Constitution and purpose
The Board has resolved to establish a Committee of the Board to be known as the Audit Committee. Its purpose is to assist the Board in reviewing the external financial reports of the business and its systems of internal controls.
a. The Committee shall be comprised of at least three, and not more than four, independent non-executive directors, appointed by the Board. A quorum shall be two members.
b. The Chairman of the Committee shall be appointed by the Board, and shall have specific responsibility for chairing and overseeing the performance of the Committee.
c. At least one member of the Committee should at any time have recent relevant financial experience in relation to the Duties of the Committee, having competence in accounting and/or auditing (FCA DTR7:7.1.1).
Attendance at Meetings
a. The Chairman, Chief Executive, Finance Director and Chief Risk Officer shall normally attend meetings. A representative of the external auditors and internal auditors should normally attend meetings if required by any such party. Any member of staff may be required by the Committee to attend meetings. However, at least once a year the Committee shall meet with each of the external auditors and internal auditors without other Executives, management or staff present.
b. The Company Secretary shall be the Secretary of the Committee.
Frequency of Meetings
Meetings shall be held when necessary, and not less than three times a year. The internal or external auditors may request a meeting if they consider that one is necessary.
The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Internal Auditor has the right to direct access to any member of the Audit Committee if for any reason he does not wish to consult the Chief Executive.
The duties of the Committee shall be:
a. to review the internal control systems, including internal financial controls, and ensure that these continue to be effective;
b. to advise the Risk Committee as appropriate of any concerns regarding the effectiveness of the current control framework.
c. to review the annual financial statements and annual regulatory returns, and any formal announcements relating to Scottish Friendly’s financial performance, before submission to the Board, focusing particularly on:
i. any changes in accounting policies and practice
ii. major judgmental areas
iii. significant adjustments resulting from the audit
iv. the going concern assumption and compliance with accounting standards and legal requirements, including the regulations and guidance of the PRA/FCA
v. where appropriate, allocations between Scottish Friendly’s funds;
d. to make recommendations to the Board, for it to put to the Delegates for approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external audit;
e. to discuss with the external auditor before the audit commences the nature and scope of the audit;
f. to discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss (in the absence of management where necessary);
g. to review the external auditor’s management letter and management’s response;
h. to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
i. to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken;
j. to monitor the internal audit programme in the context of the overall control systems, including approving the programme and reviewing the reports produced,
k. to ensure co-ordination between the internal and external auditors, and that the internal audit function is adequately resourced and has appropriate standing within Scottish Friendly;
l. to consider the major findings of any internal investigations and management’s response;
m. to review the effectiveness of the internal audit function and approve any significant changes in the provision of this service, including the review of any updates on internal audit action points;
n. to consider other topics, as defined by the Board.
a) The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board and any such other attendees as the Chairman of the Audit Committee shall direct. The Chairman shall provide a verbal update on discussions and decisions made to the next Board meeting following each Committee meeting.
b) The Committee shall undertake a review of the Committee's performance and these terms of reference annually and, where necessary, make recommendations to the Board for approval.