Audit and Risk Management Committee Charter

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1 1. Committee of the Board Audit and Risk Management Committee Charter The Audit and Risk Management Committee (Committee) is a Committee of the Board, with the specific powers delegated as set out in this Charter in accordance with rule 8.1 of the Company's constitution. Purpose of the Committee The purpose of the Committee is to assist the Board in the effective discharge of its responsibilities for financial reporting, internal controls, risk management, and external audit. The Committee does not relieve any Directors of their responsibilities for these matters. Functions of the Committee The Committee: a) is not required to personally conduct accounting reviews or audits; and b) is entitled to rely on employees of the Company or professional advisers or consultants engaged by the Committee or the Company where: (i) there are reasonable grounds to believe that the employee, adviser or consultant is reliable and competent; and (ii) the reliance was made in good faith and after making an independent assessment of the information. 2. Composition Membership The Committee shall consist of at least two members The Committee must consist of a majority of non-executive Directors Competence The Committee should understand the Company s structure, controls and types of transactions in order to adequately assess the significant accounting, auditing and financial reporting issues faced by the Company. Each member of the Committee must ensure that they have an appropriate understanding of any relevant laws, regulations, the Listing Rules and codes of particular significance to the Company. A member of the Committee may, with the approval of the chairman of the Committee (Committee Chairman) and at the Company's expense, attend seminars or training courses in respect to issues related to the functions and responsibilities of the Committee Chairman The Committee Chairman will be an independent Director, provided that the Chairman of the Board, if a member of the Committee, cannot be the Committee Chairman. Details of the members of the Committee and the status of their independence are disclosed in the Corporate Governance Statement or Directors Report in the Annual Report. S&P/ASX 300 1

2 If the Company is included in the S&P/ASX 300 Index at the beginning of its financial year in any year, the composition of the Committee will be restructured to meet the requirements of the ACGC Principles. 3. Powers of the Committee Access to management and auditor The Committee, in performing its functions, may: (a) direct any of the following to attend a meeting of the Committee: (i) the external auditor; (ii) any employee of the Company; and (b) to the extent permitted by law, access any document, report, material or information in the possession of an employee or external adviser of the Company. Access to independent advice The Committee may obtain independent professional advice to assist it in the proper exercise of its powers and responsibilities, with the cost to be borne by the Company. 4. Financial Reporting The Committee should oversee the Company s financial reporting process, this includes: reviewing and assessing the appropriateness of the Company s accounting policies and principles including any significant changes to the policies and principles; reviewing financial reports and reviewing the results of external audits of these reports; reviewing and assessing any significant estimates and judgments in financial reports by examining the processes used to derive material estimates and judgments and seeking verification of those estimates from management or external auditors; reviewing and assessing the processes used by management to monitor and ensure compliance with laws, regulations and other requirements relating to external reporting by the Company of financial and non-financial information. These include, but are not limited to: o Australian Accounting Standards; o Corporations Act; and o Listing Rules, including but not limited to: - the existence of an appropriate procedure for meeting the Company s continuous disclosure obligations; and - reviewing for completeness and accuracy the disclosure of the Company s main corporate governance practices in the Corporate Governance Statement. assessing (before publication) whether external reporting is consistent with Committee members information and knowledge and is adequate for shareholder needs; reviewing material documents and reports prepared for lodgment with regulators, assessing their impact on the Company and making decisions on their approval or amendment; ensuring that a comprehensive process is established to capture issues for the purpose of reporting to any exchange on which the securities of the Company are quoted; reviewing the completeness and accuracy of the Company s main corporate governance practices as required by the rules of the exchange on which the securities of the Company are quoted; assessing information from internal (if any) and external auditors that affects the quality of financial reports; 2

3 assessing solvency and the going concern assumption; assessing the non-financial information in documents to ensure that conflicts with financial statements and other documents do not occur; and reviewing and assessing documents and reports to regulators and making recommendations to the Board on their approval or amendment. 5. External Audit The Committee shall review and assess key areas relating to the external audit of the Company. In particular this includes: making recommendations to the Board on the appointment, reappointment or replacement and remuneration of the external auditor; reviewing and agreeing with the external auditor the terms of engagement for the external auditor; monitoring the effectiveness and independence of the external auditor; reviewing the scope of the external audit with the external auditor including identified risk areas; reviewing and assessing provision of non-audit services by the external auditor, with particular consideration to the potential to impair, or appear to impair, the external auditor s judgment or independence in respect of the Company; on a regular basis meeting with the external auditor without the presence of management; monitoring the activities and performance of the external auditor by: o liaising with the auditor to ensure that each audit is conducted effectively; o appraising the quality of audit work; and o ensuring that no management restrictions or limitations are placed on the auditor; disclosing in the annual report whether or not the Committee believes the level of non-audit service provision by the external auditor is compatible with maintaining auditor independence, including reasons where appropriate; inviting the external auditor to attend Committee meetings to review the audit plan, discuss audit results and consider the implications of external audit findings; ensuring that the external auditor is requested to attend the annual general meeting of the Company and is available to answer questions from shareholders; raising and reviewing with the external auditor any significant disagreements between the external auditor and management, irrespective of whether they have been resolved; reviewing the external audit findings in respect of any significant deficiencies or weaknesses in controls, and ensuring that management agrees to and implements appropriate and timely corrective action; reviewing and monitoring management s responsiveness to the external auditor s findings and recommendations; reviewing all representation letters signed by management and ensuring that the information provided is complete and appropriate; and establishing procedures for the selection and appointment of the external auditor and for the rotation of external audit engagement partners. In fulfilling its responsibilities the Committee meets with the external auditors at least twice a year, more frequently if necessary. The Company s auditors have a clear line of direct communication at any time to either the Chairman of the Audit and Risk Management Committee or the Chairman of the Board. 6. Internal Control and Risk Management The Committee should review and assess internal processes for determining, monitoring and assessing key risk areas. In particular, the Committee is responsible for: 3

4 obtaining from management a risk profile which describes the material risks facing the Company including financial and non-financial matters; regularly reviewing and updating the risk profile; ensuring that the Company has an effective risk management system in place; assessing and ensuring that there are internal processes for determining and managing key risk areas, such as: o non-compliance with laws, regulations, standards and best practice guidelines including industrial relations, occupational health and safety, environmental and trade practices laws; o important judgments and accounting estimates; o business licence requirements; o litigation and claims; o fraud and theft; and o relevant business risks that are not dealt with by another Board committee; receiving reports concerning material and actual incidents within the risk areas above and ensuring that macro risks are discussed by the Board at least annually; conducting investigations of breaches or potential breaches of internal controls, and incidents within the risk areas above, particularly in relation to accounts and financial reporting; examining and evaluating the effectiveness of the internal control system with management and internal and external auditors and making improvements; making publicly available a description of the Company s risk management policy and internal compliance and control system in the corporate governance section of the Company s website; meeting periodically with key management, internal (if any) and external auditors and compliance staff to understand the Company s control environment, including the processes for improvement in place. 7. Procedures for the Selection and Appointment of the External Auditor The Committee will establish key criteria for the appointment of the auditor, including audit approach and methodology, internal governance processes, technical resources, key personnel, independence and cost Input will generally be sought from senior management with respect to any appointment The Committee will provide the Board with the recommendation for the external auditor and the reasons 8. Rotation of External Audit Engagement Partners The Audit & Risk Management Committee ensures that the external audit firm rotates its audit engagement partner and audit review partner in accordance with accepted best practice. 9. Meetings Holding of meetings Subject to paragraph (b), the Committee shall meet regularly, at the times determined by the Committee Chairman, but nevertheless shall meet at least two times a year. A member of the Committee may request that a meeting of the Committee be convened. Attendance at meetings Unless otherwise notified by the Committee Chairman, the following may attend a meeting of the Committee: o any Director; 4

5 o the Managing Director / Chief Executive Officer; o the Chief Financial Officer; and o the external auditor. The Committee Chairman may invite any of the following to attend a meeting of the Committee: o a Company officer; and o a party external to the Company. Committee Minutes The Committee Secretary shall prepare minutes of meetings and have them approved by the Committee Chairman. Minutes of meetings shall be confirmed at the next meeting of the Committee. 10. Committee Performance Evaluation The Committee must prepare a report on an annual basis comprising an appraisal of the main items dealt with during the year and a performance evaluation against the Committee s stated objectives. Where necessary, recommendations to improve the performance of the Committee should be made. This report is to be signed by the Committee Chairman and forwarded to the Chairman of the Board. 11. Reporting to the Board Minutes of each meeting and any related papers necessary for the Board to understand proceedings held at the meetings, shall be submitted to the Board. The Committee Chairman, or delegate, must report to the Board after each Committee meeting concerning: The proceedings of the Committee and All matters relevant to the Committee's role and responsibilities 12. Compliance with Disclosure Obligations The Committee will review all reporting by the Company of its audit and risk policies and practices to ensure that the Company meets its disclosure obligations as required under the Listing Rules and the Corporations Act. 13. Review and Publication of Charter The Committee will review this charter to determine its appropriateness to the needs of the Company annually. The charter may be amended by resolution of the Board. The charter is to be made available on the Company s website and the key features are published in the Annual Report. 5