Audit committee report
for the year ended 30 September 2015
The audit committee (the committee) conducted its work in accordance with the written terms of reference approved by the board (information on this is recorded in the corporate governance report) and is pleased to present its report in terms of the Companies Act for the financial year ended 30 September 2015.
The committee is satisfied that it has performed both the statutory requirements for an audit committee as set out in the Companies Act as well as the functions set out in the terms of reference, and that it has therefore complied with its legal, regulatory or other responsibilities.
Membership
In the 2015 financial year the committee consisted of the following independent non-executive directors appointed by the shareholders at the annual general meeting held on 4 February 2015: Messrs AGK Hamilton (Chairman), SS Ntsaluba and Ms B Ngonyama.
Their profiles, including their qualifications, are fully set out in the AGM document.
The committee met six times during the 2015 financial year. Details of the meetings and attendance are set out in the corporate governance report in the integrated report.
External audit
The committee
- Nominated and recommended to shareholders Deloitte & Touche as independent external auditors and the appointment of Mr B Nyembe as the independent designated auditor for the financial year ending 30 September 2016 in compliance with the Companies Act;
- Nominated Deloitte & Touche as independent external auditors and the designated audit partner for Barloworld’s subsidiary companies;
- Considered and confirmed the proposed external audit fees for each division and the group in consultation with group management and approved the external audit engagement letter;
- Reviewed and approved the policy for non-audit services that can be provided by external auditors and the pre-approval authorisation process for these services that the external auditors may provide; and
- Considered to its satisfaction the independence, objectivity and effectiveness of the external auditors and ensured that the scope of their additional (non-audit) services provided were not such that they could be seen to have impaired their independence.
Internal control and internal audit
The committee
- Reviewed the appropriateness of the internal audit charter and recommended the approval of the charter by the board.
- Approved the one-year operational internal audit work plan as well as the capacity and resources within the internal audit function to execute its work plan and monitored adherence of internal audit to its annual plan.
- Monitored and supervised the functioning and performance of internal audit, compliance with its charter and reviewed and approved the annual risk-based audit plans, resources and budgets.
- Reviewed the appropriateness of the company’s combined assurance model to ensure that the significant risks identified in the high-level risk assessments are adequately addressed.
- Received and reviewed reports from both internal and external auditors concerning the effectiveness of the internal control environment, systems and processes as well as their concerns arising out of their audits and requested appropriate responses from management.
- Reviewed the results of the financial control management self-assessments as contained in the Barloworld internal control matrix which is completed in respect of all business units and operations in the Barloworld group.
- Reviewed and evaluated the nature and extent of the documented review of internal financial controls performed by internal audit and evaluated whether any weaknesses identified in such financial controls were considered sufficiently material to be reported to the board and the stakeholders.
- Reviewed the report prepared by internal audit regarding the risk management process in the company and the level of embeddedness of such processes within each operating division.
- Reviewed the group information security policy and the results of the internal self-assessments of the levels of control in place across the group.
- Reviewed the results of divisional and business unit disaster recovery self-assessments, the testing of such plans and the internal audit review of such disaster recovery plans.
- Reviewed the performance and confirmed the suitability and expertise of the new group head of internal audit Ms A Masemola; and considered the appropriateness of the expertise and adequacy of the resources of the group’s internal audit function.
Based on the results of the formal documented review of the group’s system of internal controls and risk management conducted by internal audit function during 2015 year and having given due consideration to the results of assurance activities of various assurance providers including considering information and explanations given by management and discussions with the external auditor on the results of the audit, nothing has come to the attention of the committee that caused it to believe that the company’s system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements.
Expertise and experience of finance director and the finance function
The committee
- Reviewed the performance and confirmed the suitability and expertise of the group finance director, Mr DG Wilson; and
- Considered the appropriateness of the expertise, diversity and adequacy of resources of the group’s financial function and the experience of the senior members of management responsible for the financial function.
Financial statements
The committee
- Considered accounting treatments, significant or unusual transactions and accounting judgements;
- Considered the appropriateness of accounting policies and any changes made;
- Met separately with management, external audit and internal audit and the chairman attended the risk and sustainability committee meetings;
- Made appropriate recommendations to the board of directors regarding the corrective actions to be taken as a consequence of audit findings;
- Reviewed the process in place for the reporting of concerns and complaints relating to accounting practices, internal audit, content of auditing of the company’s financial statements, internal controls of the company and any related matters. The committee can confirm that there were no such complaints during the year under review;
- Reviewed and recommended for adoption by the board such financial information that is publicly disclosed which for the year included:
- The interim results for the six months ended 31 March 2015;
- The audited annual results for the year ended 30 September 2015;
- The circular dated 15 May 2015 to Barloworld ordinary and preference shareholders relating to the proposed amendments to the 2008 B-BBEE transaction, including the proposed issue of 450 000 shares in the company at R0.05 per share; and
- Reviewed the working capital packs prepared by management to support the board’s going-concern statement at reporting dates as well as the solvency and liquidity tests required in terms of the Companies Act 71 of 2008.
Integrated report
The committee considered the integrated annual report, incorporating the summarised annual financial statements, for the year ended 30 September 2015. The audit committee has also considered the non-financial information as disclosed in the integrated annual report and has assessed its consistency with operational and other information known to audit committee members. The committee has also considered the external assurance provider’s report and is satisfied that the information is reliable and consistent with the financial results. The summarised annual financial statements have been prepared using appropriate accounting policies, which conform to International Financial Reporting Standards.
At their meeting held on 10 November 2015 the committee recommended the integrated report for approval to the board.
AGK Hamilton
Audit committee chairman
For and on behalf of the Barloworld Limited audit committee
13 November 2015