Section 1 – Membership
The Committee shall be appointed by the Board and shall consist of not less than three independent non-executive directors. The Chairman of the Board shall not be a member of the Committee. A quorum shall be three members. Members shall serve a period of three years from date of appointment. At least one member of the Committee shall have recent and relevant financial experience.
The Chairman of the Committee shall be appointed by the Board. The Company Secretary or his nominee, as agreed with the Chairman of the Committee, shall act as Secretary to the Committee.
Section 2 – Meetings & Minutes
A quorum shall comprise three members. Only members of the Audit & Finance Committee are entitled to attend and vote at Committee meetings. The Group Head of Internal Audit and the Chief Executive, while not members of the Committee will normally, at the invitation of the Chairman, attend meetings. The Group Finance Director and a representative of the External Auditor should, at the invitation of the Chairman, attend meetings convened to discuss the nature and scope of the annual external audit and/or to review the annual financial statements and External Auditor’s Management letter. Other Board members who are not executives or employees of Ervia shall also have the right of attendance.
The Audit & Finance Committee should have a discussion with each of the External Auditor and the Group Head of Internal Audit at the Committee’s discretion as and when required but at least once a year, without executive members of the Board or other employees of Ervia present, to ensure that there are no unresolved issues of concern.
Meetings shall be convened at the discretion of the Chairman, but shall be held at least four times per annum. Such meetings should coincide with key dates in the financial reporting cycle. The Board, Committee Members or the Group Head of Internal Audit and/or the External Auditors may also request further meetings if they consider it is necessary to do so.
The Secretary shall be responsible for recording the minutes of each meeting. Minutes of meetings will be circulated to all Members in advance of their formal adoption by the Committee.
Section 3 - Authority
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. It is also authorised to seek any information it requires from the External Auditor. The Committee is also authorised to obtain outside legal or other independent professional advice if considered necessary and if necessary invite outsiders with relevant experience to attend meetings.
Section 4 – Duties and responsibilities
The duties and responsibilities of the Audit & Finance Committee are to assist and, where relevant, make recommendations to the Board on the discharging of its responsibilities as they relate to external financial reporting, external and internal audits, ensuring that an effective system of internal control, comprising financial, operational controls, compliance and risk management, is maintained and operated, and in particular:
a) to assist the Board in fulfilling its responsibilities in ensuring the appropriateness and completeness of the system of internal control, reviewing the manner and framework in which management ensures and monitors the adequacy of the nature, extent and effectiveness of internal control systems, including accounting control systems and thereby maintaining an effective system of internal control. The Committee will carry out this responsibility in close liaison with the Board Risk Committee, which will advise the Board in establishing the Board’s risk appetite and setting standards for the Board’s risk control framework
b) to review and make a recommendation on Ervia’s statement on internal control systems prior to endorsement by the Board.
a) to ensure that Ervia keeps proper books of accounts.
b) to review the annual financial statements and submit a recommendation to the Board, focusing particularly on:
i) changes in accounting policies and practices
ii) major judgemental areas
iii) significant adjusted or unadjusted audit differences
iv) the going concern assumption
v) compliance with accounting standards
vi) ensuring compliance with legal requirements
vii) consistency of other information presented alongside the financial statements (e.g. Chief Executive’s report)
c) Where requested by the Board to provide/obtain advice on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance, business model and strategy (in line with the phased adoption of the UK Corporate Governance Code published in September 2012).
d) to review any formal announcements prior to publication relating to Ervia’s financial performance.
a) to consider and recommend the appointment, reappointment and removal of the External Auditor, the audit fee and any questions of resignation or dismissal.
b) to develop and implement a policy on the engagement or the award of contracts to the External Auditor or affiliate for non-audit work, taking into account relevant best practice and ethical guidelines.
c) to ensure that the external auditors are aware of the corporate governance requirements outlined in the Code of Best Practice for Governance of State Bodies.
d) to discuss with the External Auditor before the audit commences the nature and scope of the audit.
e) to discuss matters arising from the interim and final audits and any other matters the External Auditor may wish to discuss.
f) to resolve disagreements regarding financial reporting between Management and the External Auditor.
g) to review the External Auditor’s Management letter and Management’s response and any other communications addressed to the Board.
h) to monitor and review at least annually the performance, qualifications, expertise, resources and independence of the External Auditor.
i) to annually assess the effectiveness of the external audit process.
a) to review and approve the Internal Audit Charter on an annual basis and to review and approve the Internal Audit plan on at least an annual basis.
b) to monitor and review the effectiveness of the internal audit programme, ensure co-ordination between the Internal and External Auditors and ensure that the internal audit function is adequately resourced and that adequate attention is paid to value for money auditing.
c) To receive reports from the Internal Audit function.
d) to consider compliance with the Code of Practice for the Governance of State Bodies via the Internal Audit function.
e) to consider the major findings of internal investigations and Management’s response.
f) to review the effectiveness of the Internal Audit function on an annual basis.
g) to approve the appointment or termination of appointment of the Group Head of Internal Audit.
a) to develop a policy by which staff may, in confidence, raise concerns about possible business, financial or other improprieties and ensure that arrangements are in place to investigate such matters.
b) to consider and make recommendations to the Board on the annual operating plan and budget for Ervia.
c) to consider other topics or matters delegated to it by the Board.
The Audit & Finance Committee is not responsible for reviewing executive decisions or for monitoring the efficiency of management.
Section 5 - Reporting Procedures
The Chairman shall report formally to the Board on the Committee’s proceedings after each meeting on all matters within its duties and responsibilities. The Committee shall compile a report describing its membership and its duties and activities during the year, to be included in the Annual Report and Accounts.
Management and the Group Head of Internal Audit will ensure that all information relevant to the discharge by the Committee of its responsibilities, as detailed above, is provided to the Committee (as requested by the Committee). Management will also ensure that matters of material concern that are relevant to the Committee’s responsibilities are brought to the attention of the Committee promptly.
Section 6 - Review
On an annual basis, the Committee will review the effectiveness of its operations and report to the Board on its findings and recommendations.
On an annual basis, the Committee will review these terms of reference and make recommendations on updating or amending them to the Board as appropriate.