The Audit Committee is a committee whose membership is comprised solely of Independent Non-Executive Directors.

John Warren chairs the Audit Committee and is the Senior Independent Non-Executive Director. He is a chartered accountant and was Group Finance Director of United Biscuits (Holdings) PLC and WH Smith PLC. The Board is of the view that he has recent and relevant financial knowledge and experience derived from current roles as Chairman of the Audit Committee at Welsh Water, Greencore Group plc and Bloomsbury Publishing Plc.

Responsibilities of the Audit Committee

The Audit Committee is responsible for maintaining an appropriate relationship with the Group’s external auditors and for reviewing the Group’s internal financial controls and the audit process. It aids the Board in seeking to ensure that the financial and non-financial information supplied to Shareholders presents a fair, balanced and understandable assessment of the Group’s performance and position.

The Committee reviews the effectiveness, objectivity and independence of the external auditors and also considers the scope of their work and fees paid for audit and non-audit services.

The Audit Committee has terms of reference which are re-considered and approved by the Board annually.

The Board considers that the Audit Committee members have an understanding of the following areas:

  • the principles of, and developments in, financial reporting including the applicable accounting standards and statements of recommended practice;
  • key aspects of the Company’s operations including corporate policies and the Group’s internal control environment;
  • matters which may influence the presentation of the financial statements;
  • the principles of, and developments in, company law, sector-specific laws and other relevant corporate legislation;
  • the role of internal and external auditing and risk management; and
  • the regulatory framework for the Group’s businesses.

How the Audit Committee discharges its responsibilities

The Committee has unrestricted access to Company documents and information, as well as to employees of the Company and the external auditors. Members of the Committee may, in pursuit of their duties, take independent professional advice on any matter, at the Company’s expense. The Audit Committee Chairman reports the outcome of Audit Committee meetings to the Board.

The Audit Committee meets at least twice each year and has an agenda linked to events in the Group’s financial calendar.

In order to fulfil its terms of reference, the Audit Committee receives and reviews presentations and reports from the Group’s senior management and the external auditors. During the year, the Audit Committee formally reviews draft Interim and Annual Reports and associated interim and year end results’ announcements. These reviews consider:

  • the accounting principles, policies and practices adopted in the Group’s accounts, and proposed changes to them; and
  • significant accounting issues and areas of judgment and complexity.

The Audit Committee is required to assist the Board to fulfil its responsibilities relating to the adequacy and effectiveness of the control environment and the Group’s compliance with the Corporate Governance Code. To fulfil these duties, the Audit Committee reviews:

  • the external auditors’ review of internal controls and audit highlights memoranda;
  • any reports on the systems of internal controls and risk management; and
  • any reports on identified frauds perpetrated against the Group.

The Audit Committee is responsible for the development, implementation and monitoring of the Group’s policy on external audit. The Group’s policy on external audit prohibits certain types of non-audit work from being performed by the auditors, particularly in cases where auditor objectivity and independence would be put at risk.

To fulfil its responsibility regarding the independence of the external auditors, the Audit Committee reviews:

  • changes and rotation of external audit team members in the audit plan for the current year;
  • a report from the external auditors describing their arrangements to identify, report and manage any conflicts of interest; and
  • the nature and extent of non-audit services provided by the external auditors.

To assess the effectiveness of the external auditors, the Audit Committee reviews:

  • the relevant skills and experience of the audit partner and team and their knowledge of the business;
  • planning and scope of the audit and identification of areas of audit risk;
  • execution of the audit plan; and
  • formal reports presented to the Audit Committee.

To fulfil its responsibility for oversight of the external audit process, the Audit Committee reviews

  • the terms, areas of responsibility, associated duties and scope of the audit as set out in the external auditors’ engagement letter for the forthcoming year;
  • the external auditors’ overall work plan for the forthcoming year;
  • the external auditors’ fee proposal;
  • the major issues that arise during the course of the audit and their resolution;
  • key accounting and audit judgements;
  • the levels of errors identified during the audit; and
  • recommendations made by the external auditors in their management letters and the adequacy of management’s response.