Audit Committee Terms of Reference
NCC GROUP PLC
("Company")
AUDIT COMMITTEE: TERMS OF REFERENCE
1. Definitions
In these terms of reference:
"Board" means the board of directors of the Company; and
"Committee" means the audit committee of the Board.
2. Membership
2.1 Members of the Committee shall be appointed by the Board on the recommendation of the nomination committee and in consultation with the chairman of the Committee. The Committee shall be made up of at least two members.
2.2 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.
2.3 Only members of the Committee have the right to attend Committee meetings. However, other individuals (such as the chairman of the Board, the chief executive, the finance director, other directors and representatives from the finance function of the Company) may be invited to attend for all or part of any meeting, as and when appropriate.
2.4 The external auditors of the Company shall be invited to attend meetings of the Committee on a regular basis.
2.5 Appointments to the Committee shall be for a period of up to three years, which may be extended for further three year periods provided that the relevant Committee member still meets the criteria for membership of the Committee.
2.6 The Board on the recommendation of the nomination committee, shall appoint the chairman of the Committee, who shall be an independent non executive director of the Company. In the absence of the chairman of the Committee and/or an appointed deputy, the remaining members present shall elect one of their number to chair the meeting.
3. Secretary
The Company secretary or his/her nominee shall act as the secretary of the Committee.
4. Quorum
The quorum necessary for the transaction of business shall be two. 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.
5. Frequency of meetings
The Committee shall meet at least three times a year at appropriate times in the reporting and audit cycle and otherwise as required.
6. Notice of meetings
6.1 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 the external auditor or internal audit function if they consider it necessary.
6.2 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 five 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.
7. Minutes of meetings
7.1 The secretary of the Committee shall minute the proceedings and decisions of all Committee meetings, including recording the names of those present and in attendance.
7.2 The secretary of the Committee shall ascertain, at the beginning of each Committee meeting, the existence of any conflicts of interest and minute them accordingly.
7.3 Draft minutes of Committee meetings shall be circulated promptly to all members of the Committee and, once agreed, to all other members of the Board, unless it would be inappropriate to do so.
8. AGM
The chairman of the Committee shall attend the AGM prepared to respond to any shareholder questions on the Committee's activities.
9. Duties
The Committee shall carry out the duties below for the Company, major subsidiary undertakings and the group as a whole, as appropriate.
9.1 Financial reporting
9.1.1 The Committee shall monitor the integrity of the financial statements of the Company, including its annual and interim reports and accounts, interim management statements, announcements of preliminary results and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain.
9.1.2 The Committee shall review and challenge where necessary:
• the consistency of, and any changes to, accounting policies, both on a year on year basis and across the group;
• the methods used to account for significant or unusual transactions where different approaches are possible;
• 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 of disclosure in the Company's financial reports and the context in which statements are made; and
• all material information presented with the financial statements, such as any business review/operating and financial review and any corporate governance statement (insofar as it relates to the audit and risk management).
9.2 Internal controls and risk management systems
The Committee shall:
9.2.1 keep under review the adequacy and effectiveness of the Company's internal financial controls and internal control and risk management systems; and
9.2.2 review and approve any statements to be included in the Company's annual report and accounts concerning internal controls and risk management.
9.3 Compliance, whistleblowing and fraud
The Committee shall:
9.3.1 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. The Committee shall ensure that the Company’s arrangements to deal with such concerns allow proportionate and independent investigation of such matters and appropriate follow up action;
9.3.2 review the Company’s procedures for detecting fraud; and
9.3.3 review the Company’s systems and controls for the prevention of bribery and receive reports on non-compliance.
9.4 Internal audit
The Committee shall consider annually whether the Company requires an internal audit function and if appropriate recommend to the Board that one is established.
9.5 External audit
The Committee shall:
9.5.1 consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re appointment or removal of the Company’s external auditor. 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;
9.5.2 oversee the relationship with the external auditor, including (but not limited to):
• recommendations on 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;
• 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 external 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 external auditor and the Company (other than in the ordinary course of business);
• agreeing with the Board a policy on the employment of former employees of the external auditor, then monitoring the implementation of this policy;
• monitoring the external 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; and
• assessing annually the qualifications, expertise and resources of the external auditor and the effectiveness of the audit process, which shall include a report from the external auditor on their own internal quality procedures;
9.5.3 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 the executive management being present, to discuss their remit and any issues arising from the audit;
9.5.4 review and approve the annual external audit plan and ensure that it is consistent with the scope of the audit engagement;
9.5.5 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;
• levels of errors identified during the audit; and
• the effectiveness of the audit.
The Committee shall also:
9.5.6 review any representation letter(s) requested by the external auditor before they are signed by the executive management;
9.5.7 review the executive management letter and executive management's response to the external auditor's findings and recommendations; and
9.5.8 develop and implement a policy on the supply of non audit services by the external auditor, taking into account any relevant ethical guidance on the matter.
9.6 Other matters
The Committee shall:
9.6.1 have access to sufficient resources in order to carry out its duties, including access to the Company secretariat for assistance as required;
9.6.2 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;
9.6.3 give due consideration to laws and regulations, the provisions of the UK Corporate Governance Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules, as appropriate;
9.6.4 be responsible for co ordination of the internal and external auditors;
9.6.5 oversee any investigation of activities which are within its terms of reference and act as a court of last resort;
9.6.6 approve:-
• any fees for non-audit work paid to the auditors in excess of 50% of the Audit Fee paid to the Auditors for that financial year, for any one assignment and
• the fees for any assignment which would result in the total non-audit fees paid to the auditors for that financial year exceeding the total Audit Fee paid to the Auditors for that financial year;
9.6.7 approve any fees paid to Rickitt Mitchell & Partners outside the standard terms of payment approved by the Committee.
10. Reporting responsibilities
10.1 The chairman of the Committee shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
10.2 The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
10.3 The Committee shall produce an annual report to shareholders on its activities, which will form part of the Company's annual report and accounts.
11. Self appraisal
The Committee shall, 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.
12. Authority
The Committee is authorised by the Board:
12.1 to seek any information it requires from any employee of the Company in order to perform its duties;
12.2 to obtain, at the Company's expense, outside legal or other professional advice on any matters within its terms of reference;
12.3 to call any employee to be questioned at a meeting of the Committee as and when required; and
12.4 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.
Updated April 2012