The objectives and duties of the Committee are as follows:-
The Committee shall:
- monitor the financial reporting process and the integrity of the annual, interim and preliminary financial statements of the Company reviewing significant financial reporting issues and judgements which they contain;
- review, and challenge where necessary
- the consistency of, and any changes to, accounting policies
- whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the view of the external auditor
- the clarity of disclosure in the Company’s financial reports.
Internal Controls and Risk Management
The Committee shall:
- receive and consider the relevant reports of the Risk Committee and the Risk Management Committee;
- keep under review the effectiveness of the Company’s internal controls and risk management systems, as they relate directly to financial systems and to approve the relevant statements to be included in the Annual Report;
- receive and consider reports from the Head of Risk to ensure the integrity of controls as they relate to the operations of the Audit Committee;
- receive assurance that the integrity of risk controls within the business are being reviewed and considered;
- keep under 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:
- consider and approve the Internal Audit Charter which shall include a provision to ensure that the internal audit function has, at all times, unrestricted scope to evaluate the effectiveness of the risk, compliance and finance functions as part of its internal audit plan;
- review internal audit plans as presented regularly to the Committee;
- review and monitor management’s responsiveness to the findings and recommendations of the internal auditor;
- review and monitor the effectiveness of the Company’s internal audit function including consideration as to whether or not an independent third party review of the internal audit function, which is required at least once every five years, is appropriate; and
- meet the Head of Internal Audit at least once a year, without management being present, to discuss their remit and any issues arising from their work. The Head of Internal Audit has a right of direct access to the Chairman of the Audit Committee.
The Committee shall:
- consider the effectiveness of the external auditors and make recommendations to the Board, on the appointment, re-appointment and removal of the Company’s external auditors;
- manage the tender process for the appointment of the external auditors as required ensuring that the external audit contract is put out to tender at least every 10 years;
- approve the level of remuneration for the external auditors and the terms of their engagement, and develop and implement a policy on the provision of non-audit services (see attached policy);
- review and approve the annual audit plan and subsequently review the findings and effectiveness of the audit;
- meet regularly with the external auditors, with at least one meeting being held annually without management present in order to discuss their remit and any issues arising from the audit;
- review any representation letters requested by the external auditors before they are signed by management;
- Overseeing the statutory auditor’s compliance with additional reporting requirements;
- review the management letter and management’s subsequent response; and
- the independence and objectivity of the external auditors, including the additional annual report from the auditor and discussion with the auditor of key issues and mitigation actions.
The Committee is appointed by the PLC Board from which it receives its authority, and any material change to these Terms of Reference must be approved by the PLC Board.
The Committee is authorised to:
- seek any information it reasonably requires from any employee of the Group in order to perform its duties;
- obtain, at the Company’s expense outside legal or other professional advice on any matters within its terms of reference; and
- call any employee to be questioned at a meeting of the Committee as and when required.
The Committee shall be appointed by the PLC Board and shall consist of not less than three members, all of whom should be independent non-executive directors. At least one member of the Committee shall have recent and relevant financial experience, and risk knowledge and the Committee as a whole shall have competence relevant to the asset management sector in which the Company operates.
The PLC Board will also appoint the Committee Chairman and in the absence of the Chairman the remaining members present shall elect one of their number to chair the meeting.
The Company Secretary shall act as Secretary to the Committee.
The quorum shall be two members.
Attendance / Voting
Only members of the Committee shall have an automatic right of attendance at Committee meetings. The PLC Board Chairman, other non-executive directors, the Chief Executive Officer, the Finance Director, the Heads of Risk and Internal Audit and a representative of the external auditors shall attend the Committee meetings at the invitation of the Committee. The Committee should regularly invite the Head of Internal Audit to attend Committee meetings. The Chairman of the meeting, at his discretion, may also call upon any other person to attend as and when appropriate.
Decisions are by majority vote of members present at a meeting. The Chairman has a casting vote in the case of equality of votes.
Frequency of meetings
Meetings shall be held not less than 5 times a year and as otherwise required to enable the Committee to fulfil its obligations to the Company.
To the PLC Board
Minutes of the Committee meetings shall be circulated to all members of the Committee and made available on request to all other members of the PLC Board.
The Chairman of the Committee shall report formally to the PLC Board on the Committee’s proceedings after each meeting.
To the shareholders
The Committee shall review and approve the statements to be included in the annual report & accounts concerning internal controls and risk management.
The Committee shall make a statement in the annual report & accounts on its activities.
The Chairman of the Committee shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee’s activities.
The Secretary maintains copies of all Committee papers, including minutes of meetings, and are available on request from the Secretary.
The Committee shall, at least once a year, review its own performance and terms of reference to ensure that it is operating effectively and, if relevant, to recommend any changes necessary to the PLC Board.
These Terms of Reference were approved by the Board of Aberdeen Asset Management PLC on 20 July 2016.