31 MARCH 2015ALEXANDER FORBES GROUP HOLDINGS LIMITEDINTEGRATED ANNUAL REPORT

AUDIT COMMITTEE REPORT

The Audit Committee is pleased to present its report for the financial year ended 31 March 2015. The Audit Committee is an independent statutory committee appointed by the shareholders. In compliance with the King III Report and section 61 of the Companies Act, 2008, the shareholders of the company appointed independent directors as its Audit Committee in the previous financial year. The board of directors delegates duties to the Audit Committee. This report includes those duties and responsibilities.

terms of reference

The Audit Committee has adopted formal terms of reference which are reviewed and updated as necessary on an annual basis (or more frequently if required) by both the Audit Committee and the board. The committee has conducted its affairs in accordance with its terms of reference and has discharged its responsibilities contained therein. A copy of the Audit Committee’s current terms of reference will be available shortly.

Composition and function

The Audit Committee comprises three independent members. In accordance with King III, the Audit Committee members are appointed annually by the shareholders. The chairman of the board, certain non-executive board members, the group chief executive, the group chief financial officer, the group chief risk officer, the group IT executive, external auditors, internal auditors and other assurance providers attend meetings by invitation. The Audit Committee undergoes an annual self-assessment.

Roles and responsibilities

The Audit Committee is satisfied that it complied with its legal, regulatory and other responsibilities during the financial year ended 31 March 2015. The Audit Committee’s primary objective is to assist the board with its responsibilities for the management of risk, safeguarding of assets, oversight over financial control and reporting internal controls, shareholder reporting and corporate governance, particularly relating to legislative and regulatory compliance. The Audit Committee’s roles and responsibilities include statutory and regulatory duties as per the Companies Act, 2008 and according to the King III Report on Governance for South Africa 2009. In addition, the board has assigned certain other duties to the Audit Committee, embodied in its terms of reference. The board reviews these duties and terms of reference every year.

THE INTEGRATED ANNUAL REPORT

The Audit Committee is responsible for overseeing the group’s integrated annual report and the reporting process. This is the group’s fourth integrated annual report. It focuses not only on the group’s financial performance but also on its economic, social and environmental performance. It also sets out how the business has engaged with stakeholders, addressed its material issues and governed its business.

FINANCIAL STATEMENTS AND ACCOUNTING PRACTICES

The Audit Committee has reviewed the annual financial statements for the year ended 31 March 2015, and believes that these present a balanced view of the group’s performance for the period under review and that they comply with International Financial Reporting Standards.

EXTERNAL AUDITOR APPOINTMENT AND INDEPENDENCE

The Audit Committee has satisfied itself that the external auditor is independent of the group, as set out in section 94(8) of the Companies Act, 2008, which includes consideration of previous appointments of the auditor, the extent of other work the auditor has undertaken for the group and compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by the auditor that internal governance processes within the audit firm support and demonstrate its independence. The committee ensured that the appointment of the auditor complied with the Companies Act, 2008 and other legislation relating to the appointment of auditors. The committee, in consultation with management, agreed to the engagement letter, terms, audit plan as well as scope of work performed and budgeted audit fees for the 2014/15 year. A formal procedure has been adopted to govern the process whereby the external auditor may be considered for performing non-audit services.

The committee has nominated, for election at the annual general meeting, PricewaterhouseCoopers Inc. as the external audit firm and Mr J Grosskopf as the designated auditor responsible for performing the functions of auditor for the 2015/16 year.

The Audit Committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors and their advisers.

INTERNAL CONTROLS

The Audit Committee considers significant control deficiencies raised by management and the internal and external auditors and reports its findings to the board. Where weaknesses are identified, the Audit Committee ensures that management takes appropriate action. Based on assurance obtained throughout the year, the Audit Committee confirms that the internal controls are working optimally and that there are no known material deficiencies to report on for the past financial year.

WHISTLE BLOWING

During the year the Audit Committee reviewed the whistle-blowing programme and reports resulting from the programme. We have ensured that, where appropriate, management undertook independent investigations and appropriate follow-up action. The Audit Committee receives reports of any complaints, whether from within or outside the group, relating to the accounting practices and internal audit of the group, the content or auditing of the group’s financial statements, the internal financial controls of the group and related matters.

COMBINED ASSURANCE

The Audit Committee is satisfied that the group has optimised the assurance coverage obtained from management and internal and external assurance providers in accordance with an appropriate combined assurance model.

GOING CONCERN

The Audit Committee has reviewed a documented assessment, including key assumptions prepared by management, of the going concern status of the group and has made a recommendation to the board in accordance therewith. The board’s statement on the going concern status of the group, as supported by the Audit Committee, appears in the directors’ responsibility for financial reporting found here of the annual financial statements.

GOVERNANCE OF RISK

The Audit Committee fulfils a dual function, being both an audit committee and a risk committee. Internal audit performs a full assessment of the risk management function and framework on an ongoing basis.

INTERNAL AUDIT

The Audit Committee is responsible for ensuring that the group’s internal audit function is independent and has the necessary resources, standing and authority within the group to enable it to perform its duties. Furthermore, the Audit Committee oversees cooperation between the internal and external auditors, and serves as a link between the board of directors and these functions. The Audit Committee approved the internal audit charter and the internal audit function’s annual audit plan during the year under review.

The internal audit function reports to the relevant divisional audit committees with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the group’s operations. The head of group internal audit is responsible for regularly reporting the findings of the internal audit work against the agreed internal audit plan to the Audit Committee. The head of group internal audit has direct access to the group Audit Committee, primarily through its chairman. During the year, the committee met with the external auditors and with the head of group internal audit without management being present.

EVALUATION OF THE EXPERTISE AND EXPERIENCE OF THE GROUP CHIEF FINANCIAL OFFICER (GCFO) AND THE FINANCE FUNCTION

The Audit Committee has satisfied itself that the GCFO has appropriate expertise and experience to execute his designated functions. The Audit Committee has considered and has satisfied itself on the appropriateness of the expertise, experience and adequacy of resources of the finance function.

 

Dr D Konar

Chairman of the Audit Committee

Sandton
4 June 2015