AUDIT COMMITTEE The role of the Audit Committee is to review the Group’s financial position and make recommendations to the Board on all financial matters, business risks, internal controls and compliance. This includes assessing the integrity and effectiveness of related control systems to ensure that the Group’s business is conducted in a proper and economically sound manner. The responsibilities of the Audit Committee are incorporated into the committee’s charter which is reviewed annually and approved by the Board. The committee has conducted its affairs in compliance with this charter and has discharged its responsibilities contained therein. Audit Committee membership and resources The Audit Committee consists of three independent non-executive directors. Mr RV Smither chairs the committee and its other members are Dr M Griessel and Mr NP Mageza. All members of the committee have the requisite financial knowledge and commercial skills and experience to contribute effectively to committee deliberations. The committee meets at least twice a year as per the Audit Committee charter. The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Group Audit and Risk Manager (GARM) and representatives from the external auditors attend meetings by invitation. Other members of the Board and management team attend as required. The committee meets separately with the external auditors and internal auditors at least once a year without management present, to ensure that all relevant matters have been identified and discussed without undue influence. Roles and responsibilities The Audit Committee’s roles and responsibilities include its statutory duties per the Companies Act of South Africa and the responsibilities assigned to it by the Board. The Audit Committee fulfils an oversight role regarding financial reporting risks, internal financial controls and fraud risk and Information Technology (IT) risks as it relates to financial reporting. The Audit Committee has discharged its key responsibilities as follows: •
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Reviewed the interim results, period-end financial statements, sustainability disclosure & integrated report, culminating in a recommendation to the Board. In the course of its review the committee: - took appropriate steps to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), and - considered and, when appropriate, made recommendations on financial statements, accounting practices and internal financial controls Confirmed the Internal Audit charter and audit plan Evaluated the effectiveness of risk management, controls and governance processes and satisfied itself about the adequacy and effectiveness of the Group’s system of internal financial controls Reviewed the appropriateness of the combined assurance model in addressing all significant risks facing the Group Considered and recommended to the Board the appointment and retention of external auditors Evaluated the independence and effectiveness of the external auditors Approved the audit fees and engagement terms of the external auditors Determined the nature and extent of allowable non-audit services and approved the contract terms for the provision of non-audit services by the external auditors.
The role of Audit Committee applied to all the subsidiaries of the Group. Expertise and experience of CFO and finance function As required by the JSE Listings Requirements, the Audit Committee is satisfied that the CFO and his management team have appropriate expertise and experience for the Group. External audit PricewaterhouseCoopers (PWC) are the incumbent auditors for all the Group companies. The committee continually monitors the independence and objectivity of the external auditors. During the period, PWC provided certain non-audit services, including tax services and a review of Rainbow’s feed raw material procurement process. Total fees incurred during the 2013 financial year to PWC were R7.8 million of which R1,0 million related to non-audit services. During the course of the year under review, the Audit Committee reviewed a report by the external auditors of relationships they consider may have a bearing on their independence and objectivity. The Audit Committee concluded that there were no areas of conflict. The Audit Committee has nominated, for election at the annual general meeting, PWC as the external audit firm and Mr Ramsumer as the designated auditor responsible for performing the functions of auditor for the 2014 financial year. The Audit Committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors. Risk management The Board has assigned oversight of the Group’s risk management function to the Risk Committee. The Chairman of the Audit Committee is also a member of the Risk Committee, thereby ensuring that information relevant to these committees is transferred regularly. Internal Audit function Internal Audit is an independent, objective function that provides assurance on the Group’s activities geared towards creating value and improving business processes. Internal Audit is responsible for: • • • •
Monitoring the adequacy and effectiveness of the Group’s risk management process Evaluating the Group’s governance processes Evaluating internal controls continuously to determine whether they are adequately designed, operating efficiently and effectively and recommending improvements Providing a source of information, as appropriate, for instances of fraud, corruption, unethical behaviour and irregularities.
Internal controls reviewed consist of strategic, operating, financial reporting and compliance controls and include controls relating to: • • •
The information management environment The reliability and integrity of financial and operating information The safeguarding of assets
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The effective and efficient use of company resources Compliance with relevant policies, procedures, laws and regulations.
The purpose, authority and responsibility of the Internal Audit activity is defined and governed by an Internal Audit Charter approved by the Audit Committee and Board. The activities of the Internal Audit function are co-ordinated by the GARM. To ensure independence, the GARM reports functionally to the Audit Committee and, only from an administrative perspective, to the CEO. The GARM holds a senior position in the organisation and his appointment or dismissal is subject to ratification by the Audit Committee. Internal Audit has free and unrestricted access to management, employees, activities, physical locations and to all information considered necessary for the proper execution of Internal Audit’s work, at the discretion of the GARM. Confidentiality of information is maintained and information is not disclosed without proper authority. The annual Internal Audit plan is based on an assessment of risk areas identified by management, as well as focus areas highlighted by the Audit Committee and executive directors which ensures that a risk based audit approach is applied. The annual plan is also updated as appropriate to ensure that it is responsive to changes in the business. A comprehensive report of Internal Audit findings is presented to the Executive Management regularly and the Audit Committee when it meets. Follow-up audits are performed in areas where control weaknesses are found. In addition to the Internal Audit findings, the report to the Audit Committee includes an update on the progress made against the audit plan and statistics on follow-up audits conducted. Internal Audit is also involved in IT throughout the Group to ensure satisfactory IT governance and assurance. All new major IT projects are subject to pre-and/or post-implementation reviews. Internal Audit co-ordinates its scope and efforts with External Audit in order to provide efficient and effective assurance to the Audit Committee. Internal Audit comprises a dedicated team of appropriately qualified and technically experienced personnel. Where necessary certain audits are outsourced to consultants with appropriate skills & technical expertise, for example specialised IT reviews. The Audit Committee, External Audit and the GARM completed an assessment of the Internal Audit function for the year. This assessment was supplemented by the results of the Audit Satisfaction Questionnaires (ASQ) that were completed by management during the year. The Chairman of the Audit Committee and the GARM are responsible for determining any actions required to enhance the effectiveness of the Internal Audit function. The Audit Committee will commission an independent quality assurance review at an appropriate future date. Internal controls The executive directors are responsible for ensuring that internal control systems exist that provide reasonable assurance regarding the safeguarding of assets and the prevention of their unauthorised use or disposition, proper accounting records are maintained and the financial and operational information used in the business is reliable.
Having considered: The results of the formal documented review of the Group’s system of internal control and risk management, including the design, implementation and effectiveness of the Group’s system of internal financial controls conducted by the Internal Audit function during the year • Information and explanations given by management • Discussions with the External Auditors on the results of their audit and • The report from the Audit Committee, nothing has come to the attention of the Board that causes it to believe that the Group’s system of internal controls and risk management is not effective and that the internal financial controls do not form a basis for the preparation of reliable financial statements. •
Going concern The Audit Committee reviewed a documented assessment by management of the going concern premise of the Group before concluding to the Board that the company will be a going concern in the foreseeable future.