Audit & Risk Management Committee
The Board is committed to the basic principle that Babcock & Brown’s financial reports are true and fair and comply with the relevant accounting standards. To assist the Board with this commitment, an Audit & Risk Management Committee of the Board has been established which is responsible for advising the Board on internal controls and appropriate standards for the financial management of the Group. It is the Board’s responsibility to ensure that an effective internal control system is in place across the Group. This includes internal controls to deal with both the effectiveness and the efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. The Board has delegated the responsibility for the establishment and maintenance of the company’s system of internal control to the Audit & Risk Management Committee.
The Committee oversees the financial reporting process, the systems of internal control and risk management, the audit process and the Company’s processes for monitoring compliance with laws and regulations. The Committee works on behalf of the Board with the external auditor and reviews non-audit services provided by the external auditor to confirm that they are consistent with maintaining external audit independence.
The Audit & Risk Management Committee provides advice to the Board and reports on the status of the business risks to the Group through its risk management processes aimed at ensuring risks are identified, assessed and properly managed.
The Audit & Risk Management Committee is wholly comprised of Independent Non-Executive Directors, namely Mr Sharpe (who is Chairman of the Committee), Ms Nosworthy and Mr Martin.
The responsibilities of the Committee pursuant to its Charter include:
Financial Reports for the half year and full year
- review and consider the financial reports for the half year and full year.
- consider in connection with the half year and full year financial reports the CEO and CFO letter of representation to the Board.
- review the financial sections of the annual report and related regulatory filings before release.
- review with management and the external auditors the results of the audit.
Internal Control
- review the effectiveness of the Group’s internal controls regarding all matters affecting the Group’s financial performance and financial reporting, including information technology security and control.
- review the scope of internal and external auditors’ review of internal control, review reports on significant findings and recommendations, together with management’s responses, and recommend changes from time to time as appropriate.
Internal Audit
- review with management and the internal auditor, the charter, plans and activities of the internal audit activity.
- meet with the internal auditor to review reports and monitor management response.
- meet separately, at least once a year, to discuss any matters that the Committee or internal audit believes should be discussed privately.
- review the effectiveness of the internal audit activity.
- ensure there are no unjustifi ed restrictions or limitations, and review and concur in the appointment, replacement or dismissal of the internal auditor by management.
External Audit
- review the external auditors’ proposed audit scope and approach.
- meet with the external auditors to review reports, and meet separately, at least once a year, to discuss any matters that the Committee or auditors believe should be discussed privately.
- recommend to the Board policies regarding independence of the external auditor.
- review and confirm the independence of the external auditors.
- review the performance of the external auditors, and consider the re-appointment and proposed fees of the external auditor and, if appropriate, conduct a tender of the audit for the review of the Board. Any subsequent recommendation following the tender for the appointment of an external auditor will be put to the Board.
Compliance
- consider the work plan for Group compliance activities.
- obtain regular updates from management and Group legal counsel regarding compliance matters.
- review the effectiveness of the system for monitoring compliance with laws and regulations and the results ofmanagement’s investigation and follow-up (including disciplinary action) of any instances of non-compliance.
- review the findings of any examinations by regulatory agencies.
- review the process for communicating to Group personnel, and for monitoring compliance with Group codes of conduct.
Risk Management
- oversee the development of risk management policies and review the Group’s overall risk management framework and its effectiveness in meeting sound corporate governance principles and keep the Board informed of all significant business risks.
- review with management the system for identifying, managing and monitoring the key risks of the organisation.
- obtain reports from management on the status of any key risk exposures or incidents.
- obtain annually a report from management on the status and coverage of the insurance policies for the Group.
Reporting Responsibilities
- regularly report to the Board about Committee activities, issues and related recommendations.
- provide an open avenue of communication between internal audit, the external auditors and the Board. For the purpose of supporting the independence of their function, the external auditor and the internal auditor have a direct line of reporting access to the Committee.
- report annually to the shareholders on matters relating to Committee responsibilities as required by law or the ASX Listing Rules.
- review any other reports the Company issues that relate to Committee responsibilities.
The Committee meets at least four times a year and reports to the full Board following each meeting, including in respect of recommendations of the Committee that require Board approval or action.