Reliance and Impact on Key Capitals
Governance and Leadership
Statutory approvals and reports
Group financial statements
Company financial statements
REPORT OF THE AUDIT COMMITTEE
The Hulamin Group Audit Committee ("the committee" or "Audit Committee") presents its report in terms of section 94(7)(f) of the Companies Act, No 71 of 2008, as amended ("Companies Act"), and as recommended by King III, for the financial year ended
31 December 2015.
The Audit Committee is an independent statutory committee appointed by the shareholders. Further duties are delegated to the committee by the board of directors of the company.
Membership and meetings
The committee comprises three independent non-executive directors, who were appointed by shareholders at the 2014 annual general meeting of the company in terms of section 94(2) of the Companies Act. For the year under review, the Audit Committee comprised:
- T P Leeuw (Chairman)
- N N A Matyumza
- L C Cele
V N Khumalo, D A Austin (Chief Financial Officer), the financial manager responsible for internal audit and representatives from the external and internal auditors also attended the committee meetings by invitation.
The Audit Committee met three times during the year and all members of the committee attended all of these meetings.
Full details of membership of the committee and attendance at committee meetings during the financial year are also set out in the Corporate Governance section of this integrated annual report of the group.
role and responsibilities
The role and responsibilities of the committee include statutory duties as per the Companies Act, and further responsibilities assigned
to it by the board. The committee executed its duties in terms of the requirements of King III.
The key responsibilities of the committee are as follows:
- Ensuring the integrity of the financial reporting process, including sound systems of internal control and financial risk management
- Review of Integrated Annual Reports, Annual Financial Statements, Interim Reports and other financial announcements, including the accounting principles and policies adopted therein and compliance with JSE regulations
- Monitoring the performance and effectiveness of the independent external auditors and evaluating the qualifications, expertise, resources, fees, scope of work and independence of the external auditors prior to recommending their appointment to the board and shareholders
- Approving the internal audit work plan and overseeing the conduct of the internal audit and the implementation of internal control enhancements
- Approving any non-audit services provided by the external auditors
- Consider the appropriateness of the expertise, resources and experience of the financial function and of the Chief Financial Officer
- Approving the appointment of an external assurance provider in respect of the sustainability report
- Performing statutory duties in terms of the Companies Act, as well as to report to the shareholders in respect of the financial year, including those matters in terms of section 94(7)(f) of the Companies Act
- Ensuring that the combined assurance model introduced by the King III Code is applied to provide a coordinated approach to assurance activities.
Performance of duties
The Audit Committee is satisfied that, during the year under review, it complied with its legal, regulatory and other responsibilities, conducted its affairs in compliance with board-approved terms of reference, and discharged its responsibilities contained therein.
The committee is therefore pleased to report that it discharged the following responsibilities for the period under review:
External auditor appointment and independence
The committee has satisfied itself that the external auditor was independent of the company, as set out in section 94(8) of the Companies Act, which includes consideration of previous appointments of the auditor, the extent of other work undertaken by the auditor for the company and compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors.
The committee ensured that the appointment of the auditor complied with the Companies Act, and any other legislation relating to the appointment of auditors.
The committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and audit fees for the 2015 year as disclosed in note 19.3 of the financial statements of the group and note 6.1 of the financial statements of the company.
There is a formal procedure that governs the process whereby the auditor is considered for non-audit services. The committee approved all engagements for the provision of non-audit services by the external auditor, in terms of the established policy for non-audit services.
The committee has nominated, for election at the annual general meeting, PricewaterhouseCoopers as the external audit firm and
Mr H N Govind as the designated auditor responsible for performing the functions of auditor, for the 2016 year. The committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors and their advisors.
Financial statements and accounting practices
The committee has reviewed the accounting policies and the financial statements of the company and the group for the year ended
31 December 2015, and is satisfied that they are appropriate and comply with International Financial Reporting Standards.
The committee receives and deals with any concern or complaints, whether from within or outside the company, relating to the accounting practices and internal audit of the company, the content or auditing of the company's financial statements, the internal financial controls of the company and related matters. There were no such complaints during the year under review.
Internal financial controls
The committee has overseen a process by which internal audit performed a written assessment of the effectiveness of the company's system of internal control and risk management, including internal financial controls.
Based on the results of the formal documented review of the company's system of internal financial controls by the internal audit function, the information and explanations given by management and the comment by the independent auditors on the results of their statutory audit, including a review of significant issues raised by the internal audit processes and the adequacy of corrective action in response thereto, nothing has come to the attention of the committee which indicates that, in all material aspects, Hulamin's system of internal financial controls was not operating effectively during the year under review.
This written assessment by internal audit formed the basis for the committee's recommendation in this regard to the board, in order for the board to report thereon. The board's opinion on the effectiveness of the system of internal controls and risk management is included on here. The committee supports the opinion of the board in this regard.
Integrated reporting, sustainability and combined assurance
The committee fulfils an oversight role regarding the company's integrated report and the reporting process.
The committee considered the company's sustainability information as disclosed in the integrated report and separate sustainability report of the group for the year ending 31 December 2015 and has assessed its consistency with operational and other information known to committee members, and for consistency with the annual financial statements. The committee discussed the sustainability information with management and has considered the conclusion of the external assurance provider. The committee is satisfied that the sustainability information is reliable and consistent with the financial results.
The committee recommended to the board the appointment of KPMG Services (Pty) Ltd to perform an assurance engagement on key performance indicators included in the company's 2015 sustainability reporting. The committee determined the scope of this assurance engagement and satisfied itself as to the independence and competency of the external assurance provider.
The committee ensures the combined assurance model is appropriate to address the significant risks facing the business, and is satisfied that the company has optimised the assurance coverage obtained from management, and internal and external assurance providers for the year under review.
The committee has recommended the 2015 integrated report for approval by the board of directors.
The committee has reviewed a documented assessment, including key assumptions, prepared by management of the going concern status of the company as at 31 December 2015 and has made a recommendation to the board in this respect. The board's statement on the going concern status of the company, as supported by the committee, is detailed here.
Governance of risk
The board has assigned oversight of the company's risk management function to the Risk and SHE Committee. The chairman of the Audit Committee attended meetings of the Risk and SHE Committee as a member thereof for the year under review to ensure that information relevant to these respective committees was transferred regularly. The Audit Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, and fraud and information technology risks as they relate to financial reporting.
The committee is responsible for ensuring that the company's internal audit function is independent and has the necessary resources, standing and authority within the company to enable it to discharge its duties in terms of the established internal audit charter. Furthermore, the committee oversees cooperation between the internal and external auditors, and serves as a link between the board of directors and these functions.
An internal audit charter is in place which defines the function, responsibility and authority of the group's internal audit activity. The internal audit function's 2015 annual audit plan was approved by the committee.
The internal audit function reports centrally with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the company's operations. The head of the internal audit function, who has direct access to the committee, is responsible for reporting the findings of the internal audit work against the agreed internal audit plan to the committee on a regular basis.
During the year under review, the committee met with the internal and external auditors without management being present.
Evaluation of the expertise and experience of the financial director and finance function
The committee has satisfied itself during the year under review that the Chief Financial Officer has appropriate expertise and experience.
The committee has considered, and has satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management responsible for the financial function.
On behalf of the Audit Committee:
Chairman of the Audit Committee
16 February 2016