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FORTUNE OIL PLC |
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AUDIT COMMITTEE (THE ˇ§COMMITTEEˇ¨) TERMS OF REFERENCE 1. Constitution The Board resolved on 9 August 1993 to establish a committee of the Board to be known as the Audit Committee (the ˇ§Committeeˇ¨). The Company shall ensure that these Terms of Reference are made generally available by means of publication on the Company's website as required by the Combined Code July 2003. 2. Membership 2.1 Members
of the Committee shall be appointed by the Board. The Committee
shall be made up of at least three members.
2.2 All members of the Committee shall be Non-executive Directors of the Company at least one of whom shall have recent and relevant financial experience. The Committee shall comprise of a Chairman and at least two other non-executive directors. 2.3 Only members of the Committee have the right to attend Committee meetings. However, other individuals such as members of the board and representatives from the finance function may be invited to attend all or part of any meeting as and when appropriate. 2.4 The external auditor will be invited to attend meetings of the Committee on a regular basis. 2.5 Appointments to the Committee shall be for a period of up to two years, which may be extended with the consent from the Board. 2.6 The Board shall appoint the Committee chairman who shall be an independent non-executive director. The Chairman of the Board shall not be the Chairman of the Committee. In the absence of the Committee chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting. 2.7 The members of the Audit Committee for the time being shall be:
3. Quorum 5. Frequency of meetings 5.1
The Committee shall meet at least two times a year at appropriate times
in the company's reporting and audit cycle and in advance of a Board
meeting where financial statements are to be approved, and otherwise as
required.
6. Notice of meetings 6.1
Meetings of the Committee shall be called by the Secretary of the
Committee at the request of any of its
members or at the request of external or internal auditors if they
consider it necessary.
6.2 Unless otherwise agreed, Notice of each meeting confirming the venue, time and date together an agenda of items to be discussed, shall be forwarded to each member of the Committee, any other person required to attend no later than 3 working days before the date of the meeting. Supporting papers shall be sent to committee members and to other attendees as appropriate, at the same time. 7. Minutes of meetings 7.1
The Secretary shall minute the proceedings and resolutions of all
Committee meetings, including recording the names of those present and
in attendance.
7.2 The
Secretary shall ascertain, at the beginning of each meeting, the
existence of any conflicts of interest and minute them accordingly. 7.3 Minutes of committee meetings shall be circulated promptly to all members of the Committee and, once agreed, to all members of the board, unless a conflict of interest exists. 8. Annual General Meeting (AGM) 9. Duties 9.1
Financial reporting
9.1.1
The Committee shall monitor the integrity of the financial statements
of the Company, including its Annual Financial Report announcement and
interim report announcement.
9.1.2 The Committee shall review and challenge where necessary 9.1.2.1
The consistency of, and any changes to, accounting policies both on a
year on year basis and across the Company/group.
9.1.2.2 The methods used to account for significant or unusal transactions where different approaches are possible. 9.1.2.3 Whether the company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditors. 9.1.2.4 The clarity of disclosure in the company's financial reports and the context in which statements are made; and 9.1.2.5 All material information presented with the financial statements such as the operating and financial review and the corporate governance statement (insofar as it relates to the audit and risk management). 9.2
Internal Control and Risk Assessment
The
Committee shall
9.2.1
keep under review the effectiveness of the Company's financial internal
control and risk management systems; and
9.2.2
review and approve the statements to be included in the annual report
concerning internal controls and risk management.
9.3 Whistleblowing and fraud The
Committee shall
9.3.1
review the Company's arrangements for its employees to raise concerns,
in confidence, about possible wrongdoing in financial reporting or
other matters. The Committee shall ensure that these arrangements
allow proportionate and independent investigation of such matters and
appropriate follow up action; and
9.4 Internal audit The
Committee shall
9.4.1
consider and approve the remit of the head of the internal audit
function and ensure it has adequate resources and appropriate access to
information to enable it to perform its function effectively and in
accordance with the relevant professional standards.
The Committee shall also
ensure the function has adequate standing and is free from management
or other restrictions.
9.4.2 review the annual internal audit plan. 9.4.3 review promptly all reports on the company from the internal auditors. 9.4.4 review and monitor management's responsiveness to the findings and recommendations of the internal auditor; and 9.4.5 meet the head of internal audit at least once a year, without management being present, to discuss their remit and any issues arising from the internal audits carried out. In addition, the head of internal audit shall be given the right of direct access to the chairman of the Board and the Committee. 9.5
External Audit
The
Committee shall
9.5.1
consider and
make recommendations to the Board, to be put to shareholders for
approval at the AGM, in relation to the appointment, re-appointment and
removal of the Company's external auditors. The Committee shall
oversee the selection process for new auditors and if an auditor
resigns the Committee shall investigate the issues leading to this and
decide whether any action is requried.
9.5.2 oversee the relationship with the external auditor, including (but not limited to): 9.5.2.1
approval of their remuneration, whether fees for audit or non-audit
services and that the level of fees is appropriate to enable an
adequate audit to be conducted.
9.5.2.2 approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit. 9.5.2.3 assessing annually their independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole including the provision of any non-audit services. 9.5.2.4 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). 9.5.2.5 monitoring the auditor's compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements. 9.5.2.6 assessing annually their qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the external auditor on their own internal quality procedures. 9.5.2.7 considering the risk of the withdrawal of the Company's present auditor from the market. 9.5.3
meet regularly with external auditor, including once at the planning
stage before the audit and once after the audit at the reporting
stage. The Committee shall meet the external auditor at least
once a year, without management being present, to discuss their remit
and any issues arising from the audit.
9.5.4
review and approve the annual audit plan and ensure that it is
consistent with the scope of the audit engagement.
9.5.5 review the findings of the audit with the external auditor. This shall include but not be limited to, the following 9.5.5.1
a discussion of any major issues which arose during the audit;
9.5.5.2 any accounting and audit judgements; and 9.5.5.3 levels of errors identified during the audit. The Committee shall also review the effectiveness of the audit. 9.5.6 review any representation letter(s) requested by the external auditor before they are signed by management. 9.5.7 review the management letter and management's response to the auditor's findings and recommendations. 9.5.8 develop and implement a policy on the supply of non-audit services by the external auditor, taking into account any relevant ethical guidance on the matter. 9.6
Reporting responsibilities
9.6.1 The Committee chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities. 9.6.2 The Committee shall make whatever recommendations to the board it deems appropriate on any area within its remit where action or improvement is needed. 9.6.3 The Committee shall compile a report to shareholders on its activities to be included in the Company's annual report. 9.7
Other matters
The
Committee shall
9.7.1 have access to sufficient resources in order to carry out its duties, including access to the Company secretariat for assistance as required. 9.7.2 be provided with appropriate training, both in the form of an induction programme for new members and on an ongoing basis for all members. 9.7.3 give due consideration to laws and regulations, the provisions of the Combined Code and the requirements of the UK Listing, Prospectus and Disclosure and Transparency Rules as appropriate. 9.7.4 be responsible for co-ordination of the internal and external auditors. 9.7.5 oversee any investigation of activities which are within its terms of reference and act for internal purposes as a court of the last resort. 9.7.6 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. 10.
Authority
The
Committee is authorised
10.1
to seek any information it requires from any employee of the Company in
order to perform its duties.
10.2
to obtain, at the Company's expense, outside legal or other
professional advice on any matter within its terms of reference.
10.3 to call any employee to be questioned at a meeting of the Committee as and when required. The Audit Committee has adopted the above Terms of Reference on 9 October 2009. This is last updated on 6 December 2011.
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