1. Overall Purpose / Objectives
The audit committee will assist the board in fulfilling it's oversight responsibilities. The audit committee will review the financial reporting process, the system of internal control and management of financial risks, the audit process, and it's own code of business conduct. In performing it's duties, the committee will maintain effective working relationships with the board of directors, management, and the external auditors. Each committee member will obtain an understanding of the detailed responsibilities of committee membership as well as the company's business, operations, and risks.
The board authorises the audit committee, within the scope of it's responsibilities, to:
" Seek any information it requires from:
- any employee (and all employees are directed to co-operate with any request made by the audit committee.)
- external parties
" Obtain outside legal or other professional advice with the concurrence of the board.
" Ensure the attendance of the company officers at meetings as appropriate.
3.1 The audit committee will comprise two members, including a non-executive director as chairman.
3.2 Each member should be capable of making a valuable contribution to the committee.
3.3 Each member should be capable of making a valuable contribution to the committee.
3.4 A quorum for any meeting will be two members.
3.5 The Secretary of the audit committee will be a member of the audit committee, as nominated from time to time by the chairman of the audit committee.
Attendance at Meetings
3.6 The audit committee may invite such other persons (e.g the CEO, CFO) to it's meetings, as it deems necessary.
3.7 The external auditors should be invited to make presentations to the audit committee as appropriate.
3.8 Meetings shall be held not less than four times a year. Special meetings may be convened as required.
3.9 The proceedings of all meetings will be minuted.
4. Roles and Responsibilities
The audit committee will:
4.1 Evaluate whether management is setting the appropriate "control culture" by communicating the importance of internal control and the management of risk and ensuring that all employees have an understanding of their roles and responsibilities.
4.2 Consider how management is held to account for the security of computer systems and applications, and the contingency plans for processing financial information in the event of a systems breakdown.
4.3 Gain an understanding of whether internal control recommendations made by external auditors have been implemented by management.
4.4 Gain an understanding of the current areas of greatest financial risk and how management is managing these effectively.
4.5 Consider with the external auditors any fraud, illegal acts, deficiencies in internal control or other similar issues.
4.6 Review significant accounting and reporting issues, including recent professional and regulating pronoucements, and understand their impact on the financial statements.
4.7 Ask management and the external auditors about significant risks and exposures and the plans to minimise such risks.
4.8 Review any legal matters which could significantly impact the financial statements.
In view of the size of the company and the composition of the board the audit committee will undertake it's responsibilities in relation to annual preliminary and interim financial statements in conjunction with the full board.
(b) Annual Financial Statements
4.9 Review the annual financial statements and determine whether they are complete and consistent with the information known to committee members; assess whether the financial statements reflect appropriate accounting principles.
4.10 Pay particular attention to complex and/or unusual transactions such as restructuring charges and derivative disclosure.
4.11 Focus on judgmental areas, for example those involving valuation of assets and liabilities; warranty, product or environmental liability; litigation reserves; and other commitments and contingencies.
4.12 Meet with management and the external auditors to review the financial statements and the results of the audit. This meeting will continue to be held with the full board.
4.13 Review the other sections of the annual report before it's release and consider whether the information is understandable and consistent with members' knowledge about the company and it's operations.
(c) Preliminary Announcements, Interim Financial Statements and Analysts' Briefing
4.14 Be briefed on how management develops preliminary announcements, interim financial information and analysts' briefings; and the extent to which the external auditors review such information.
4.15 Assess the fairness of the preliminary and interim statements and disclosures, and obtain explanations from management and external auditors on whether:
- Actual financial results for the interim period varied significantly from budgeted or projected results.
- Changes in financial ratios and relationships in the interim financial statements are consistent with changes in the company's operations and financial practices.
- General accepted accounting principles have been consistently applied.
- There are any actual or proposed changes in accounting or financial reporting practices.
- There are any significant or unusual events or transactions.
- The company's financial and operating controls are functioning effectively.
- The preliminary announcements and interim financial statements contain adequate and appropriate disclosures.
4.16 Review the need to introduce an internal audit function and assist in establishing the scope for any internal audit functions to be introduced.
4.17 Review the external auditors' proposed audit scope and approach and ensure no unjustified restrictions or limitations have been place on the scope.
4.18 Review the performance of the external auditors.
4.19 Consider the independence of the external auditor, including reviewing the range of services provided in the context of all consulting services bought by the company.
4.20 Make recommendations to the board regarding the reappointment of the external auditors.
4.21 Meet separately with the external auditors to discuss any matters that the committee or auditors believe should be discussed privately.
4.22 Ensure that significant findings and recommendations made by the external auditors are received and discussed on a timely basis.
4.23 Ensure that management responds to recommendations by the external auditors.
4.24 Regularly update the board about committee activities and make appropriate recommendations.
4.25 Ensure the board is aware of matters which may significantly impact the the financial condition or affairs of the business.
4.26 Perform other oversight functions as requested by the full board.
4.27 Review and update the charter; receive approval of changes from the board.
4.28 Evaluate the committee's own performance on a regular basis.