Chemring Group PLC |Annual Report and Accounts 2012

50
Corporate governance
Statement on corporate governance
continued
Audit Committee
The Rt Hon Lord Freeman (Chairman)
Mr I Much
Mrs V Murray
Air Marshal Sir Peter Norriss
The Rt Hon Lord Freeman, who is a Chartered Accountant, is
Chairman of the Audit Committee; his full biographical details are
set out on page 29. The Committee met twice during the year, and
operates within formal written terms of reference. As referred
to above, the terms of reference are available on the Company’s
website. Meetings of the Committee are attended, at the invitation
of the Chairman of the Committee, by the external auditors, the
Chairman of the Board, the Finance Director and representatives
from the Group finance and internal audit function. The Committee
meets with the auditors on a regular basis without the executive
directors being present. The Company Secretary acts as secretary
to the Committee and minutes of meetings are circulated to all
Board members.
The Committee is authorised to seek any information it requires
from any employee of the Company in order to perform its duties,
and to obtain any outside legal or other professional advice it
requires at the Company’s expense.
The Committee monitors the integrity of the Group’s financial
statements and the effectiveness of the external audit process. It is
responsible for ensuring that an appropriate relationship between
the Group and the external auditors is maintained, including
reviewing non-audit services and fees. The Committee keeps
under review the effectiveness of the Group’s internal controls
and financial risk management systems, and on an annual basis,
considers the effectiveness of the Group’s internal audit function.
The Committee reviews annually its terms of reference and its
effectiveness, and recommends to the Board any changes required
as the result of such review.
During the year, the Committee, operating under its terms of
reference, discharged its responsibilities by:
• reviewing the Group’s draft 2011 financial statements and 2012
interim results statement prior to Board approval, and reviewing
the external auditors’ detailed reports thereon;
• reviewing the appropriateness of the Group’s accounting policies,
and reviewing various accounting matters raised by management
and the external auditors in the context of financial disclosures;
• considering and approving changes to the Group’s accounting
policy manual;
• reviewing the potential impact on the Group’s financial
statements of certain matters such as impairments of fixed asset
values and the adoption of new accounting standards;
• reviewing the external auditors’ plan for the 2012 interim review
and the 2012 year end audit, including reviewing the key risks
on the accounts, confirming the auditors’ independence and the
proposed audit fee, and approving the terms of engagement for
the audit;
• receiving reports from the Risk Committee and reviewing the
Group’s risk register;
• reviewing the Group’s anti-bribery policies and procedures,
and the compliance of each of the Group’s businesses with
these policies;
• monitoring the Group’s financing structures;
• monitoring the Group’s key financial ratios and credit ratings;
• overseeing the application of the Group’s whistleblowing policy
and procedures for employees;
• reviewing the work undertaken by the Group’s internal audit
function, assessing the adequacy of the internal audit resource
and recommending changes for increasing the scope of the
internal audit activities; and
• implementing the Group’s policy on the provision of non-audit
services by the auditors, taking into account relevant guidance
and best practice.
The Group’s internal audit programme incorporates an annual
rolling review of all businesses, and focuses on both financial and
non-financial controls and procedures. Newly acquired businesses
are subject to a detailed review by the internal audit function
immediately post-completion. The Committee approves the
annual internal audit plan and receives regular reports from
the internal auditors.
To assess the effectiveness of the external auditors, the
Committee reviewed:
• the arrangements for ensuring the external auditors’
independence and objectivity;
• the external auditors’ fulfilment of the agreed audit plan and any
variations from the plan;
• the robustness and perceptiveness of the auditors in their
handling of the key accounting and audit judgements; and
• the content of the external auditors’ reporting and
internal control.
Deloitte LLP have been the Company’s auditors for many years.
In the opinion of the Committee, the relationship with the auditors
currently works well, and having reviewed their independence
and effectiveness, the Committee has not considered it necessary
to date to require Deloitte LLP to re-tender for the audit work.
Accordingly, the Committee has recommended to the Board that
Deloitte LLP be proposed for re-appointment as auditors at the
forthcoming Annual General Meeting.
The Committee has considered the likelihood of a withdrawal of
the current auditors from the market and noted that there are no
contractual obligations to restrict the choice of external auditors.
The Committee keeps under review the level of any non-audit
services which are provided by the external auditors, to ensure
that this does not impair their independence and objectivity. The
Committee has adopted a policy which states that the external
auditors should not be appointed to provide services in relation
to corporate finance matters, unless the Committee agrees that
their appointment would be in the best interests of the Company’s
shareholders in particular circumstances and would not create any
direct conflict with their role as external auditors. The Committee,
in conjunction with the Finance Director, ensures that the Group
maintains a sufficient choice of appropriately qualified audit firms.
Details of the amounts paid to the external auditors during the year
for audit and other services are set out in the notes to the financial
statements on page 69.
Chemring Group PLC Report and Accounts 2012