Annual Report 2007 in PDF - Cairn Energy PLC

CORPORATE GOVERNANCE STATEMENT
CONTINUED
Mr Story has indicated that he is willing to stand for re-election as a director of the Company on an annual basis and a resolution
will be proposed at the AGM to be held on 23 May 2008 to this effect. The Board believes that it is in shareholders’ interests
for Mr Story to be re-elected as an independent non-executive director of the Company. The Board believes Mr Story continues
to challenge rigorously the executive directors, the Board and the committees on which he sits in both a constructive and
appropriate manner and that his considerable expertise and industry experience is of great benefit to the Board, the Company
and shareholders.
Having reviewed the independence of each of the non-executive directors, the Board concluded that all non-executive directors
of the Company are independent.
Board Committees
The Board has established an audit committee, a remuneration committee and a nomination committee, each of which has
formal terms of reference approved by the Board. The terms of reference for each of these committees satisfy the requirements
of the Combined Code and are reviewed internally on an ongoing basis by the Board. Copies of the terms of reference are
available for inspection on request and will be available for inspection before the AGM to be held on 23 May 2008.
The committees are provided with all necessary resources to enable them to undertake their duties in an effective manner.
The Company Secretary acts as secretary to the remuneration and nomination committees and the Deputy Company Secretary
acts as secretary to the audit committee. The minutes of all committee meetings are circulated to all directors.
Set out below are reports from the audit committee, remuneration committee and nomination committee.
1. Audit Committee Report
The audit committee comprises three non-executive directors, all of whom are considered by the Board to be independent.
Currently, its members are Andrew Shilston (chairman), Hamish Grossart and Ed Story. The Board is satisfied that two members
of the committee have recent and relevant financial experience. Mr Shilston was the Finance Director of Enterprise Oil plc from
1993 to 2002 and is currently the Finance Director of Rolls-Royce plc. Mr Grossart serves on audit committees of other listed
companies and trained as an investment banker.
Andrew Shilston intends to retire as a director of the Company at the AGM to be held on 23 May 2008. The nomination
committee is reviewing the future composition of the audit committee.
The audit committee met four times in 2007. At the request of the audit committee, the Finance Director and senior members of
the Finance Department attended each of these meetings. The Chairman also attended two meetings as an observer, on being
invited to do so by the committee. In addition, all four meetings were attended by the external auditors and by the internal
auditors.
The external auditors receive copies of all audit committee papers (including papers to be considered at meetings when they
are not in attendance) and minutes of all committee meetings. In addition, the chairman of the committee regularly meets with
the external audit partner to discuss matters relevant to the Company.
The role of the committee includes:
• monitoring the integrity of the financial statements of the Company and formal announcements relating to the Company’s
financial performance and reviewing any significant financial reporting judgements contained in them;
• reviewing accounting policies, accounting treatments and disclosures in financial reports;
• reviewing the Company’s internal financial controls and internal control and risk management systems;
• monitoring and reviewing the effectiveness of the Company’s internal audit function;
• overseeing the Company’s relationship with the external auditors, including making recommendations to the Board as to the
appointment or reappointment of the external auditors, reviewing their terms of engagement, and monitoring the external
auditors’ independence, objectivity and effectiveness; and
• reviewing the Company’s whistleblowing procedures and ensuring that arrangements are in place for the proportionate and
independent investigation of possible improprieties in respect of financial reporting and other matters and for appropriate
follow-up action.
The audit committee met on three occasions during the year end process. Issues likely to impact the financial statements are
raised at the initial meeting by both the senior management and the external auditors. The auditors also present their audit
plan. Audit committee guidance is sought on accounting policies and assumptions to be adopted in preparing the financial
statements. After discussing and challenging the issues raised, the audit committee recommends the policies to be adopted
or direct senior management to produce further information if deemed necessary.
At the final meeting, the external auditors report their audit results to the audit committee, including a summary of the
significant accounting and auditing issues, internal control findings and a summary of audit differences identified. The audit
committee considers any disagreements in accounting treatment between management and the auditors, should any arise.
CAIRN ENERGY PLC ANNUAL REPORT 2007 43