(Adopted by the Board of Directors on 13 May 2009 and amended on 24 September 2009, 13 September 2012 and 27 November 2013)

Transcription

1 Thomas Cook Group plc THE AUDIT COMMITTEE TERMS OF REFERENCE (Adopted by the Board of Directors on 13 May 2009 and amended on 24 September 2009, 13 September 2012 and 27 November 2013) Chairman and members of the Committee 1. Members of the Committee shall be appointed by the Board, on the recommendation of the Nominations Committee in consultation with the Chairman of the Audit Committee. All members of the Committee shall be Independent Non- Executive Directors. The minimum number of members shall be three. 2. The Board shall appoint the Committee Chairman from amongst the members of the Committee. 3. At least one of the members shall have recent and relevant financial experience. 4. Only members of the Committee have the right to attend Committee meetings. However, other individuals such as representatives from the Group Finance team may be invited to attend all or part of any meeting as and when appropriate. 5. The Group Chief Executive Officer, Group Chief Financial Officer, the Director of Enterprise Risk and Audit, the Group General Counsel and the external auditors will be invited to attend meetings of the Committee on a regular basis. 6. Appointments to the Committee shall be for a period of up to three years, which may be extended for two further three-year periods, provided the member in question continues to be determined by the Board as being independent. Secretary 7. The Company Secretary shall be the Secretary of the Committee and shall keep appropriate minutes of its proceedings. The Secretary shall make available the minutes of Committee meetings, once agreed, to all members of the Board, unless it would be inappropriate to do so in the opinion of the Committee Chairman. The Company Secretary shall have direct access to the Chairman of the Committee at all times. Quorum 8. Two members of the Committee shall constitute a quorum. Notice and frequency of meetings 9. Meetings shall be held not less than four times per year on pre-arranged dates as set out in the corporate calendar, or otherwise at the request of any of its members or at the request of external or internal auditors if they consider it necessary. Meetings of the Committee shall be called by the Secretary of the Committee. Outside of the formal meeting programme, the Committee Chairman will maintain a dialogue with key individuals connected to the audit processes (e.g. the Company Chairman, the Group Chief Executive Officer, the Group Chief Financial Officer, the external audit lead partner and the Director of Enterprise Risk and Audit). Page 1 of 9

2 10. Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with the agenda of items to be discussed and the supporting papers, shall be forwarded to each member of the Committee, any other person required to attend and all other non-executive Directors, no later than four working days before the date of the meeting. Annual General Meeting 11. The Chairman of the Committee shall attend the Annual General Meeting and shall be prepared to respond to any shareholder questions on the Committee s activities. Authority 12. The Committee is authorised by the Board to investigate any activity within these terms of reference and can seek any information it requires from any employee; all employees shall be directed to co-operate with any request by the Committee. The Committee may call any employee to be questioned at a meeting of the Committee as and when required. 13. The Committee may obtain, at the Company s expense, outside legal or independent professional advice and such advisors may attend meetings as necessary and appropriate. Such advice must be sought at a reasonable cost commensurate with the matter under review. 14.The Committee is authorised by the Board to ensure that the Internal Audit, Corporate Secretariat, and risk management functions are adequately resourced and have appropriate authority within the Company. Duties 15. The duties of the Committee shall be: i) Internal Controls and Risk Management Systems To assess the scope and review the effectiveness of the Company' internal controls and the systems established by management to identify, assess, manage and monitor financial and non-financial risks. To review and approve the statements to be included in the Annual Report & Accounts concerning internal controls and risk management. To consider the findings of internal investigations and management s response to those. To call for and review a thorough and regular evaluation of the nature and extent of the risks to which the Company is exposed. To review the Company s risk management strategy and the results of management s regular risk analysis work. To review and supervise the Company s procedures for reporting of fraud and for handling allegations or information from whistleblowers and to receive and consider regular reports on any allegations or instances of fraud and/or matters brought to management s attention under the whistleblowing policy. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action. Page 2 of 9

3 ii) Internal Audit To ensure that the Director of Enterprise Risk and Audit has a right of direct access to the Chairman of the Board and of the Committee. To review the internal audit annual plan and any subsequent changes thereto. To review the integrity of the Company s internal financial control systems. To monitor and review the effectiveness of the Company s internal audit function in the context of the Company s overall risk management system. To approve the appointment and removal of the Director of Enterprise Risk and Audit and to deal with all matters relating to the engagement of the internal auditors. To receive at each meeting reports from the Internal Audit function summarising the Internal Audit activities for the period concerned. To consider and approve the remit of the internal audit function and ensure it has adequate resources and appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards. The Committee shall also ensure the function has adequate standing and is free from management or other restrictions. To review and agree the recommendations made by internal audit concerning maintenance of a sound control environment throughout the Company and to review management s responsiveness to the findings and recommendations of the internal auditor. To meet the Director of Enterprise Risk and Audit at least once a year, without management being present, to discuss their remit and any issues arising from the internal audits carried out. iii) External Audit To make recommendations to the Board (for the Board to put a resolution to shareholders for approval in general meeting) in relation to the appointment, reappointment and removal of the external auditor, the audit fee, the terms of engagement, including their engagement letter, and any questions of resignation or dismissal. The Committee shall ensure that at least once every ten years the external audit services contract is put out to tender to enable the Committee to compare the quality and effectiveness of the services provided by the incumbent auditor with those of other audit firms. If an auditor resigns, the Committee shall investigate the issues leading to this and decide whether any action is required. To discuss with the external auditor before the audit commences the nature and scope of the audit. To ensure co-ordination where more than one firm of auditors is involved. To monitor and review annually the external auditor s independence, objectivity and effectiveness, taking into consideration the auditor s quality control procedures and steps taken by the auditor to respond to changes in relevant UK professional and regulatory requirements, satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the Page 3 of 9

4 Company (other than in the ordinary course of business) that could adversely affect the auditor s independence and objectivity. To meet regularly with the external auditor, including once at the planning stage before the audit and once after the audit at the reporting stage. The Committee shall meet the external auditor at least once a year without management present, to discuss their remit and any issues arising from the half year and final audits and the intervening quarterly reviews, and any matters the auditor may wish to discuss (in the absence of management where necessary). To review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement, having regard to the seniority, expertise and experience of the audit team. To review the findings of the audit with the external auditor. This shall include but not be limited to the following: - a discussion of major issues which arose during the audit; - key accounting and audit judgements; and - levels of error identified during the audit. To review the effectiveness of the audit, review any representation letter requested by the external auditor before they are signed by management, review the external auditor s management letter and management s response to this and the letter of representation. To develop and implement the policy for provision of non-audit services by the external auditor (attached in these terms of reference) and to keep under review the nature and extent of non-audit services supplied by the auditors. To pre-approve fees in respect of non-audit services provided by the external auditor in accordance with the policy approved by the board and to ensure that the provision of non-audit services does not impair the external auditor s independence or objectivity. To agree with the Board a policy on the employment of former employees of the Company s auditor, then monitoring the implementation of this policy. To monitor the auditor s compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements. To assess annually their qualifications, expertise and resources and the effectiveness of the audit process which shall include a report from the external auditor on their own internal quality procedures. To seek to ensure coordination with the activities of the internal audit function. iv) Financial Reporting To monitor the integrity of the half year and annual financial statements, and the intervening interim management statements (and any other formal announcements relating to the Company s financial performance), before submission to the Board reviewing significant financial reporting and issues and judgments, focusing particularly on matters of material financial impact. Page 4 of 9

5 The Committee shall also review any significant financial returns to regulators and any financial information contained in certain other documents, such as announcements of a price sensitive nature. The Committee shall also review and challenge where necessary: The consistency of, and any changes to, significant accounting policies and practices, and any changes in them, both on a year on year basis and across the Group; Decisions requiring a major element of judgment; The extent to which the financial statements are affected by any unusual transactions in the period in question, the methods used to account for significant or unusual transactions where different approaches are possible and how they are disclosed; The clarity of disclosures in the Company s financial reports and the context in which statements are made; Significant adjustments resulting from the audit; The going concern assumption; Whether the Company has followed appropriate accounting standards and made appropriate estimates and judgments, taking into account the views of the external auditor; All material information presented with the financial statements, such as the business review and the corporate governance statement (insofar as it relates to the audit and risk management); Reviewing the Company s statement on internal control systems prior to endorsement by the board and to review the policies and process for identifying and assessing business risks and the management of those risks by the Company; Any formal announcements relating to the Company s financial performance; The impact of the funding position of the Pension Scheme. Where, following its review, the Committee is not satisfied with any aspect of the proposed financial reporting by the Company, it must report its views to the board. To review management statements which accompany such financial statements for adequacy and consistency of disclosure with the financial statements themselves. To consider any other matter which should be taken into account in reaching its recommendations to the board of Directors concerning the approval of the financial statements and to escalate issues of concern to the Board. v) Narrative Reporting When requested by the Board, the Committee shall review the content of the annual report and accounts and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company s performance, business model and strategy. vi) General The Committee shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities. To escalate any significant issues to the board and make recommendations for resolving these issues. Page 5 of 9

6 To consider other topics as defined from time to time by the board. To conduct an annual review of their work and these terms of reference and make recommendations to the board. The Committee shall compile a report to shareholders on its activities to be included in the Company s annual report. The Committee shall: have access to sufficient resources in order to carry out its duties, including access to the Company Secretariat for assistance as required; be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members; give due consideration to laws and regulations, the provisions of the UK Corporate Governance Code and the requirements of the UKLA s Listing, Prospectus and Disclosure and Transparency Rules as appropriate; be responsible for coordination of the internal and external auditors; oversee any investigation of activities which are within its terms of reference and act for internal purposes as a court of last resort; at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval. vii) Definitions In these terms of reference: Thomas Cook Group or the Company shall mean Thomas Cook Group plc; and Group shall mean Thomas Cook Group plc and its subsidiaries and subsidiary undertakings for the time being. Page 6 of 9

7 Thomas Cook Group plc SCHEDULE TO THE AUDIT COMMITTEE TERMS OF REFERENCE GROUP POLICY FOR PROVISION OF NON-AUDIT SERVICES BY THE EXTERNAL AUDITORS (Approved by the Audit Committee on 13 May 2009) 1. The FRC s Guidance on Audit Committees (formerly known as the Smith report) recommends that procedures be adopted for non-audit services provided by external auditors to ensure that such matters do not impair the judgement or independence of the auditors. This policy is to assist the Group s control over such matters. 2. Any material non-audit services require approval of the Group Audit Committee. This requirement applies to the Group and all its subsidiaries. Furthermore, any large consultancy contract should normally be put to tender, unless there are strong reasons to override such a step. 3. Under The (Companies Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 ( the Regulations ), the Group is required to disclose the auditors remuneration in its annual Report and Accounts split two ways between: fees receivable for the audit and fees receivable for other services. Audit Fees are defined as the remuneration received for the audit of the financial statements of the Group and its subsidiaries. Fees for Other Services fall into ten categories as set out in Schedule 2 to the Regulations 1 and include the audit of regulatory returns, review of interim results, due diligence work for acquisitions, general accounting advice including application of new accounting standards, tax compliance support, assurance reviews on compliance and controls, and any work in connection with listing particulars and public documents. 4. This approval policy applies to all items classified as Fees for Other Services, with the exception of the audit of regulatory returns and the review of interim results. 5. For this purpose, materiality is set as cost in excess of 50,000 before VAT and expenses (or the Euro equivalent). The threshold for large consultancy contracts to go for tender is set at cost in excess of 100,000 before VAT and expenses (or the Euro equivalent). These levels should apply whether a discrete project or linked series of assignments. Any fees to be based upon a contingency fee basis would require approval, irrespective of size. 6. Where there is an urgent need to engage the auditors for non-audit services above the lower threshold, the Group Chief Financial Officer can discuss and agree the matter with the Chairman of the Group Audit Committee and report their conclusion at the next Committee meeting. 7. The cost of all non-audit services, both above and below the materiality threshold, will be reported to the Group board half yearly. This report will list all such items on a 12 month basis, to allow board members to monitor the cumulative result. 8. When assessing the non-audit services for approval the Group Audit Committee will take the following into consideration: Page 7 of 9

8 whether the skills and experience of the audit firm make it the most suitable supplier of the non-audit service; whether there are safeguards in place to ensure that there is no threat to the objectivity or independence in the conduct of the audit resulting from the provision of such services by the external auditor. the nature of the non-audit services, the related fee levels and the fee levels individually and in aggregate relative to the audit fee; and the criteria which govern the compensation of the individuals performing the audit. 9. Current ethical guidance suggests that the Committee would in principle be unlikely to give approval for non-audit services which would result in: the external auditor auditing its own firm s work; the external auditor making management decisions for the Company; a mutuality of interest being created; or the external auditor being put in the role of advocate for the Company. 10. For information, the Group s auditors have also confirmed that their own policy excludes them providing the following services for audit clients: internal audit; secondments to senior position that involve any decision making; valuations that will be included in the financial statements; or litigation support. 1 The categories set out in Schedule 2 of the Regulations are: 1. The auditing of accounts of associates of the company pursuant to legislation (including that of countries and territories outside Great Britain) 2. Other services supplied pursuant to such legislation 3. Other services relating to taxation 4. Services relating to information technology 5. Internal audit services 6. Valuation and actuarial services 7. Services relating to litigation 8. Services relating to recruitment and remuneration 9. Services relating to corporate finance transactions entered into or proposed to be Page 8 of 9

9 entered into by or on behalf of the company and any of its associates. 10. All other services. Page 9 of 9