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218 NEDBANK GROUP Limited INTEGRATED REPORT 2010The emphasis on risk governance is based on a three lines of defenceconcept, which is the backbone of the group’s ERMF. The ERMF placesweight on accountability, responsibility, independence, reporting,communication and transparency, both internally and with all keyexternal stakeholders.The functions of the three lines of defence, as well as the principalresponsibilities that extend across the group, are set out in the Risk andBalance Sheet Management review on pages 146 and 195.Specific responsibilities of the committee include the following:Internal control• Monitoring management’s success at creating and maintaining aneffective internal control environment throughout the group and atdemonstrating and stimulating the necessary respect for this controlenvironment.• Monitoring the identification and correction of weaknesses andbreakdowns of systems and internal controls.Financial control, accounting and reporting• Monitoring the adequacy and reliability of management informationand the efficiency of management information systems.• Delegating to the Group Information Technology Committee themonitoring of the adequacy and efficiency of the group’s informationsystems and receiving from them reports thereon.• Satisfying itself of the expertise, resources and experience of thefinance function.• Reviewing quarterly, interim and final financial results and statementsand reporting for proper and complete disclosure of timely, reliableand consistent information.• Evaluating on an ongoing basis the appropriateness, adequacy andefficiency of accounting policies and procedures, compliance withgenerally accepted accounting practice and overall accountingstandards as well as any changes thereto.• Discussing and resolving any significant or unusual accounting issues.• Reviewing and monitoring capital expenditure throughout the groupfor adequate control, monitoring and reporting.• Reviewing reports from the Group Credit Committee regardingthe effectiveness and efficiency of the credit-monitoring process,exposures and related impairments and adequacy of impairmentprovisions to discharge its board and Banks Act obligationssatisfactorily.• Reviewing and monitoring the effectiveness and efficiency andthe management and reporting of tax-related matters of the taxfunction.• Monitoring the management and effectiveness of the accountingand taxation risks as set out in the group’s ERMF.• Reviewing and monitoring all key performance indicators toensure the appropriate high-level decisionmaking capabilities aremaintained at industry levels.• Reviewing and reporting annually to the board on the effectivenessof the group’s internal controls over financial reporting.Internal Audit• Direct reporting by the Chief Internal Auditor to the Chairman of thecommittee.• Approving the internal audit annual plan.• Monitoring the effectiveness of the internal audit function in termsof its scope, execution of its plan, coverage, independence, skills,staffing, overall performance and position within the group.• Monitoring and challenging, where appropriate, action taken bymanagement with regard to adverse internal audit findings.• Forming a view on the adequacy and effectiveness of the controlenvironment.• Monitoring the group’s compliance with the Basel II Accord.External Audit• Recommending to the board the selection of the external auditorsand approving their audit fees.• Approving the external auditors’ annual plan and related scope ofwork.• Monitoring the effectiveness of external auditors in terms of theirskills, independence, execution of the audit plan, reporting andoverall performance.• Approving non-audit services to be rendered by the external auditorsand monitoring conflicts of interest.• Considering whether the extent of reliance placed on internal auditby the external auditors is appropriate and whether there are anysignificant gaps between internal and external audit.Regulatory Reporting• Reviewing the adequacy of the regulatory reporting processes,including the quality of the Banks Act reporting and the adequacy ofsystems and people to perform these functions.• Considering the contents of any regulatory reports relating to the keyfunctions of the committee and monitoring management actions toresolve any issues identified.• Performing such other functions as are prescribed in the regulationsrelating to the Banks Act.Having considered, analysed, reviewed and debated information providedby management, internal audit and external audit, the committeeconfirmed that:
219Reports andcertificationsConsolidatedannual financialstatementsShareholdermeeting mattersDefinitions andabbreviationsInstrumentcodesContactdetailsAudit committee report• the internal controls of the group have been effective in all materialaspects throughout the year under review;• these controls have ensured that the group’s assets have beensafeguarded;• proper accounting records have been maintained;• resources have been utilised efficiently; and• the skills, independence, audit plan, reporting and overall performanceof the external auditors are acceptable and it recommends theirreappointment in 2011.Corporate Laws Amendment Act RequirementsIn terms of the Companies Act, 61 of 1973 (as amended), the committeeis responsible, as set out above, for all subsidiary companies without theirown audit committees, which responsibilities include:• reviewing the formalised process to perform functions on behalf ofsubsidiaries; and• ratifying annually the list of subsidiaries for which responsibility isassumed.Appropriateness of the expertise and experienceof the Chief Financial OfficerIn terms of the JSE Listings Requirements the audit committee had, at itsmeeting held on 20 January 2011, satisfied itself as to the appropriatenessof the expertise and experience of the Chief Financial Officer.Annual Financial StatementsThe committee has:• reviewed and discussed the audited annual financial statementsincluded in the integrated report with the external auditors, the ChiefExecutive and the Chief Financial Officer;• reviewed the external auditors’ management letter andmanagement’s response thereto;• reviewed significant adjustments resulting from external auditqueries and accepted any unadjusted audit differences; and• received and considered reports from the internal auditors.The committee concurs with and accepts the external auditors’ reporton the annual financial statements and has recommended the approvalthereof to the board. The board has subsequently approved the financialstatements, which will be open for discussion at the forthcoming annualgeneral meeting.CJW BallGroup Audit Committee Chairman25 February 2011
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