The Audit Committee, which comprises Shonaid Jemmett-Page (as Chair), James Hughes and Haresh Jaisinghani, is responsible, amongst other things, for making recommendations to the Board on the appointment of auditors (and the audit fee) and for monitoring and reviewing the integrity of the Company's financial statements, and any formal announcements on the Company's financial performance, as well as reports from the Company's auditors on those financial statements. In addition, the Audit Committee will review the Company's internal financial control and risk management systems to assist the Board in fulfilling its responsibilities relating to the effectiveness of those systems.
APR ENERGY PLC (Company No 7062201)
AUDIT COMMITTEE TERMS OF REFERENCE
1.1 The Audit Committee shall have a minimum of three members, who shall be appointed by the Board of the Company (the “Board”) on the recommendation of the Nomination Committee and in consultation with the Chair of the Audit Committee.
1.2 The Chair of the Audit Committee shall be appointed by the Board and shall be an independent non-executive director.
1.3 All of the members of the Audit Committee shall be independent non-executive directors who are free from any business or other relationship which could materially interfere with the exercise of their independent judgment.
1.4 Appointments to the Audit Committee shall be for a period of up to three years, which may be extended for two further three year periods, provided they continue to be independent and to otherwise fulfil the criteria for membership.
1.5 At least one member of the Audit Committee must have recent and relevant financial experience, ideally with a professional qualification from one of the professional accountancy bodies.
1.6 All members of the Audit Committee have the right to attend and vote at Audit Committee meetings. All other members of the Board have the right to attend Audit Committee meetings in a non-voting capacity, provided that the Chair of the Audit Committee may at any time in his sole discretion ask any such other member to leave all or part of a meeting. The external auditor and chief financial officer will be invited to attend meetings of the Audit Committee on a regular basis and other non-members may be invited to attend all or part of any meeting as and when appropriate and necessary.
2. DUTIES AND AUTHORITY
2.1 The committee should carry out the duties below for the parent company, major subsidiary undertakings and the Group as a whole, as appropriate.
2.2 The Audit Committee is a sub-committee of the Board of directors. Accordingly, the Audit Committee exercises such powers of the Board as have been delegated to it, is answerable to the Board and will report to it on a regular basis. It is authorised to investigate any activity within its terms of reference and to seek any information which it requires from the Company.
2.3 In particular, the Audit Committee has authority to carry out the following duties:- Financial Reporting
2.3.1 to monitor and review the integrity of the financial statements of the Company, including its half year and annual financial statements, interim information statements, preliminary results announcements and any other formal announcements relating to its financial performance, reviewing significant financial reporting issues and/or judgments which they give rise to or which are contained in them, before their submission to the Board;
2.3.2 to review summary financial statements, significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature;
2.3.3 where the Audit Committee is not satisfied with any aspect of the proposed financial reporting of the Company, it shall report its views to the Board;
2.3.4 to review and discuss with the auditors the preliminary results, interim information and annual financial statements and any formal announcements relating to the Company's financial performance before submission to the Board, focussing particularly on:-
(a) the quality, consistency and acceptability of the accounting policies and practices and financial reporting disclosures and changes thereto across the Group and on a year by year basis;
(b) areas involving significant judgment, estimation, uncertainty or unusual transactions;
(c) whether the Company has followed appropriate accounting standards (taking into account the external auditors' view);
(d) material misstatements detected by the auditors that individually or in aggregate have not been corrected and, if required, explanations of any employees as to why they have not been adjusted;
(e) all material information presented with the financial statements, such as the business review/operating and financial review and the corporate governance statement (insofar as it relates to the audit and risk management);
(f) the basis for the going concern assumption;
(g) compliance with financial reporting standards and relevant financial and governance reporting requirements; and
(h) the clarity and completeness of disclosure in the Company's financial reports and the context in which statements are made;
External Audit 2.3.5 to make recommendations to the Board on the appointment or re-appointment of the external auditors, the audit fee, the terms of engagement of the external auditors and any questions of resignation or dismissal relating to the external auditors;
2.3.6 to enter into discussions with external auditors concerning the nature and scope of the audit ensuring it is consistent with the scope of the audit engagement, to co-ordinate the audit where more than one firm is involved, to monitor the audit and review any problems or reservations arising from the audit and to review the findings of the audit with the external auditors:-
(a) this shall include, but not be limited to:-
(i) a discussion of any major issues which arose during the audit;
(ii) any accounting and audit judgements; and
(iii) levels of errors identified during the audit, and to discuss any matters which the external auditors wish to discuss;
2.3.7 to review the effectiveness of the audit and the independence and objectivity of the external auditors;
2.3.8 ensure that at least once every ten years the audit services contract is put out to tender to enable the Audit Committee to compare the quality and effectiveness of the services provided by the incumbent external auditors with those of other audit firms; and in respect of such tender oversee the selection process and ensure that all tendering firms have such access as is necessary to information and individuals during the duration of the tendering process;
2.3.9 if any external auditor resigns investigate the issues leading to this and decide whether any action is required;
2.3.10 in respect of the external auditors:-
(a) satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the Company (other than in the ordinary course of business);
(b) monitoring the auditor's compliance with relevant ethical and professional guidance on the rotation or audit partner, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements;
(c) assessing annually the qualifications, expertise and resources of the auditor, which shall include a report from the external auditor on their own internal quality procedures;
2.3.11 to consider the risk of withdrawal of the external auditors from the market;
2.3.12 to review the external auditors' management letter and consider the Company's response;
2.3.13 to review any representation letter(s) requested by the external auditor before they are signed by management;
2.3.14 to consider communications from the external auditors on audit planning and findings and on material weaknesses in accounting and internal control systems that have come to the auditors' attention;
2.3.15 to discuss any difficulties, reservations or other matters arising from the external auditors' interim and final audits;
2.3.16 to review, prior to its consideration by the Board, the external auditors' report to the directors;
2.3.17 to approve the external auditors' remuneration, whether fees for audit or non-audit services and so that the level of fees is appropriate to enable an adequate audit to be conducted;
2.3.18 to meet regularly and at least once a year with the external auditors without management being present, including once at the planning stage before the audit, and once after the audit at the reporting stage; Narrative reporting
2.3.19 where requested by the Board, the Committee should review the content of the annual report and accounts and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy; Internal controls and risk management systems
2.3.20 to review the Group's internal financial control systems and the Group's internal risk management systems and, in particular, to review:-
(a) the policies and overall process for identifying and assessing business risks and managing their impact on the Company;
(b) regular assurance reports from any internal audit, external audit and others on the operational effectiveness of matters related to risk and control; and
(c) the timeliness of, and reports on, the effectiveness of corrective action taken by the Company;
2.3.21 to consider any necessary disclosure implications of the process that has been applied by the Board to deal with material internal control aspects of any significant problems disclosed in the annual report and accounts;
Internal audit 2.3.22 to:-
(a) consider the appointment, resignation or dismissal of the head of internal audit (if any);
(b) receive a report on the results of the internal auditor's work on a periodic basis;
(c) review and discuss with the head of internal audit (if any) the scope of work of the internal audit function, its plans, the issues identified as a result of its work and how the Group is addressing these issues;
(d) ensure that the internal audit function has direct access to the Board chairman and to the Audit Committee Chair and is accountable to the Audit Committee;
(e) ensure that the function is adequately resourced, and has appropriate authority and standing within the Group;
(f) review co-ordination between the internal and external auditors and (where relevant) the risk management department;
(g) meet with the head of internal audit at least once a year without the presence of management; and
(h) monitor and review the effectiveness of the Company's internal audit function in the context of the Company's overall risk management system;
2.3.23 to approve and monitor the Company's policy relating to the employment of former employees of the external auditors;
2.3.24 to review any significant findings of internal investigations into control weaknesses, fraud or misconduct and the response of any employees (to the extent relevant);
2.3.25 to compile a report to shareholders (to be included in the annual report) on its activities and to consider the disclosure about the role of the Audit Committee included in the annual report and, in particular, concerning internal controls and risk management;
2.3.26 where there is no internal audit function, to consider annually whether there is a need for an internal audit function;
2.3.27 to review other disclosures or documents as determined by the Board;
Compliance, whistle blowing and fraud 2.3.28 to consider other topics, as defined by the Board, such as the Group's policies for preventing or detecting fraud, its code of corporate conduct/business ethics or the policies for ensuring that the Company complies with relevant regulatory and legal requirements;
2.3.29 to review arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters;
2.3.30 to ensure that arrangements are in place for investigation of possible impropriety in matters of financial reporting or other matters, focussing particularly on:-
(a) the proportionality and independence of these investigations; and
(b) the appropriateness of follow-up action by the Audit Committee; and
2.3.31 to develop and implement a policy on the supply of non-audit services by the external auditors to avoid any threat to auditor objectivity and independence, taking into account any relevant ethical guidance on the matter; and
2.3.32 at least once every twelve months to review and update its own terms of reference, requesting Board approval for all proposed changes and, at appropriate intervals, to evaluate its own performance against its terms of reference and best practice.
2.4 The Audit Committee is authorised to obtain external professional (including legal) advice in pursuance of its duties at the cost of the Company. Persons providing such professional advice shall be permitted to attend meetings of the Audit Committee, but shall not be members of it.
2.5 If the auditors also supply non-audit services to the Company, the Audit Committee should:-
2.5.1 keep the nature and extent of such services under review (seeking to balance the maintenance of objectivity and value for money);
2.5.2 take into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and
2.5.3 report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and make recommendations as to the steps to be taken.
3. OTHER MATTERS
3.1 The Audit Committee shall:-
3.1.1 have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
3.1.2 be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;
3.1.3 give due consideration to laws and regulations and the requirements of the UK Listing Authority's Listing, Prospectus and Disclosure and Transparency Rules as appropriate and as applicable to the Company;
3.1.4 oversee any investigation of activities which are within its terms of reference and act for internal purposes as a court of the last resort;
3.1.5 at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval; and
3.1.6 have regard to the prevailing market conditions in carrying out its role.
3.2 For the purposes of these terms of reference, "Group" shall mean the Company and any subsidiary undertakings of the Company from time to time.
4.1 Only members of the Audit Committee shall have the right to attend meetings of the Audit Committee. However, the Audit Committee may invite any outsiders to attend its meetings as it deems appropriate (including calling any employee to be questioned at a meeting of the Audit Committee as and when required). Accordingly, other individuals such as the external auditor, the head of any internal audit department and the chief financial officer of the Company may be invited to attend all or part of any meeting as and when appropriate.
4.2 In the absence of the Chair of the Audit Committee, and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting. The membership of this Committee is to be set out in the Annual Report and Accounts of the Company.
4.3 The quorum for any decisions of the Audit Committee shall be two members. A duly convened meeting of the Audit Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Audit Committee.
4.4 The company secretary or his or her nominee shall act as secretary of the Audit Committee and will ensure the Committee receives information and papers in a timely manner to enable full and proper consideration to be given to issues.
4.5 The Audit Committee shall meet not less than four times a year at appropriate times in the reporting and audit cycle, including prior to the announcement of the results of the Company, when the external auditor shall be in attendance, and at such other times as circumstances require. Meetings of the Audit Committee shall be called by the secretary or his or her nominee or at the request of any of its members or at the request of the external or internal auditors if they consider it necessary.
4.6 Outside of the formal meeting programme, the Audit Committee Chair will maintain a dialogue with key individuals involved in the Company's governance, including the Board chairman, the chief executive officer, the chief financial officer, the external audit lead partner, the general counsel & chief compliance officer and the head of internal audit.
4.7 Notice of the date of any meeting of the Audit Committee shall be given no later than five working days before the meeting, although such notice period may be amended, waived or shortened with the consent of all the members of the Audit Committee for the time being. Confirmation of the time of, and venue for the meeting, together with an agenda of items to be discussed and supporting papers shall be forwarded to each member of the Audit Committee, any other person required to attend and all other non-executive directors no later than five working days before the scheduled date of the meeting.
5.1 The Audit Committee Chair shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and shall also formally report to the Board on how it has discharged its responsibilities. This report shall include:
5.1.1 the significant issues that it considered in relation to the financial statements (required under paragraph 2.3.1 and how these were addressed;
5.1.2 its assessment of the effectiveness of the external audit process (required under paragraph 2.3.10(c) and its recommendation on the appointment or reappointment of the external auditor; and
5.1.3 any other issues on which the Board has requested the Audit Committee's opinion.
5.2 The secretary or his or her nominee shall minute the proceedings and resolutions of all meetings of the Audit Committee, including details of those present or in attendance and details of any conflicts of interest notified to the Audit Committee. Once agreed, the minutes of meetings of the Audit Committee shall be made available to all members of the Board and to the external auditors promptly unless inappropriate to do so in the opinion of the Chair of the Audit Committee.
5.3 The Audit Committee shall have discussions with the external auditors and internal head of audit at least once a year without any executive Board members being present.
5.4 The Committee shall compile a report on its activities to be included in the Company's annual report. The report should include an explanation of how the Committee has addressed the effectiveness of the external audit process; the significant issues that the Committee considered in relation to the financial statement and how these issues were addressed, having regard to matters communicated to it by the auditor; and all other information requirements set out in the UK Corporate Governance Code.
5.5 In the compiling of the reports referred to in paragraph 5.1 and 5.4, the Committee should exercise judgement in deciding which of the issues it considers in relation to the financial statements are significant, but should include at least those matters that have informed the Board's assessment of whether the Company is a going concern. The report to shareholders need not repeat information disclosed elsewhere in the annual report and accounts, but could provide cross-references to that information.
5.6 The Chair of the Audit Committee shall be available at the Annual General Meeting of the Company to answer questions.
5.7 The Audit Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed and the Chair of the Audit Committee shall report to the Board after each meeting.
Adopted on 20 November 2014