to attend meetings of the committee on a regular basis.

4.3    Other person(s) as the committee may decide can be invited to attend and participate in specific meetings.


4.4    At least once a year the committee will meet with the external auditors without executive Board members present.

4.5    Telephone/virtual meetings are permissible.

4.6    The company secretary or his or her nominee shall act as the secretary of the committee.

The committee shall meet no fewer than three times a year at appropriate times in the reporting and audit cycle and otherwise as required.

6.1    The committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees will be directed to co-operate with any request made by the committee.

6.2    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.

6.3    The committee shall 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.

The committee should carry out the duties below for the parent company, major subsidiary undertakings and the group as a whole, as appropriate.

7.1.1    Monitor the integrity of the financial statements of the group and any formal announcements relating to the group’s financial performance, reviewing significant financial reporting issues and judgements contained therein;
7.1.2    Review and challenge where necessary the group’s operating, financial and accounting policies and practices;
7.1.3    Review the findings and discuss problems and reservations arising from the interim and final audits and any matters the auditors wish to discuss (in the absence of management where necessary) including major issues subsequently resolved or left unresolved, key accounting and audit judgements, and levels of errors identified during the audit; and
7.1.4    Review the clarity of disclosure and all material information presented with the financial statements, such as the business review/operating and financial review and the corporate governance statement (insofar as it relates to the audit and risk management).

7.2.1    Review, on behalf of the Board, the adequacy and effectiveness of the group’s system of internal control (including financial, operational compliance and risk management); and
7.2.2    Review and approve the statements to be included in the annual report concerning internal controls and risk management.

7.3.1    Review the adequacy and security of the group’s arrangements by which staff of the group may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters, with the objective of ensuring that arrangements are in place, where required, for the proportionate and independent investigation of such matters and for appropriate follow-up action;
7.3.2    Review the group’s procedures for detecting fraud;
7.3.3    Review the group’s systems and controls for prevention of bribery and receive reports on non-compliance; and
7.3.4    Keep under review the adequacy and effectiveness of the company’s Code of Conduct policy.

7.4.1    Review on at least an annual basis the need for an internal audit function in the context of the group’s overall risk and management system;
7.4.2    Where such a function exists, approve the appointment or termination of appointment of the head of internal audit;
7.4.3    Review the internal audit programme, ensure co-ordination between the internal and external auditors 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;
7.4.4    Ensure that the internal auditor has direct access to the Board Chairman and the committee and is accountable to the committee, periodically receive a report on the results of the internal auditor’s work, meet with the head of internal audit at least once a year without the presence of management, monitor and assess the role and effectiveness of the internal audit function in the overall context of the group’s risk management system; and
7.4.5    Consider the major findings of internal investigations and management’s responsiveness to the internal auditors findings and recommendations.

7.5.1    Consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, the appointment, re-appointment and removal of the company’s external auditors.  The committee shall oversee the selection process for a new auditor and if an auditor resigns the committee shall investigate the issues leading to this and decide whether any action is required;
7.5.2    Discuss with the external auditors, before the audit commences, the nature and scope of the audit, and to ensure co-ordination where more than one audit firm is involved;
7.5.3    Oversee the relationship with the external auditor including but not limited to:

7.5.3.1    recommendations on their remuneration, whether fees for audit or non-audit services and to develop and implement policy, where needed, on the engagement of the external auditors to supply non-audit services, taking into account relevant ethical guidelines regarding the provision of non-audit services by the external auditor;
7.5.3.2    approval of their terms of engagement including any engagement letter issued at the start of each audit;
7.5.3.3    review on at least an annual basis the effectiveness of the audit and the qualification, expertise, resources and independence and objectivity of the external auditor taking into consideration relevant UK professional and regulatory requirements and the internal quality control procedures of the external auditors;
7.5.3.4    monitor 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; and
7.5.3.5    review the findings of the audit with the external auditor.  This shall include but not be limited to: a discussion of any major issues which arose during the audit, any accounting and audit judgements, levels of errors identified during the audit, the effectiveness of the audit.