Audit and Compliance Committee
The Audit and Compliance Committee is constituted as a statutory committee of Tongaat Hulett in respect of its duties prescribed by the Companies Act, and as a committee of the Board in respect of all additional duties assigned to it by the Board. The committee was appointed by the shareholders at the last AGM and comprises three non-executive directors of the company, all of whom are independent and possess the necessary skills, knowledge and expertise to direct the committee constructively in the execution of its responsibilities. The current members are J John (Chairman), F Jakoet and R P Kupara. The Chief Executive Officer, P H Staude, the Chief Financial Officer, M H Munro, the Head of Internal Audit, D K Young and representatives of the internal and external auditors attend by invitation. The Company Secretary, M A C Mahlari, is the secretary for this committee. The committee meets at least three times a year.
The Audit and Compliance Committee’s terms of reference, which have been updated in line with King III and the Companies Act and approved by the Board, include the overall objective of the committee to assist the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems and controls, the assessment of going concern status, ensuring that pertinent compliance and relevant risk management processes are in place, reviewing the work performed by the external auditors and the internal audit function, and to review interim financial information and annual financial statements which are provided to shareholders and other key stakeholders.
The committee provides a forum through which the external and internal auditors report to the Board. It is responsible for the appointment and review of internal and independent external auditors, the maintenance of a professional relationship with them, reviewing accounting principles, policies and practices adopted in the preparation of public financial information and examining documentation relating to the interim and annual financial statements. In addition, it reviews procedures and policies of internal control, including internal financial controls and internal audit reports. The adequacy and capability of Tongaat Hulett’s external and internal audit functions are also subject to continuous review. The committee further considers the independence and objectivity of external auditors.
Management is focused on continuous improvements to systems of internal control. An external quality assurance review of the internal audit function was performed in 2013, which concluded that the Tongaat Hulett internal audit function “generally conforms” to the standards recommended by the Institute of Internal Auditors, which is the highest rating in terms of the standards of the Institute of Internal Auditors. The status of “generally conforms” continues to be applicable for a period of five years from the date of validation in terms of the standards of the Institute of Internal Auditors.
The external and internal auditors have unrestricted access to members of the Audit and Compliance Committee and its Chairman at all times, ensuring that their independence is in no way impaired. Both the internal and external auditors have the opportunity of addressing the committee and its Chairman at each of the meetings without management being present. The Audit and Compliance Committee determines the purpose, authority and responsibility of the internal audit function in an Internal Audit Charter, which is in line with King III and approved by the committee and the Board. The charter sets out the terms of reference of Tongaat Hulett’s internal audit function, its reporting line to the Chairman of the committee, the working relationship with the Head of Internal Audit and the fact that the internal auditors have unrestricted company wide access to all functions, records, property and personnel. The committee also reviews the scope and coverage of the internal audit function. While the internal audit function has been outsourced to a professional firm of registered accountants and auditors, co-ordinated by the Head of Internal Audit, the company’s independent external auditors do not assist in the performance of any internal audit assignments.
The nature and extent of all non-audit services provided by the independent external auditors are approved and reviewed by the committee, to ensure compliance with the company’s policy on non-audit services.
The committee is also responsible for ensuring that the combined assurance model espoused in King III is applied to provide a coordinated approach to all assurance activities. Tongaat Hulett has adopted a Combined Assurance Strategy and Plan that provides a framework for the various assurance providers to provide assurance to the Board, through the Audit & Compliance and Risk, SHE, Social & Ethics Committees, that all significant risks facing the company are adequately managed and that assurance activities are integrated and coordinated in the most efficient and proficient manner. The Combined Assurance Strategy and Plan is discussed further here in the Risk Management Process section of the integrated annual report.
The committee’s focus on regulatory compliance is ongoing in line with the regular updates to the regulatory environment. The framework of high priority laws and regulations applicable to Tongaat Hulett’s operations has continued to be refined during the year with the aim of strengthening the culture of legal awareness and compliance. The Board-approved compliance policy confirms and firmly entrenches Tongaat Hulett’s commitment, through the combined efforts of various role players, to implement controls and processes to manage regulatory compliance across all operations. Management continuously assesses and reviews statutory and regulatory requirements and risks, and identifies appropriate processes and interventions to enhance compliance with applicable legislation. No material infractions have come to management’s attention during the period under review that indicates non-compliance with pertinent legislation and codes of good practice.
As part of an effort to review and ensure optimal performance and delivery of its mandate, the committee conducted an assessment of its performance for the period, with input from internal and external auditors, considering such factors as its composition and authority, the execution of its role and responsibilities, its working relationship with both internal and external audit and its statutory obligations towards the company and its shareholders. The outcome of the assessment process has been positive, reflecting that the committee meets best practice, and is functioning effectively and efficiently.
Each major operational area has its own audit and compliance meeting processes which subscribe to the same company audit philosophies and reports and leads to the Tongaat Hulett Audit and Compliance Committee.
The Audit and Compliance Committee is pleased to report as follows for the financial year ended 31 March 2014:
| 1. | Statutory duties | |
The committee confirms that it performed the following statutory duties as required by the Companies Act and in accordance with its terms of reference: |
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Nominated for appointment as external auditor of the company at the AGM, Deloitte & Touche, a registered auditor accredited to appear on the JSE List of Accredited Auditors who, in the opinion of the committee is independent of the company, and Mr Wentzel Moodley as the designated auditor, for the 2014/2015 financial year; |
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Determined the fees to be paid to the external auditor and agreed to the terms of their engagement and audit plan in consultation with executive management; |
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Ensured that the appointment of the external auditor complies with the provisions of the Companies Act and any other legislation relating to the appointment of auditors, including consideration of criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors; |
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Determined the nature and extent of any non-audit services that the auditor may provide to the company; |
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Pre-approved any proposed agreement with theexternal auditor for the provision of non-audit services to the company. The committee confirms that it did not receive any concerns or complaints relating to the accounting practices and the internal audit of the company; the content or auditing of the company’s financial statements; the internal financial controls of the company or any other related matter during the period under review. |
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| 2. | Terms of reference | |
The Audit and Compliance Committee has adopted and operates within formal terms of reference that have been approved by the Board of directors. The committee confirms that for the period under review, it discharged its duties and responsibilities in accordance with the terms of reference. The summary of the role of the committee is as articulated on here of this integrated annual report. |
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| 3. | Duties assigned by the Board | |
During the period under review, the committee performed its duties and responsibilities assigned to it by the Board in accordance with the terms of reference. The committee specifically reviewed the financial statements of the company and was satisfied that they comply with International Financial Reporting Standards. The committee reviewed the assessment by management of the going-concern statement of the company and concluded to the Board that the company will be a going concern in the foreseeable future. |
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| 4. | Expertise and experience of Financial Director and the finance function | |
During the period under review, the committee considered the expertise and experience of the Tongaat Hulett financial director in terms of the Listing Requirements of the JSE and satisfied itself that the financial director’s expertise and experience meet the appropriate requirements. The committee also evaluated the competence of the finance function as required by King III and concluded that the expertise, resources and experience of the finance function of all operations, reporting into the financial director of Tongaat Hulett, meet the appropriate requirements. |
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| 5. | Internal Audit | |
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The work performed by internal audit was in accordance with the internal audit plan for the year ended 31 March 2014 and included the review of general and application computer controls on the systems used for financial reporting purposes. In addition, the committee approved internal audit’s coverage and work plan for the financial year commencing 1 April 2014. |
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The Head of Internal Audit has direct access to the committee primarily through the Chairman of the committee. During the period under review, the Head of Internal Audit had the opportunity to address the committee without the executive management of the company present. |
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Tongaat Hulett’s internal audit function, which is supported by its internal audit service provider, KPMG, has as required by its mandate, performed a review of the effectiveness of the company’s internal control environment, including its internal financial controls, IT controls as they pertain to financial reporting and the effectiveness of its risk management process. Based on the results of these reviews, the internal audit function has confirmed to the Audit and Compliance and Risk, SHE, Social and Ethics Committees and to the Board that no evidence came to light that the internal control environment and risk management process for the company were ineffective. In addition, nothing indicated a material weakness in internal financial controls, whether from design, implementation or operation (individually or in combination with other weaknesses). The Audit and Compliance Committee is of the view, based on the representations made by internal audit, that the internal financial controls in place for the company were not ineffective during the period under review. |
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| 6. | Sustainability and governance reporting | |
The committee has considered the sustainability and governance information as disclosed in the company’s integrated annual report to ensure its reliability and consistency with the annual financial statements. The committee also considered the various reports of the external assurance service providers and is satisfied that the information is reliable and consistent with the financial results and other operational information at the disposal of the committee. Furthermore, the committee assessed and satisfied itself of the independence of the external assurance service provider for the Sustainability report. |
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| 7. | Approval of Integrated Report | |
At its meeting held on 13 May 2014, the committee recommended the integrated annual report for approval by the Board of directors, taking into account the combined assurance model adopted by the company. |
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| 8. | Attendance | |
The Audit and Compliance Committee had three meetings during the period under review. The record of attendance of members of this committee is contained above. |
