CYBG PLC BOARD AUDIT COMMITTEE CHARTER

Transcription

1 CYBG PLC BOARD AUDIT COMMITTEE CHARTER 1. PURPOSE OF THE CHARTER This Charter sets out the authority, role, responsibilities, composition and meeting procedures of the CYBG PLC (the Company) Board Audit Committee (the Committee). 2. APPOINTMENT 2.1 The Committee is appointed and authorised by the Board of Directors of the Company (the Board). 2.2 The authority of the Committee is sourced from: the Company s Articles of Association; this Charter; and separate Board delegations, resolutions and approvals granted to it from time to time. 3. COMPOSITION Committee Members 3.1 The Chairman of the Committee (the Committee Chairman) and Committee members are appointed by the Board on the recommendation of the Board Governance and Nomination Committee and, in relation to Committee members, in consultation with the Committee Chairman. 3.2 The Committee shall comprise at least three members (which shall include the Committee Chairman) all of whom are to be independent Non-Executive Directors of the Company. Independence for these purposes will be assessed by reference to provision B.1.1 of the UK Corporate Governance Code (the Code). 3.3 At least one member of Committee shall be a member of the Board Risk Committee (BRC) and at least one member of the Committee must have recent and relevant financial experience, holding a professional qualification from one of the professional accountancy bodies. All Committee members must be financially literate. Chairman 3.4 The Committee Chairman shall be an independent Non-Executive Director. 3.5 The Chairman of the Board (the Chairman) may not be a member of the Committee and the Chairman of the BRC may be a member of the Committee but not the Committee Chairman. 3.6 In the absence of the Committee Chairman at any meeting the remaining Committee members present shall elect one of their number to chair the meeting, unless the Committee Chairman has designated a member of the Committee to deputise for him in his absence v3.0 1

2 Fees 3.7 Committee members are entitled to receive remuneration as determined from time to time by the Board. Training 3.8 The Committee shall make available a suitable induction process to new members and ongoing training to its existing members. Appointment 3.9 The appointments of the Committee Chairman and Committee members shall be for a period of up to three years or shorter if circumstances dictate, which may be extended for up to two further three year periods provided the Committee member still meets the criteria for membership of the Committee. Attendees 3.10 No-one other than the Committee Chairman and Committee members is entitled to be present at a meeting of the Committee but others may attend at the invitation of the Committee Chairman with the support of the Committee. Standing Attendees 3.11 The Committee Chairman, with the support of the Committee will determine which other Directors of the Company and members of the management team are to be standing attendees of the Committee. The Secretary shall maintain a register of standing attendees appointed pursuant to this clause. Other Attendees 3.12 It would be expected that senior representatives of the Company s External Auditor and the Chief Financial Officer (CFO) would attend Committee meetings (or parts thereof) on a regular basis. In addition to these attendees, the following would be expected to attend meetings (or parts thereof) as and when required: Chief Executive Officer Chief Risk Officer (CRO) Director Internal Audit External independent advisers as appointed by the Committee Secretary 3.13 The Company Secretary or delegate shall act as Secretary of the Committee. 4. MEETINGS 4.1 Unless otherwise provided for in this Charter, meetings and proceedings of the Committee shall be governed by the provisions of the Articles of Association of the Company as to the meetings and proceedings of the Directors, insofar as they are applicable. 4.2 To the extent practicable, all reasonable action will be taken to provide all members of the Committee with adequate advance notice of meetings, even those called at short v3.0 2

3 notice but a meeting of the Committee shall not be invalid as a result of any failure to give notice to all members. 4.3 So far as practicable, papers and supporting documents will be circulated to the Committee members 5 working days prior to the relevant meeting, to enable adequate time for the Committee members to consider their content. Quorum 4.4 The quorum necessary for the transaction of business of the Committee shall be two members. 4.5 The Committee Chairman shall not have a casting vote. Frequency of Meetings 4.6 The Committee should meet often enough to effectively discharge its role and responsibilities, but not less than four times per annum, at appropriate intervals in the financial reporting and audit cycle. 4.7 In addition, the Committee Chairman may call a meeting at any time and will call a meeting of the Committee if so requested by any member of the Committee, the External Auditor, Director Internal Audit or by the Chairman of the Board. 4.8 In addition, the Committee will hold a joint meeting, at least once per annum, with the BRC. Minutes and Committee Records 4.9 Minutes are to be kept of all Committee meetings and circulated to the Committee and to the Board of the Company The Secretary shall maintain copies of all Committee agendas, meeting papers and minutes. Annual General Meeting 4.11 The Committee Chairman shall attend the Annual General Meeting (AGM) to answer any shareholder questions on the Committee s activities. 5. ROLE OF THE COMMITTEE The role of the Committee is to oversee: 5.1 the integrity of the accounting, financial statements and financial reporting processes of the Company and its subsidiaries (the Group); 5.2 the effectiveness of the Group s internal control and risk management systems; 5.3 the effectiveness of the Group s External Audit and, where applicable, Internal Audit processes; 5.4 the effectiveness of the Group s whistleblowing, fraud and anti-money laundering procedures; and v3.0 3

4 5.5 the application of Group policies and procedures adopted in accordance with this Charter throughout the Group. 6. COMMITTEE RESPONSIBILITIES Primary Responsibilities In performing the role outlined at clause 5, the Committee shall attend to the following: Financial Reporting 6.1 (i) Review and monitor the integrity of the financial statements of the Company including its annual and half-yearly reports, Preliminary results announcements, quarterly management statements, and any other public or formal announcements relating to the financial performance of the Company, reviewing significant financial reporting issues and judgements which they contain, having regard to matters communicated to it by the External Auditor. In particular the Committee shall review, report to the Board on, and challenge where necessary: (a) significant accounting and financial reporting issues and judgements raised by Internal Audit and External Audit; (b) the consistency and application of, as well as any changes to policies, both on a year on year basis and across the Group; (c) the methods used to account for significant or unusual transactions where different approaches are possible; and (d) significant accounting policies and any changes to them, and any significant estimates and judgements and whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the External Auditor. (iii) the clarity, appropriateness and completeness of disclosure in the financial reports and the context in which statements are made, including: (a) (b) (c) (d) the going concern statement made by the Board and whether there are any material uncertainties to the Company's ability to continue to give that statement over a period of at least twelve months from the date of the approval of the financial statements; the Strategic Report and the Corporate Governance Statement; significant financial returns to regulators; and any financial information contained in certain other documents, such as announcements of price sensitive information as well as any other related information. (iv) (v) (vi) comment letters received from the Financial Reporting Review Panel or other relevant regulatory authorities. Where the Committee, following the review, is not satisfied with any aspect of the proposed financial reporting by the Company it shall report its views to the Board. Review the financial statements of the Group's pension funds where not reviewed by the Board as a whole v3.0 4

5 Narrative Reporting 6.2 (i) The Committee will review the content of the Annual Report and Accounts and advise the Board on whether, taken as a whole, they are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company s performance, business model and strategy. Regulatory Reporting 6.3 (i) Ensure that, where applicable, the Group complies with all necessary regulatory reporting including, but not limited to reviewing arrangements established by management for compliance with regulatory financial reporting and best practice requirements, such as the requirements and recommendations of the relevant regulatory bodies (including the Prudential Regulation Authority and the Financial Conduct Authority). Internal Controls and Risk Management Systems 6.4 (i) Keep under review the adequacy and effectiveness of the Company s internal controls and risk management systems, covering all material controls such as financial, operational and compliance controls, by: (a) (b) (c) reviewing management s reports on the effectiveness of systems for internal control and risk management, and management s responsiveness to addressing control weaknesses and non-compliance and any other weaknesses identified by Internal Audit and/or External Audit; reviewing Internal Audit s reports on effectiveness of systems for internal control; and reviewing the Company s procedures for detecting financial reporting fraud. (iii) (iv) Consider and report to the Board and/or the BRC on the major findings of any relevant internal investigations into control weaknesses, fraud or misconduct and management s response. Review and approve the statement on internal controls and risk management to be included in the Company s Annual Report and Accounts. Provide advice on how, taking into account the Company's position and principal risks, the Company s prospects have been assessed, over what period and why the period is regarded as appropriate. The Committee shall also advise on whether there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the said period, drawing attention to any qualifications or assumptions as necessary. Whistleblowing 6.5 (i) Review the adequacy and security of the Group s whistleblowing arrangements for its employees and contractors to raise concerns, in confidence, about possible wrong doing in financial reporting and other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action v3.0 5

6 Internal Audit Changes 6.6 (i) Consider and approve the appointment, performance and if relevant, dismissal of the Director Internal Audit. The Committee will make recommendations on the remuneration, set the objectives of the Director Internal Audit and thereafter monitor his/her performance. Evaluate and approve any major proposed outsourcing of the Internal Audit function. Relationship, Adequacy and Independence 6.7 (i) Review and approve the charter of the Internal Audit function, as well as their responsibilities, budget, resources and access to information to enable it to perform its function effectively and in accordance with appropriate professional standards. (iii) (iv) (v) (vi) (vii) (viii) (ix) Meet privately with the Director Internal Audit and the CRO, on an annual basis, without the presence of management. Ensure the Director Internal Audit has direct access to the Chairman of the Board and the Committee Chairman and the Chairman of the BRC and is accountable to the Committee. Review, approve and monitor the Internal Audit process with particular attention to auditing compliance with the Group s internal policies and procedures as well as with regulatory requirements and the validation of selfassessment of business risk by management. Review, assess and approve the scope of and any material changes to the annual Internal Audit Plan, with Internal Audit, management and the External Auditor so that relevant material risks and financial reporting requirements are covered. Monitor and review the effectiveness of the Company s Internal Audit function, in the context of the Group s overall risk management system. Review the results of internal quality assurance reviews of the Internal Audit function at least annually. Where the External Auditor is being considered to undertake aspects of the Internal Audit function, consider the effect this may have on the effectiveness of the Group's overall arrangements for internal control and investor perceptions. Review the adequacy and independence of the Internal Audit function and assess whether there is the appropriate level of access to management and rights to seek information. Obtain an independent external assessment of the Internal Audit function at appropriate intervals and, at least once every five years. The Committee Chairman will oversee and approve the appointment of the external assessor and the results of the external assessment will be considered by the Committee v3.0 6

7 Findings 6.8 (i) Review Internal Audit findings and recommendations, including management s responsiveness to these, to ensure that issues are being managed and addressed in an appropriate and timely manner. Receive and review Internal Audit reports on the results of their work including the effectiveness of the risk management and internal control environment. External Audit Changes 6.9 (i) Consider and make recommendations to the Board in relation to the appointment, re-appointment and removal of the Company s External Auditor (to be put to shareholders for approval at the AGM). (iii) Ensure that at least once every ten years the audit services contract is put out to tender, to enable the Committee to compare the quality and effectiveness of the services provided by the incumbent External Auditor with those of other audit firms; and in respect of the tendering firms have such access as is necessary to information and individuals during the duration of the tender process. If an auditor resigns, investigate the issues leading to this and decide whether any further action or investigation is required. Relationship, Adequacy and Independence 6.10 Oversee the relationship with the External Auditor including, but not limited to: (i) (iii) (iv) (v) maintaining regular, timely, open and honest communication with the External Auditor (including the lead partner of the External Auditor), ensuring the External Auditor reports to the Committee on all relevant matters to enable it to carry out its oversight responsibilities; approving of the terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit, and making recommendations to the Board on their remuneration, including fees for audit and non-audit services, and that the level of fees are appropriate to enable an effective and high quality audit to be conducted; reviewing and approving the annual audit plan (including planned levels of materiality) and ensuring that it is consistent with the scope of the audit engagement, having regard to the seniority, expertise and experience of the audit team; keeping under review the scope and results of the audit, the audit fee and its cost effectiveness, taking into consideration relevant professional and regulatory requirements; reviewing on an annual basis, the independence and objectivity of the External Auditor, taking into account relevant UK professional and regulatory requirements and the relationship with the External Auditor as a whole, including the provision of non-audit services and reporting to the Board on the same; v3.0 7

8 (vi) reviewing and monitoring the objectivity and effectiveness of the audit process; (vii) developing and implementing a policy on the supply of non-audit services by the External Auditor (specifying the types of non-audit services if any, and specifically which non-audit services cannot be undertaken by the External Auditor) to avoid any threat to or impairment of auditor objectivity and independence taking into account any relevant ethical guidance on the matter; (viii) satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the External Auditor and the Company as well as the Group (other than in the ordinary course of business), which could adversely affect the External Auditor s independence and objectivity; (ix) (x) (xi) agreeing with the Board a policy on the employment of former employees of the Company s External Auditor and monitoring the implementation of this policy; monitoring the External Auditor s compliance with relevant ethical and professional guidance on the rotation of audit partner, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements; assessing on an annual basis, the qualifications, expertise and resources of the External Auditor and the effectiveness of the audit process, which shall include a report from the External Auditor on their own internal quality procedures and reporting to the Board on the same; (xii) seeking to ensure coordination with the activities of Internal Audit and evaluating the risks to the quality and effectiveness of the financial reporting process and consideration of the need to include the risk of the withdrawal of the External Auditor from the market in that evaluation; (xiii) meeting regularly with the External Auditor (including once at the planning stage before the audit and once after the audit at the reporting stage) and at least once a year, without management being present, to discuss the External Auditor s remit and any issues arising from the audit; and (xiv) seeking to resolve any disagreements between management and the External Auditor regarding financial reporting. Findings 6.11 (i) Review the findings of the audit with the External Auditor including, but not limited to: (a) (b) (c) (d) a discussion of any major issues which arose during the audit; key accounting and audit judgements; level of errors identified during audit; and the effectiveness of the audit process. Review any representation letter requested by the External Auditor before it is signed by management. (iii) Review the management letter and management s response to the External Auditor s findings and recommendations v3.0 8

9 Other Responsibilities 6.12 (i) The other responsibilities of the Committee are to: (a) (b) (c) (d) (e) be responsible for the co-ordination between the activities of the External Auditor and Internal Audit; maintain close lines of communication with the BRC and refer to any matters that have come to the attention of the Committee that are relevant for the BRC; outside of the formal meeting programme, the Committee Chairman will maintain a dialogue with key individuals involved in the Company's governance, including the Chairman of the Board, the CFO, the Chief Executive Officer, the External Auditor lead partner and the Director Internal Audit; work and liaise with all other Board Committees; and consider other matters relating to the purpose of the Committee as are referred to it by the Board. In discharging their duties, each Committee member shall have due regard to the legislative and regulatory rules applicable to them as Directors, the provisions of sections of the Companies Act 2006, the UKLA Listing Rules, Disclosure and Transparency Rules, the rules of the Australian Securities Exchange, best practice, principals of the Code and other regulatory requirements. 7. AUTHORITY 7.1 The Committee will operate under delegated authority from the Board and has full power to make decisions concerning matters referred to in this Charter, whilst decisions relating to items included in the Matters Reserved for the Board (as defined in the Board Charter), must be referred to the Board. 7.2 The Committee shall have adequate access to information on the Company s financial reporting and audit processes and shall determine the nature, the amount, the format and the frequency of the information which it is to receive. 7.3 The Committee shall have access to sufficient resources and the authority to seek any information it requires from employees of the Company, including the Company Secretary, or otherwise in order to fulfil its role and responsibilities. 7.4 The Committee may obtain, at the Company s expense, any appropriate independent external expert advice on any matter it considers necessary to fulfil its role and responsibilities. 7.5 The Committee may from time to time establish sub-committees as it considers necessary or appropriate to assist in carrying out its responsibilities. Any such subcommittee must be comprised of one or more members of the Committee and shall adopt a Charter, to be approved by the Committee, setting out matters relevant to the authority, role, responsibilities, composition and operation of that committee. 7.6 The Committee will liaise regularly with the BRC and where there is perceived overlap of responsibilities between the Committee and BRC, the respective committee Chairmen shall have discretion to agree the most appropriate committee to fulfil any obligation. An obligation under the Charter of the Committee or BRC will be deemed to have been fulfilled providing it is dealt with by either the Committee or BRC v3.0 9

10 8. REPORTING 8.1 The Committee, through its Chairman or his nominee, will report to the Board, at the earliest possible meeting after each Committee meeting by means of a formal report, which shall include: the significant issues it considered in relation to the financial statements and how these were addressed; its assessment of the External Audit process and its recommendations on the appointment or re-appointment of the External Auditor; its assessment of the Internal Audit function and its recommendations on the appointment or dismissal of the Director Internal Audit; and any other issues on which the Board has requested the Committee s opinion or the Committee believe should be brought to the attention of the Board, including any recommendations requiring approval or action. 8.2 The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit, in particular acceptance of interim and annual reports and financial statements. 8.3 The Committee shall compile a report on its activities to be included in the Company s annual report. The report should include: an explanation of how the Committee has addressed the effectiveness of the External Audit process; whether the Committee is satisfied that Internal Audit have the appropriate resources and the effectiveness of the Internal Audit function; and the significant issues that the Committee considered in relation to the financial statements and how the issues were addressed, having regard to matters communicated by the auditor; and all other information requirements set out in the Code. 8.4 The Committee shall receive reports from the Clydesdale Bank PLC Board Audit Committee after each meeting of that Committee and have regular contact with the Chairman of the Clydesdale Bank PLC Board Audit Committee. 8.5 The Committee shall make its Charter available to shareholders via the Company s website. 9. DIRECT ACCESS 9.1 The Committee members shall have direct access to the Company Secretary. 9.2 Executive management, Internal Audit and the External Auditor will be able to report directly to the Committee and will have direct access to the Committee where necessary. Additionally the Committee will have unfettered access to Internal Audit, Finance and Risk Executives and to the External Auditor. The Chairman of the Committee will normally keep the Director Internal Audit, CFO and CRO fully informed of any such dialogue. 9.3 In addition to executive management, Internal Audit and the External Auditor, direct access to the Committee shall be provided via the Secretary or Committee Chairman v3.0 10

11 10. LIMITATION 10.1 The Committee does not have a duty to: plan or conduct audits (which is the responsibility of the Internal Audit function and the External Auditor); or determine that the Group s financial statements and disclosures are complete and accurate (the External Auditor s responsibility is to audit the financial statements and to be satisfied they give a true and fair view). 11. ANNUAL REVIEW 11.1 The performance of the Committee, the Committee Chairman and of each Committee member shall be reviewed annually as part of the annual Board s Performance Evaluation process which is overseen by the Board Governance and Nomination Committee This Charter will be reviewed by the Committee at least annually and any amendments will subsequently be approved by the Board This Charter was adopted by the Board on 11 November 2015 to be effective from the date upon which CYBG PLC is admitted to trading on the Main Market of the London Stock Exchange plc (Effective Date) v3.0 11

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