AFRICAN COMPASS INTERNATIONAL
TERMS OF REFERENCE OF THE
AUDIT AND RISK COMMITTEE
1.1 The board of directors (“the board”) of ACI (“the company”) resolved to establish a committee of the board to be known as the audit and risk committee (“the committee”) to fulfil the functions as set out herein in respect of the company and its subsidiaries and associated companies (“the group”).
1.2 The board hereby resolves to adopt these terms of reference of the committee.
2.1 The committee shall be appointed by the board and shall comprise a minimum of 2 (two) non executive directors of the company, both of whom must comply with the requirements of the Corporate Laws Amendment Act of 2006.
2.2 A quorum shall be two members present in person or via telecommunication facilities.
2.3 The committee shall be entitled to invite specialists, if necessary, to attend all meetings of the committee.
2.4 At least one of the members of the committee should be financially literate so as to enable the committee to discharge its duties as set out in Section 6 hereof.
2.5 The chair of the committee shall be appointed by the board and should be an independent non-executive director and should not be the chair of the board.
2.6 The chair of the committee will be required to attend the company’s annual meetings to answer relevant questions posed by shareowners.
3 ATTENDANCE AT MEETINGS
3.1 The COO, the head of internal audit (if any) and a representative of the external auditors will be required to attend the meetings.
3.2 Other board members shall have the right of attendance, with the prior consent of the chairman of the committee.
3.3 The committee shall annually meet with the external auditors with or without other board members, as the committee may elect.
3.4 The company secretary shall be the secretary of the committee.
4 FREQUENCY OF MEETINGS
4.1 Meetings shall be held not less than 3 (three) times a year. These meetings should be prior to the commencement of the annual external audit; prior to the board’s approval of the annual financial statements and interim results; and after the completion of the annual external audit.
4.2 Any member of the committee or the external auditors or the head of internal audit (if any) may request a meeting if deemed necessary and a meeting will then be arranged in consultation with the chair of the committee.
5.1 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 are directed to co-operate with any request made by the committee.
5.2 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 deemed necessary.
5.3 The company shall meet all expenses reasonably incurred by the committee in the fulfilling of its duties, including the payment of a fee to committee members as determined by the board from time to time.
The duties of the committee, which shall be in respect of the group, shall be to:
External Auditors, Audit Process and Annual Financial Statements
6.1. consider the appointment and/or termination of the external auditors and to nominate for appointment a registered auditor who is independent of the group as and when required;
6.2. determine the annual audit fee and terms of engagement of the external auditors;
6.3. annually review the independence, objectivity and effectiveness of the external auditors;
6.4. ensure that the appointment of the external auditors comply with the provisions of the Companies Act of 1973 as amended (“the Act”) and any other applicable legislation;
6.5. consider and set, if appropriate and subject to relevant legislative requirements, mandatory term limits on the length of time the external auditors or audit partner may serve the company and ensure a managed rotation process in respect of the audit partner after every 5 (five) years;
6.6. determine the nature and extent of non-audit services which the external auditors may provide, subject to the provisions of the Act, and ensuring proper disclosure of such services and related fees in the annual financial statements as required;
6.7. pre-approve any proposed contract with the external auditors for the provision of non-audit services to the group;
6.8. discuss with the external auditor before the annual audit commences the nature and scope of the audit;
6.9. review the half year and annual financial statements before submission to the board, focusing particularly on:-
6.9.1. any changes in accounting policies and practices;
6.9.2. major judgemental areas;
6.9.3. significant adjustments resulting from the audit;
6.9.4. the going concern statement;
6.9.5. compliance with accounting standards;
6.9.6. compliance with statutory requirements;
6.9.7. reliability and accuracy of the financial information provided to management and other users of financial information.
6.10. discuss problems and reservations arising from the interim, (if and when applicable) and final audits, and any matters incidental thereto which the external auditors may wish to discuss (in the absence of management where necessary);
6.11. review any accounting or auditing concerns identified as a result of the internal or external audits;
6.12. review the external auditor’s management letter and management’s response, if available, and/or to consider the matters to be dealt with therein;
6.13. review the company’s statement on internal control systems prior to endorsement by the board;
Risk Management and Compliance
6.17. review the processes and procedures for risk identification, analysis and quantification;
6.18. review the processes implemented to monitor the ongoing management of risks;
6.19. review reports on the effectiveness of the processes and procedures of risk management;
6.20. submit an annual report to the board on the total risk management and assessment process and outcomes;
6.21. review the group’s compliance with legal and regulatory provisions, its articles of incorporation, code of business conduct and ethics and the rules established by the board and any significant breaches thereof;
6.22. review any statements on ethical standards or requirements for the company and the procedures or review system implemented to promote and enforce compliance;
6.23. review significant cases of employee conflicts of interest, misconduct or fraud, or any other unethical activity by employees or the group;
6.24. where requested, make recommendations on any material potential conflict of interest or questionable situations;
6.25. give due consideration to the principles of governance and the code of best practice as contained in the King Report on Corporate Governance for South Africa;
6.26. retain a copy of the current terms of reference of the committee at the registered office of the company and provide shareowners with a copy of same if requested;
6.27. include a report in the annual financial statements describing how the committee carried out its functions and stating whether it is satisfied that the external auditors are independent of the group;
6.28. receive and deal with any internal or external complaint relating to either accounting practices and internal audit of the group or to the content or auditing of the financial statements or to any related matter; and
6.29. consider such other topics and fulfil such other duties as defined by the board.
7 REPORTING PROCEDURE
7.1 The secretary shall incorporate the approved minutes of meetings of the committee in the meeting files prepared for meetings of the board for noting purposes.
7.2 The company shall disclose in its annual report whether or not the committee has adopted these formal terms of reference and if so whether or not the committee satisfied its responsibilities for the year in compliance with its terms of reference.
7.3 Membership of the committee and attendance at committee meetings shall be disclosed in the company’s annual report.
8 REVIEW AND ASSESSMENT
The committee’s activities and effectiveness should be assessed periodically and reviewed with the board.
INITIAL ADOPTION: November 2008
AMENDED: July 2009
REVISED: May 2013
READOPTED: January 2017