ANNEXURE B – AUDIT COMMITTEE REPORT
Audit committee report
The audit committee is pleased to present its report for the financial year ended 31 March 2017. The audit committee is an independent statutory committee appointed by the shareholders. In compliance with the King III Report and section 61 of the Companies Act of South Africa the shareholders of the company appointed independent directors as its audit committee in the previous financial year. The board of directors delegates duties to the audit committee. This report includes those duties and responsibilities.
Terms of reference
The audit committee has adopted formal terms of reference, which are reviewed and updated as necessary on an annual basis (or more frequently if required) by both the audit committee and the board. The committee has conducted its affairs in accordance with its terms of reference and has discharged its responsibilities contained therein. A copy of the audit committee’s current terms of reference is available on the company’s website at www.alexanderforbes.co.za.
Composition and function
The audit committee comprises three independent members. In accordance with King III the audit committee members are appointed annually by the shareholders. The chairman of the board, certain non-executive board members, the group chief executive, the group chief financial officer, the group chief risk officer, the group IT executive, external auditors, internal auditors and other assurance providers attend meetings by invitation. The audit committee undergoes an annual self-assessment.
Roles and responsibilities
The audit committee is satisfied that it complied with its legal, regulatory and other responsibilities during the financial year ended 31 March 2017. The audit committee’s primary objective is to assist the board with its responsibilities for the management of risk, safeguarding of assets, and oversight over financial control and reporting internal controls, shareholder reporting and corporate governance, particularly relating to legislative and regulatory compliance. The audit committee’s roles and responsibilities include statutory and regulatory duties as per the Companies Act of South Africa and according to King III on Governance for South Africa 2009. In addition, the board has assigned certain other duties to the audit committee, embodied in its terms of reference. The board reviews these duties and terms of reference every year.
Meetings attended
During the year, four meetings were held, attendance at which was as follows:
| Meeting dates | ||||
| Committee member | Jun 2016 |
Aug 2016 |
Nov 2016 |
Mar 2017 |
|---|---|---|---|---|
| D Konar (chairman) | ✔ | ✔ | ✔ | ✔ |
| M Collier | ✔ | ✔ | ✔ | ✔ |
| RM Kgosana | ✔ | ✔ | ✔ | ✔ |
| ✔ Indicates in attendance. | ||||
The integrated annual report
The audit committee is responsible for overseeing the group’s integrated annual report and the reporting process. The sixth integrated annual report has been reviewed by the audit committee. It focuses not only on the group’s financial performance, but also on its economic, social and environmental performance. It also sets out how the business has engaged with stakeholders, addressed its material issues and governed its business.
Financial statements and accounting practices
The audit committee has reviewed the audited consolidated and separate annual financial statements of the group for the year ended 31 March 2017, particularly to ensure that disclosure was adequate and that fair presentation had been achieved. The committee recommended the approval of the consolidated and separate annual financial statement to the board of directors. The committee believes that they present a balanced view of the group’s performance for the period under review and that they comply with International Financial Reporting Standards.
External auditor appointment and independence
The audit committee has satisfied itself that the external auditor is independent of the group, as set out in section 94(8) of the Companies Act of South Africa, which includes consideration of previous appointments of the auditor, the extent of other work the auditor has undertaken for the group and compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by the auditor that internal governance processes within the audit firm support and demonstrate its independence. The committee ensured that the appointment of the auditor complied with the Companies Act of South Africa and any other legislation relating to the appointment of auditors. The committee, in consultation with management, agreed to the engagement letter, terms, audit plan as well as scope of work performed and budgeted audit fees for the 2016/17 year. A formal procedure has been adopted to govern the process whereby the external auditor may be considered for performing non-audit services.
The committee has nominated, for election at the annual general meeting PricewaterhouseCoopers Inc. as the external audit firm and Mr RP Hariparsad as the designated auditor responsible for performing the functions of auditor for the 2017/18 year.
The audit committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors and their advisers.
Internal controls
Based on the review of the design, implementation and effectiveness of the group’s system of internal financial controls conducted by the internal audit function during the year under review, and reports made by the independent external auditors on the results of their audit and management of internal financial controls is effective and forms a basis for the preparation of reliable financial statements. No findings have come to the attention of the committee to indicate that any material breakdown in internal controls has occurred during the past financial year.
Whistle-blowing
During the year the audit committee reviewed the whistle-blowing programme and reports resulting from the programme. We have ensured that, where appropriate, management made independent investigations and took appropriate follow-up action. The audit committee receives reports of any complaints, whether from within or outside the group, relating to the accounting practices and internal audit of the group, the content or auditing of the group’s financial statements, the internal financial controls of the group and related matters.
Combined assurance
The audit committee is satisfied that the group has optimised the assurance coverage obtained from management, internal and external assurance providers in accordance with an appropriate combined assurance model.
Going concern
The audit committee has reviewed a documented assessment, including key assumptions prepared by management, of the going concern status of the group and have made a recommendation to the board in accordance therewith. The board’s statement on the going concern status of the group, as supported by the audit committee, appears in the directors’ responsibility for financial reporting section of the integrated annual report.
Governance of risk
The audit committee fulfils a dual function, being both an audit committee and a risk committee. Internal audit performs a full assessment of the risk management in a function and framework on an ongoing basis.
Internal audit
The audit committee is responsible for ensuring that the group’s internal audit function is independent and has the necessary resources, standing and authority within the group to enable it to perform its duties. Furthermore, the audit committee oversees co-operation between the internal and external auditors, and serves as a link between the board of directors and these functions. The audit committee approved the internal audit charter and the internal audit function’s annual audit plan during the year under review.
The internal audit function reports to the relevant divisional audit committees with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the group’s operations. The head of group internal audit is responsible for regularly reporting the findings of the internal audit work against the agreed internal audit plan to the audit committee. The head of group internal audit has direct access to the group audit committee, primarily through its chairman. During the year the committee met with the external auditors and with the head of group internal audit without management being present.
Evaluation of the expertise and experience of the acting group chief financial officer (GCFO) and the finance function
The audit committee has satisfied itself that the acting GCFO has appropriate expertise and experience to execute his designated functions. The audit committee has considered and has satisfied itself of the appropriateness of the expertise, experience and adequacy of resources of the finance function.
Dr D Konar
Chairman of the audit committee
Sandton
9 June 2017
