The audit committee is pleased to present this report to shareholders as required by the Companies Act no. 71 of 2008 (“the Companies Act”) and as recommended by King III.
|Mr GR Rosenthal
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|Ms ZBM Bassa
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|Mr PL Campher
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|Ms B Modise
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|Independent non-executive director||Independent non-executive director||Independent non-executive director||Independent non-executive director|
|Meeting attendance: 5/5||Meeting attendance: 5/5||Meeting attendance: 5/5||Meeting attendance: 4/5|
The audit committee (“the committee”) members as nominated by the board and appointed by shareholders in respect of the financial year ended 30 June 2014, each have the requisite financial skills and experience to contribute to the committee’s deliberations.
During the period under review and following the assessment of the effectiveness of the committee as conducted by the nomination committee, the members of the committee were nominated by the board for re-election to the committee in the forthcoming financial year. The members have availed themselves for re-election by shareholders at the 2014 annual general meeting.
The committee meetings are also attended by the Chief Executive, Chief Financial Officer, Director: Group Internal Audit, the Group’s financial manager, Group’s tax manager and external auditors, who attend the committee meetings by invitation. Additional members of management are required to be present at such meetings at the instance of the committee. The committee Chairman is also a member of the risk and social and ethics committees, and attends these meetings to ensure that the committee is kept apprised of matters canvassed given the overlap of matters. The committee chairman then provides feedback to the committee on the relevant matters.
The committee’s board approved mandate and terms of reference include its statutory duties as detailed in the Companies Act, and is supplemented with the duties assigned to the committee by the board.
The committee is satisfied that it has considered and discharged its responsibilities in accordance with its mandate and terms of reference during the year under review as set out in this report. This was further supported by the committee’s most recent evaluation conducted in 2014 and the board’s assessment of the committee’s effectiveness in fulfilling its mandate.
The committee is assisted in its functions through the Group’s Internal Audit as well as the external auditors as set out below.
Group Internal Audit (“GIA”) provides management and the committee with independent evaluations and examinations of the Group’s activities and resultant business risks. The head of GIA has unfettered access to the committee Chairman and meets with the Chairman independently of management several times during the year.
GIA provides the committee with assurances relating to the effectiveness of risk management across the Group and on the Group’s internal financial controls.
The purpose, authority and responsibilities of GIA are formally defined in an internal audit charter which is reviewed by the committee and approved by the board. This review takes place annually, with the charter revised as necessary.
GIA is designed to maintain an appropriate degree of independence from management to render impartial and unbiased judgements in performing its services. The scope of GIA’s functions include:
GIA is also responsible for monitoring and evaluating operating procedures and processes through, inter alia, gaming compliance, the Responsible Gambling Programme compliance, operational health and safety, and environmental audits. Risk assessment is coordinated with the board's assessment of risk through interaction between GIA and the audit and risk committees so as to minimise duplication of effort. The director of GIA reports at all audit and risk committee meetings and has unrestricted access to the chairmen of these committees. The appointment or dismissal of the GIA director is done with agreement of the committee.
The committee further assesses the effectiveness and competency of the GIA director. In the year under review, the committee has considered and satisfied itself on the appropriateness of the expertise of Mr CS Benjamin as the head of GIA and confirmed that he has executed his duties competently with the relevant skill and expertise.
The committee approved GIA’s annual audit plan for the 2014/2015 financial year which sets out the number and nature of internal audits planned for the year. GIA provides services across all Group operations and conducts a myriad of internal audits during the year. Any weaknesses that are identified are brought to the attention of the committee, with GIA providing executive management’s comments and remedial actions implemented if so required.
In accordance with the requirements of the Institute of Internal Auditors, GIA has undergone an independent quality assurance review on its effectiveness this year, with the last completed independent review having being conducted during 2011. The results of the review indicated that GIA “generally conforms” to the International Standards for the Professional Practice of Internal Auditing.
The external auditors provide the committee with their independent observations and findings on the Group’s internal controls, and make recommendations on improving financial reporting. The Group’s external auditors are PricewaterhouseCoopers Inc.
The external auditors’ audit approach is risk-based, requiring them to continually identify and assess risks throughout the audit process. The external auditors are directed by operating procedures and place emphasis on understanding how management obtains the assurance that the business is generating reliable information, and then evaluate and validate the basis of this assurance. This approach aligns the methodology closely with the organisational structures and risk management processes.
There is close cooperation between internal and external audit and reliance is placed, where possible, on the work of GIA, therefore minimising duplication of effort. The annual external audit plan, together with the associated audit fee, are reviewed and approved by the committee. The external auditors attend all shareholder meetings of the Company and are re-elected by shareholders annually at the AGM.
The committee considered and satisfied itself on the appropriateness of the expertise and experience of the Chief Financial Officer, Mr AM Leeming, and his abridged résumé details his experience.
Having conducted a review of the appropriateness, skills and adequacy of resourcing of the Group’s finance function, the committee has satisfied itself on the overall adequacy, resourcing and appropriateness of the finance function.
The board of directors is responsible for the Group’s systems of internal financial controls. These systems are designed to provide reasonable but not absolute assurance as to the integrity and reliability of the financial statements. The systems also safeguard, verify and maintain accountability of Group assets, as well as to detect and minimise significant fraud, potential liability, loss and material misstatement while complying with applicable laws and regulations. The board has tasked the committee to oversee the testing of the Group’s internal financial controls.
The committee confirms that GIA has adequately tested the Group’s internal financial controls to provide the board with positive assurance on the key areas of the Group’s internal financial controls.
The committee is of the opinion having received the written assurance provided by GIA that the Group’s systems of internal financial controls in all key material aspects is effective and provides reasonable assurance that the financial records may be relied upon for the preparation of the annual financial statements.
The controls throughout the Group concentrate on all risk areas with an emphasis on critical risk areas in the casino and hotel control environments. These risk areas are closely monitored and subjected to GIA reviews. Furthermore, assessments of the information technology environments are also performed. Continual review and reporting structures enhance the control environments.
GIA is of the opinion that the control environment of the Group is adequate and effective in meeting the risks to which the Group is exposed.
The committee is satisfied that in respect of the 2014 financial year it has performed all the functions required by law to be performed by the committee, including those requirements as set out in section 94(7) of the Companies Act and the JSE Listings Requirements. In this regard the committee has:
To ensure that all relevant matters are thoroughly and frankly canvassed, the committee meets independently with management, GIA and the external auditors. The committee satisfies itself of the cooperation between the internal and external auditors and serves as a link between the board of directors and the internal and external audit functions.
The committee did not receive any complaints relating to the accounting practices; internal audit; the content or auditing of the Group’s financial statements; the internal financial controls of the Group; or any related matters.
The committee has reviewed the Group’s combined assurance model, which provides an additional mechanism that assists the Group in understanding and demonstrating its combined lines of defence in mitigating against areas of risk. The combined assurance model, as depicted below, is structured around the top 20 key risks relevant to the Group. It has been robustly evaluated by management, the risk committee and the committee during the year, thereby providing the committee with the relevant assurance in this regard.
The committee fulfils an oversight role regarding the Group’s Integrated Annual Report and its reporting processes.
The committee has reviewed the findings of the external assurance provider, IRAS, emanating from the performance of an independent assurance exercise on the sustainability content of this Integrated Annual Report. IRAS undertakes its review in part by visiting the Group’s different properties and testing the reported information against the actual operations.
The committee is satisfied with the findings of the independent assurance exercise. In addition, it has reviewed the sustainability information set out in the Integrated Annual Report and is satisfied that the sustainability information is reliable and consistent with the information contained in the annual financial statements.
The committee having fulfilled the oversight responsibility regarding the reporting process and having regard to material factors that may impact on the integrity of the information, has recommended the Integrated Annual Report and the consolidated annual financial statements for approval by the board of directors.
Sun International Limited audit committee
16 October 2014