Terms of Reference for Audit, Compliance and Risk Management Committee Policy: Audit, Compliance & Risk Management Committee ToR Version: 11 Approved by: Board of Directors Date: 31 May 2018 Review Period: Every 2 years Sponsor: Group CFO
Audit, Compliance and Risk Management Committee Terms of Reference 1. Committee Purposes The Committee exists to assist the Board in fulfilling its responsibilities in the areas of financial accounting, financial reporting, compliance and risk management. 2. Committee Objectives The objectives of the Committee are to assist the Board in fulfilling its responsibilities in all matters related to the Group s financial accounting and reporting, material tax planning arrangements, risk management, and compliance with applicable laws regulations and standards, including but not limited to: maintain the integrity of the company s financial reporting; ensure the quality and independence of the company s external audit and auditor; identify and review significant business risks and the Company s legal and regulatory compliance; and provide oversight over the control environment to safeguard company assets. 3. Responsibilities The Committee will carry out the following responsibilities: 3.1. Financial Accounting and Reporting Consider and review with Management and external auditor (as relevant) during the year: - the treatment of transactions which are significant, unusual or require substantial judgement. - the appropriateness of accounting policies including changes to relevant accounting standards and legislation impacting on the preparation of financial statements - the adequacy of internal controls including computerised information systems control and security - written representations from Management - whether the Group continues to meet the going concern assumption now and in the foreseeable future Review with Management and the auditor at the completion of the external audit: - the Group s financial statements and related note disclosures including the assessment of significant estimates and judgements in the financial statements - any significant findings or recommendations of the auditor and Management s responses
- any disputes or difficulties encountered in the course of the audit including restrictions on the scope of the audit work or access to required information - any changes required in the scope of the audit plan Review of releases to external parties including NZX announcements issued by the Group concerning financial results, performance, and outlook. 3.2. External Audit Review and approve the external audit scope, plans and strategy. Evaluate the overall effectiveness of the external audit programme through regular meetings with the external auditors. Review the external auditor s fees, terms of engagement and annual independence statement in accordance with the Group s Audit Independence Policy. Consult with the auditors on any significant proposed regulatory, accounting or reporting issues and assess the potential impact of such on the Group s financial reporting processes. Make recommendations to the Board on the appointment and remuneration of the external auditor. Review with Management and the auditor, the co-ordination of audit effort to ensure completeness of coverage and to assess the working relationship between the external auditor and Management. Meet separately with the external auditor to discuss any matters that the Committee or auditor believe should be discussed privately. 3.3. Risk Management, Compliance and Insurance Ensure that Management has established a risk management framework which includes policies and procedures to effectively identify, treat, monitor and report principal business risks and appetite for risk. Review, monitor and report to the Board on appropriate legislative compliance. Reviewing the Group s insurance covers and recommending the renewal of policies to the Board. Review with Management and agree the internal audit activity s plans and resource requirements. 3.4. Internal Control Environment Review the adequacy and effectiveness of the Group s internal control systems implemented by Management, including the Delegated Authorities Policy. Evaluating the Group s potential exposure to fraud. 4. Composition The Committee, and the Chair of the Committee are appointed by the Board.
The Chair of the Committee will be an independent director, who is not the Chair of the Board. There are to be a minimum of three members, all of whom are to be non-executive directors, and the majority of whom will be independent. Members of the Committee will be financially literate and at least one member of the Committee will be a chartered accountant or have a similar recognised form of financial expertise. 5. Meetings A quorum for Committee meetings is three members of which two must be independent. Members of the Committee may participate by way of telephone conference as long as all members participating can hear each other. The Committee will hold at least three scheduled meetings per year having regard to when statutory financial requirements such as annual report, half year report, are required to be complete. Any member of the Committee or the Group CEO may request a meeting of the Committee at any time if they consider it necessary. Reasonable notice of meetings and the business to be conducted are to be given to members of the Committee, the Group CEO, the auditor as necessary, and all other members of the Board. The Committee may have in attendance at its meetings, members of Management and any other persons or advisors as it considers necessary. The Board appoints a secretary for the Committee, and minutes are to be kept for every meeting. 6. Authorities The Committee does not take actions or make decisions on behalf of the Board unless specifically mandated to do so. The Committee makes recommendations to the Board on the matters as set out in these terms of reference, or which would otherwise be seen as falling within the scope of the Committee s mandate. The Committee may conduct or authorise investigation into any matters within the Committee s responsibilities and is authorised by the Board, at the expense of the Group, to obtain independent counsel, engage the advice of independent accountants, or other external parties in order to assist in the conduct of any investigation. Management are to promptly advise the Committee of any matters requiring its attention. If Management becomes aware of any fraudulent activity in the Group, this will be notified to the Chair of the Committee immediately. The Chair of the Committee may deal directly with the auditors on behalf of the Committee or through the Committee Secretary in relation to meetings and the content thereof.
The Committee will require of the auditors: A summary of the audit approach A summary of the audit staffing A summary of control weaknesses Recommendations on changes to accounting policies and disclosures. The external auditor reports directly to the Committee. The auditors will be instructed to advise the Committee on any matter requiring attention. The Chair or any member of the Committee can be contacted individually on a formal or informal basis, by the auditors. 7. Reporting After each meeting, the Chair of the Audit, Compliance and Risk Management Committee will report the Committee s recommendations, findings and activities to the Board. The minutes of Committee meetings will be circulated to members of the Board. Extracts of the minutes are made available to members of Management and other Company Officers as the Board directs, in order for Company Officers to properly carry out their functions. 8. Review of the Committee The Committee, the Board, and the Group CEO will review annually the Committee s performance against its objectives and responsibilities and against these Terms of Reference. 9. Reference Risk Management Policy Audit Independence Policy Insurance Policy 10. Definitions Term Board Company Company Officer Group Group CEO Group CFO Committee Definition The Board of Directors of Methven Ltd. and its subsidiary companies together or individually as the context implies. A director or employee of and/or its subsidiaries. and its subsidiary companies together or individually as the context implies. CEO of the Methven Group CFO of the Methven Group The Audit, Compliance & Risk Management Committee (ARC).