Principle 4 – Safeguard integrity in corporate reporting
The ASX Corporate Governance Council states that a company should “have formal and rigorous processes that independently verify and safeguard the integrity of its corporate reporting.”
Members of the Audit Committee:
- Maria Martin - Independent Non-Executive Director and Chair of the Audit Committee;
- John P Schmoll - Independent Non-Executive Chairman of the Board;
- J Will Vicars – Non-Executive Director.
Sam Weiss was a member of the Audit Committee until his resignation on 27 November 2015. Subsequently, J Will Vicars and Ross B Lane were appointed to the Audit Committee, however following an internal review of Committee membership, Ross B Lane resigned from the Audit Committee from 30 August 2016, to ensure there was a majority of independent directors on the Committee.
Details of membership, member qualifications and attendance are contained in the Directors’ Report.
As a consequence of the above changes in membership of the Audit Committee during the period, the Audit Committee did not have a majority of independent Directors for the full year ended 30 July 2016 and therefore the Group was not compliant with recommendation 4.1. Regardless of whether Directors are defined as independent, all Directors are expected to bring independent views and judgement to Audit Committee deliberations.
Notwithstanding this, the situation has now been addressed and the Audit Committee now has a majority of independent Directors.
Audit Committee Charter and Responsibilities
The purpose, importance and responsibilities of the Audit Committee are to assist the Board in its oversight responsibilities. It has the following functions:
- To ensure the OrotonGroup accounting policies and practices are in accordance with current and emerging accounting standards promulgated by the Australian Accounting Standards Board (AASB);
- Reviewing the scope of the audit through discussion with the external auditors of the Consolidated Entity;
- To ensure adherence to the External Auditors’ independence requirements, including reviewing and approving the level of non-audit services provided by the External Auditors and ensure it does not adversely impact on auditor independence;
- To monitor and approve the selection, appointment and continued engagement of the External Auditor and for the rotation of External Audit Engagement Partners;
- Review any significant disagreements between the auditors and management, irrespective of whether they have been resolved;
- Provide external auditors with a clear line of direct communication at any time to either the Chairman of the Audit Committee or the Chairman of the Board;
- To ensure compliance with legal and regulatory requirements and policies in this regard;
- To oversee the adequacy of internal controls and the overall efficiency and effectiveness of financial operations;
- Oversee the effective operation of the risk management framework.
Meetings of the Audit Committee
The Audit Committee may have in attendance or by invitation such members of management or others as it may deem necessary to provide appropriate information or explanations.
The Audit Committee meets each quarter and more frequently if required.
PricewaterhouseCoopers was appointed as the external auditor on 14 December 2000 following the completion of a tender process. PricewaterhouseCooper’s policy is to rotate audit engagement partners on listed companies at least every five years. The performance of the external auditor is reviewed annually by the Audit Committee and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in note 29 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence. This declaration is included in the 2016 Annual Report on page 26.
The External Auditor attends Audit Committee meetings and attends the Annual General Meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.
Managing Director and Chief Financial Officer Certification
A management certification process is conducted prior to the Board’s approval of the Group’s financial statements.
The key steps in the certification process are the completion of a questionnaire by key management covering information that is critical to the financial statements, risk management and internal controls.
The certification process carried out by the Managing Director and Chief Financial Officer and reported to the Board provides that:
- The financial statements provide a true and fair view, in all material respects of OrotonGroup’s financial condition and operating results (in accordance with ASX Corporate Governance best practice recommendation 4.2);
- A sound system of risk management and internal compliance and control is in place;
- There is compliance with relevant laws and regulations;
- OrotonGroup’s risk management, internal compliance and control systems are operating efficiently and effectively in all material respects.
The process of certification serves the following purposes:
- Provide assurance to the Board to support their approval of the Annual Report and other financial reports;
- Formalises the process by which the Executive Team signs-off on those areas of risk responsibility delegated to them by the Board;
- Ensures a true and fair view of OrotonGroup’s financial statements.