Report of the Altron audit committee
We are pleased to present our report for the financial year ended 28 February 2010.
AUDIT COMMITTEE MANDATE AND TERMS OF REFERENCE
The Altron audit committee (the committee) has adopted a formal mandate and terms of reference that has been approved by the board of directors. The committee has conducted its affairs in compliance with this mandate and terms of reference and has discharged its responsibilities contained therein. The mandate and terms of reference is available on the company’s website at http://www.altron.com and is also available on request.AUDIT COMMITTEE MEMBERS AND ATTENDANCE AT MEETINGS
The committee consists of four independent, non-executive directors and meets at least three times per annum as per the committee mandate and terms of reference.The Altron chief executive, financial director, subholding group chief executive officers, head of internal audit, external auditor and other assurance providers (Altron tax manager and Altron finance manager) attend meetings by invitation.
During the year under review three meetings were held.
| 30 April | 2 October | 26 February |
|
Name of member |
2009 | 2009 | 2010 |
 |
|||
| PL Wilmot | Present | Present | Present |
| CA (SA) | |||
| Year appointed | |||
| as chairman: 2002 | |||
| NJ Adami | Present | Present | Absent* |
| BBusSci (Hons) (UCT); | |||
| MBA (Wits) | |||
| Year appointed: 2009 | |||
| MJ Leeming | Present | Present | Present |
| BCom (Rhodes); | |||
| MCom (Wits); FIBSA, | |||
| FCMA; AMP (Harvard) | |||
| Year appointed: 2003 | |||
| JRD Modise | Present | Present | Present |
| BCom (Wits); BAcc (Wits); | |||
| CA(SA); MBA (Wits); | |||
| AMP (Samford); | |||
| AMP (Harvard) | |||
| Year appointed: 2004 | |||
| *Apologies. | |||
ROLE AND RESPONSIBILITIES
The committee’s role and responsibilities include its statutory duties as per the Corporate Laws Amendment Act, 2006, and the responsibilities assigned to it by the board.Statutory duties
In the conduct of its duties, the committee has performed the following statutory duties:- Nominated for appointment as external auditor of the company, KPMG Inc. a registered auditor who, in the opinion of the committee, is independent of the company;
- Determined the fees to be paid to the external auditor and their terms of engagement;
- Ensured that the appointment of the external auditor complies with the Corporate Laws Amendment Act, 2006 and any other legislation relating to the appointment of auditors;
- Determined the nature and extent of any non-audit services that the external auditor may provide to the company (and the Altron group); and
- Pre-approved any proposed agreement with the external auditor for the provision of non-audit services to the company (and the Altron group).
External auditor
The committee has satisfied itself that the external auditor, KPMG Inc. was independent of the company, as set out in section 270A (5) of the Corporate Laws Amendment Act, 2006, which includes consideration of compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by the external auditor that internal governance processes within KPMG Inc. support and demonstrate their claim to independence.The committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees for the 2009/2010 financial year.
There is a formal written policy and procedure (incorporating an authority matrix) that governs the process whereby the external auditor is considered for non-audit services. The committee approved the terms of the written policy for the provision of non-audit services by the external auditor, and approved the nature and extent of non-audit services that the external auditor may provide.
The committee has nominated, for approval at the annual general meeting, KPMG Inc. as the external auditor and Mr NH Southon as the designated auditor, for the 2010/2011 financial year. It has further satisfied itself that the audit firm and designated auditor is accredited to appear on the JSE List of Accredited Auditors.
Furthermore, the committee has satisfied itself that the audit firms of Altron’s major subsidiaries, KPMG Inc. and PKF (Jhb) Inc., are accredited to appear on the JSE List of Accredited Auditors and that the designated auditors are not disqualified from acting as such.
Internal financial controls
Based on the results of the formal documented review of the design, implementation and effectiveness of the Altron group’s system of internal financial controls conducted by the internal audit function during the 2009/2010 financial year and, in addition, considering information and explanations given by management plus discussions held with the external auditor on the results of their audit, the committee is of the opinion that the Altron group’s system of internal financial controls is effective and forms a basis for the preparation of reliable financial statements.Financial statements (including accounting practices)
The committee has reviewed the financial statements of the company and the Altron group and is satisfied that they comply with International Financial Reporting Standards.Going concern
The committee reviewed a documented assessment by management of the going-concern premise of the company and the Altron group before concluding to the board that the company, as well as the Altron group will be a going concern in the foreseeable future.Expertise and experience of financial director and finance function
The committee has satisfied itself that the financial director of Altron has appropriate expertise and experience.The committee has considered, and has satisfied itself of the appropriateness of the expertise and adequacy of resources of the Altron group’s finance function and experience of the senior members of management responsible for the financial function.
Duties assigned by the board
The committee fulfils an oversight role regarding the company’s integrated annual report and the reporting process, including the system of internal financial control. It is responsible for ensuring that the company and the Altron group’s internal audit function is independent and has the necessary resources, standing and authority within the organisation to enable it to effectively discharge its duties. Furthermore, the committee oversees co-operation between the internal and external auditors, and serves as a link between the board of directors and these functions.During the year under review, the committee met with the external auditor and with the head of internal audit without management being present.
The committee is satisfied that it has complied with its legal, regulatory and other responsibilities.
Risk management
The board has assigned oversight of the company’s (including the Altron group’s) risk management function to the risk management committee. The chairman of the committee attends the risk management committee meetings as an ex officio member to ensure that information relevant to these committees is shared regularly. The committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk as it relates to financial reporting and information technology risks as it relates to financial reporting.Internal audit
The committee annually considers and has recommended the internal audit charter for approval by the board. The internal audit function’s annual audit plan was approved by the committee.The internal audit function resides within the Altron corporate office and has responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the Altron group’s operations. The head of internal audit is responsible for reporting the findings of the internal audit work against the agreed internal audit plan to the committee on a regular basis.
The head of internal audit has direct access to the committee, primarily through its chairman.
During May 2010, an external effectiveness peer review will be performed by PricewaterhouseCoopers Inc. (PWC). Previously in 2007, PWC conducted a peer review of the company’s internal audit function, reporting positive results and rating the internal audit function as ‘high quality’.
Whistle-blowing
The committee is satisfied that instances of whistle-blowing were appropriately dealt with during the period under review.Sustainability reporting
The committee recommended to the board the appointment of sustainabilityservices.co.za, an external assurance provider, to perform an assurance engagement on key performance indicators included in the company’s corporate responsibility report. The committee determined the scope of this assurance engagement and satisfied itself as to the independence and competency of the external assurance provider.The committee considered the company’s sustainability information as disclosed in the integrated annual report and has assessed its consistency with operational and other information known to committee members, and for consistency with the annual financial statements. The committee discussed the sustainability information with management and the chairman of the risk management committee, and has considered the conclusion of the external assurance provider. The committee is satisfied that the sustainability information is reliable and consistent with the financial results.
Recommendation of the integrated annual report for approval by the board
The committee recommended the integrated annual report for approval by the board of directors, on 31 May 2010.
PL Wilmot – Chairman
Altron audit committee
May 2010