A5 KELDA HOLDINGS LTD AUDIT COMMITTEE TERMS OF REFERENCE DUTIES The duties of the Committee shall be to: Annual Report and Financial Statements - monitor the integrity of the financial statements of the Group and any formal announcements relating to the Group s financial performance, reviewing significant financial reporting judgements contained in them before submission to the Board, focusing particularly on reviewing and challenging; (i) the application of significant accounting policies and practice and any changes to them; (ii) major estimates and judgements, taking into account the external auditor s views on the financial statements; (iii) (iv) clarity and completeness of disclosures; the going concern assumption; (v) all information presented with the financial statements, including the Strategic Report and the Corporate Governance Statements relating to the audit of such statements and risk management; (iv) compliance with any other legal requirements; - discuss problems and reservations and any significant adjustments arising from external audits, and any matters the external auditor may wish to discuss (in the absence of management where necessary); Narrative Reporting
- The Committee should review the content of the annual report and financial statements and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company s performance, business model and strategy and whether it informs the Board s statement in the annual report on these matters. Internal Control and Risk Management review the Group s operating, financial and accounting policies and practices; review, on behalf of the Board, the Group s system of internal control (including financial, operational, compliance and risk management) and risk management systems and the effectiveness of the said systems and make recommendations to the Board; review arrangements by which employees of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters and for the proportionate and independent investigation of such matters and for appropriate follow-up action as detailed in the Group s Whistleblowing Policy including the reports of any such investigations; External Audit make recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor; discuss and agree with the external auditor before the audit commences the annual audit plan and the nature and scope of the audit;
review and monitor annually the external auditor s independence and objectivity and the effectiveness (including cost effectiveness) of the audit process, taking into consideration relevant UK professional and regulatory requirements and relevant ethical guidance (currently the FRC Ethical Standard 2016); develop and review annually the policy on the engagement of the external auditor to supply non-audit services and its implementation, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken; review the letter of representation to the external auditor, management letter and management s response; Internal Audit at least annually review the internal audit programme, monitor and review the co-ordination between the internal and external auditors, monitor and review the effectiveness of the internal audit function and its activities and ensure that it is adequately resourced and has appropriate standing within the Group. The Head of Risk and Audit shall have direct access to the Chair of the Committee and, where necessary, the Chair of the Board; consider the material findings of internal audit investigations and management s response; approve the appointment or removal of the Head of Risk and Audit; Regulatory submissions
Other To review and advise the Board on the integrity of the content of those regulatory submissions for which Board approval is required by Ofwat; consider other topics as defined by the Board; report to the Board on how it has discharged its responsibilities; have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required. AUTHORITY The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to cooperate with any request made by the Committee. The Committee is also authorised to obtain, at the Company s expense, independent legal, accounting or other professional advice on any matter it believes it necessary to do so. MEMBERSHIP The members of the Committee shall be appointed by the Board. The Committee as a whole shall have competence relevant to the sector in which the Company operates. At least one member of the Committee shall have recent and relevant financial experience with competence in accounting and/or auditing and other members shall have the requisite financial knowledge and experience to provide appropriate challenge. CHAIR ATTENDANCE The Chair of the Committee shall be a non-executive director appointed by the Board. In the absence of the Committee Chair at a Committee meeting, the remaining members shall elect one of themselves to chair the meeting. Only members of the Committee have the right to attend Committee meetings. The Group Director of Finance, Regulation and Markets
and the Head of Risk and Audit shall normally attend meetings by invitation. The Committee may also invite the Chairman of the Company, Chief Executive and any relevant employee to attend meetings as they consider appropriate. The external auditors shall be invited to attend meetings of the Committee on a regular basis. At least once a year the Committee shall meet with the external auditors and with the Head of Risk and Audit, without executive directors present. FREQUENCY OF MEETINGS ADVISERS SECRETARY QUORUM MINUTES REPORTING RESPONSIBILITIES Meetings shall be held not less than three times a year and at such other times as the Chair of the Committee shall require. The external auditors may request a meeting if they consider that one is necessary. The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of any person with relevant experience and expertise if it considers this necessary. The Group Company Secretary shall be the secretary of the Committee. The quorum necessary for the transaction of business shall be two members. The minutes of meetings of the Committee shall be circulated to all members of the Board and the board of Yorkshire Water Services Ltd where they relate to matters concerning that company. The Committee Chair shall report formally to the Board on its proceedings after each meeting on all matters within its duties. These terms of reference will be reviewed annually to ensure they are appropriate, relevant and support the work of the Committee and the Board.