Audit committee report
The Audit Committee (the committee) presents the following report pursuant to the requirements of section 94(7)(f) of the Companies Act, 71 of 2008, as amended (the Companies Act) to shareholders for the 2018 financial year.
The committee has specific statutory responsibilities to the shareholders of the company in terms of the Companies Act and assists the board by advising and making recommendations on financial reporting, internal financial controls, internal and external audit functions and regulatory compliance.
Members are appointed by shareholders on the recommendation of the Nomination Committee and the board. Shareholders will again be requested to approve the appointment of the committee members for the 2019 financial year at the company’s AGM to be held on Tuesday, 12 February 2019.
The members of the committee for the 2018 financial year were independent non-executive directors, Chris Wells (Chairman), Marang Mashologu and Harish Mehta. Andrew Waller who was appointed to the Board on 7 February 2018 attended meetings by invitation in his capacity as an independent non-executive director.
The Nomination Committee and the board have nominated for re-election at the 2019 AGM, Chris Wells (Chairman), Marang Mashologu and Harish Mehta and for election Andrew Waller as members of the committee. Their qualifications and experience are available here.
Permanent invitees at committee meetings are the CEO, the Group Financial Director, the Group Internal Audit Manager, the external auditors and the Company Secretary (who acts as the secretary of the committee).
The committee met three times during the 2018 financial year. Members’ attendance at meetings was as follows:
|Member||Status||13 Nov 2017||28 May 2018||6 Aug 2018|
|Chris Wells (Chairman)||Independent non-executive||✓||✓||✓|
|Harish Mehta||Independent non-executive||✓||✓||✓|
|Marang Mashologu||Independent non-executive||✓||✓||✓|
Members’ attendance was 100%.
Terms of reference
The committee executes its responsibilities in accordance with a formal terms of reference, which is reviewed annually and is aligned with the King IV™ recommendations. No changes were made to the terms of reference since its last review in 2017.
A copy of the committee’s terms of reference and work plan is available here.
The committee received assurance on all relevant matters within its terms of reference from the following committees during the 2018 financial year:
- Risk Committee
- Social and Ethics Committee
The committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference.
Role and responsibilities
The committee has an independent role with accountability to both the board and shareholders. The committee’s responsibilities include the statutory duties prescribed by the Companies Act, requirements of the JSE Listings requirements, activities recommended by King IV™, as well as responsibilities assigned to it by the board.
Details of the committee’s duties are contained in its terms of reference.
The effectiveness of the committee is assessed by way of a self-evaluation review every two years and will be performed again in 2019.
Key focus areas
In addition to the key areas of focus detailed below, the committee, during the 2018 financial year, reviewed the:
- unaudited interim results report and associated reports and announcements;
- summarised information issued to shareholders;
- appropriateness of the accounting policies, disclosure policies and the effectiveness of internal controls;
- disclosure of sustainability issues to ensure that they were reliable and did not conflict with the financial information;
- changes to the JSE Listings Requirements which pertain to the committee’s responsibilities;
- JSE proactive monitoring of financial statements report;
- company’s banking facilities;
- 2019 budget guidelines and assumptions;
- King IV™ recommendations;
- property lease arrangements entered into by the company;
- policies which fall under the committee’s control and oversight. The group’s delegation of authority policy, fraud prevention policy and whistle-blowing policy were reviewed and recommended to the board for approval. In line with King IV™ requirements, management is in the process of drafting a tax policy, which will be presented to the board for approval;
- external auditor’s audit report and key audit matters;
- internal auditor’s report and key audit matters and findings; and
- whistle-blowing complaints.
Key audit matters identified by the external auditors are included in the annual financial statements. These matters have been discussed and agreed with management and were presented to the committee.
Annual Financial Statements
The committee reviewed the annual financial statements for the year ended 30 September 2018 and is of the view that in all material aspects, they comply with the relevant provision of IFRS and the Companies Act. The committee also reviewed the integrity of the 2018 Integrated Annual Report and recommended both to the board for approval. The board subsequently approved the annual financial statements and 2018 Integrated Annual Report, which will be open for discussion at the 2019 annual general meeting.
Going Concern Status
The committee reviewed the solvency and liquidity assessment as part of the going concern status of the company and based on this detailed review, recommended to the board that the company adopt the going concern concept in preparation of the financial statements.
The committee has primary responsibility for overseeing the relationship with, and the performance of, the external auditor, including making recommendations on their re-appointment and assessing their independence, as set out in section 94(8) of the Companies Act.
As a result of the proposed implementation of an audit firm rotation process and following an extensive tender process undertaken by the committee in 2017, PwC was appointed by shareholders as the company’s external auditor at the 2018 AGM in place of Deloitte & Touche.
In the execution of its statutory duties and based on the processes followed and assurances received, the committee:
- has assessed the suitability for appointment of the external auditor and designated audit partner in accordance with the appropriate audit quality indicators and their independence against the criteria specified by the Independent Regulatory Board for Auditors, the South African Institute of Chartered Accountants and international regulatory bodies and JSE Listings Requirements;
- has no concerns regarding the external auditor’s performance or independence and accordingly recommended to the board, the re-election of PwC as external auditor and Sharalene Randelhoff as the designated audit partner for the 2019 financial year. PwC has been the company’s external auditor for one year and is required to rotate the designated audit partner every five years. Accordingly, Sharalene Randelhoff will be required to rotate as the designated audit partner in 2023.
- determined the terms of engagement and fees paid to PwC as disclosed in note 3 of the annual financial statements; and
- determined the nature and extent of the non-audit services that PwC provide to the company as disclosed in note 3 of the annual financial statements.
The Chairman met with the external auditor without management present to facilitate an exchange of views and concerns that may not be appropriate for discussion in an open forum, with no concerns raised.
Non-audit services policy
External auditors may only be considered as a supplier of such services where there is no alternative supplier for these services, there is no other commercially viable alternative or the non-audit services are related to and would add value to the external audit.
The company has an internal audit department consisting of three permanent employees. The internal audit function is independent and has the necessary standing and authority to enable it to discharge its duties. The Group Internal Audit Manager, Samesh Naidoo, and the Chairman of the committee meet on a regular basis to discuss internal audit’s performance and any concerns.
During the 2018 financial year, the committee:
- approved the internal audit plan and any variations thereof;
- reviewed and recommended to the board for approval the internal audit charter. No changes were made to the internal audit charter since its last review in 2017;
- satisfied itself that the Group Internal Audit Manager is competent and possesses the appropriate expertise and experience to act in this capacity;
- confirmed that the company’s internal audit function met its objectives and that adequate procedures were in place to ensure that the company complies with its legal, regulatory and other responsibilities; and
- ensured that appropriate financial reporting procedures exist and were working.
The committee is of the opinion that the company’s system of internal controls and risk management is effective and that the internal financial controls form a sound basis for the preparation of reliable financial statements. This opinion is based on the results of the formal documented review of the company’s system of internal controls and risk management – including the design, implementation and effectiveness of internal financial controls conducted by the internal audit function during the 2018 financial year – and considering information and explanations given by management and discussions with the external auditor on the results of the external audit, assessed by the committee. The committee’s opinion is supported by the board.
Group Financial Director and finance function
The committee is satisfied that Mark Godfrey has the appropriate expertise and experience to meet the responsibilities of his appointed position as the Group Financial Director. His qualifications and experience are available here.
The committee considered the appropriateness of the expertise and adequacy of resources of the finance function and was satisfied with the experience of the senior members of management responsible for the group function.
During the 2018 financial year, the company appointed Laurence Balcomb as the Finance Executive responsible for overseeing the financial management of the South African business.
The board has allocated the oversight of risk governance, technology and information governance and compliance governance to the Risk Committee. Chris Wells, the chairman of this committee, is also the Chairman of the Risk Committee and ensures that information relevant to the Risk Committee is transferred and shared regularly with this committee.
The committee accordingly fulfils an overview role regarding financial reporting risks, internal financial controls, taxation risks, compliance and regulatory risks, risk appetite and tolerance, fraud risk (as it relates to financial reporting) and information technology risk (as it relates to financial reporting), and based on the processes and assurances obtained, the committee is satisfied that these areas have been appropriately addressed.
The integrated assurance policy and framework was reviewed and approved by the board on 7 August 2018 and is in the process of being implemented. The implementation of the framework will help support corporate governance guidelines to provide appropriate assurance and, in addition, evidence of integrated/combined assurance.
Thank you to the members of the committee, internal audit and external audit for their dedicated and constructive contributions to the functioning of the committee.
Chairman of the Audit Committee
13 November 2018