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Report of the Audit Committee

Members: Alison Reed (Chairman), Baroness Kingsmill, Chumpol NaLamlieng, Ken Smart and Baroness Symons. Maarten van den Bergh rejoined the Committee with effect from April 1, 2009.

The Board is satisfied that Alison Reed has recent and relevant financial experience for the purposes of paragraph C.3.1 of the Combined Code.

The Committee met four times during the year ended March 31, 2009. In addition, given the downturn in the economic conditions and the potential impact on the Company’s results for the year, the Committee held an additional meeting to support its review of the Company’s year-end financial statements. During the course of the year the Committee has also held closed meetings and has also met privately with both the external and internal auditors.

Regular attendees at Committee meetings, at the invitation of the Committee, included the Chairman, the Chief Executive, Chief Financial Officer, the Head of Corporate Risk and Internal Control, the Group Financial Controller, the Group Reporting Manager and representatives from the external auditor.

The Audit Committee is responsible for exercising the full powers and authority of the Board in accounting and financial reporting matters. The full terms of reference, which were amended following the issue of a revised version of Guidance on Audit Committees by the Financial Reporting Council in October 2008, are available on the Company’s investor relations website, bashares.com.

The key duties of the Committee include to:

  • Monitor the integrity of the Company’s year-end financial statements, the interim management report and its interim management statements prior to their submission to the Board and any formal announcements relating to the Company’s financial performance;
  • Review the Company’s financial statements to ensure that its accounting policies are the most appropriate to the Company’s circumstances and that its financial reporting presents a balanced and understandable assessment of the Company’s position and prospects;
  • Keep under review the Company’s system of internal control, including compliance with the Company’s codes of conduct and the scope and results of the work of internal audit and of external audit, together with the independence and objectivity of the auditors;
  • Keep under review the Company’s risk management process, ensuring that it remains robust and appropriate for the economic environment, using a top down and bottom up methodology;
  • Oversee the processes for the appointment, reappointment and removal of the auditors. Approve the terms of their engagement and the remuneration for the audit services;
  • Oversee the performance, as well as the objectivity and independence, of the external auditor. The external auditor is only permitted to carry out work for the Group in the following categories: audit work; advice and assurance on accounting standards; tax and regulatory requirements; tax compliance, planning and advice; due diligence in relation to alliances, investments and joint ventures; and the provision of attestation reports or comfort letters confirming compliance or reasonableness as required by third parties. Managers are required to obtain prior approval before contracting such services from the external auditor. The Audit Committee has also specified certain non-audit services which the external auditor may not supply to the Group such as bookkeeping and actuarial services; and
  • Take responsibility for the oversight of the Company’s policy on whistleblowers.

Items reviewed during the year include:

Financial reporting

The Committee reviewed the draft annual and interim management report before recommending their publication to the Board. The Committee discussed with the Chief Executive, Chief Financial Officer and external auditors the significant accounting policies, estimates and judgements applied in preparing these reports. The Committee also reviewed the draft interim management statements.

As discussed above, the Committee held an additional meeting as part of the year-end process in which it focused on matters requiring significant management judgement and key assumptions, together with presentational and disclosure issues associated with new accounting standards and/or interpretive guidance. In particular, these included the Group’s goodwill impairment reviews, pensions, material provisions and investment valuations. In addition, the Committee reviewed the Company’s assessment of going concern and liquidity risk.

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