Virgin Australia Holdings Ltd Audit and Risk Management Committee Charter 1. Introduction This Charter sets out the purpose, membership, responsibilities, authority and operation of the Audit and Risk Management Committee (Committee). 2. Purpose The Committee has been established by the Board of Directors (the Board) to assist the Board to discharge its oversight responsibilities relating to: (i) (j) the preparation and integrity of the Virgin Australia Group financial statements; reporting financial information to users; the application of accounting policies; internal controls, policies and procedures that the Virgin Australia Group uses to identify and manage business risks; qualifications, independence, engagement, fees and performance of the External Auditor; the External Auditor s annual audit of the financial statements; the resources, performance and scope of work of the Internal Audit function; the risk policy and risk profile; the effectiveness of the internal control systems; and compliance with legal and regulatory requirements and policies. The Committee has no responsibility for airline safety issues, which remains the responsibility of the Board. 3. Authority The Committee has authority to: exercise the power and authority delegated to it by the Board; make recommendations to the Board; resolve any disagreement between management and the External Auditor, with areas of significant disagreement being advised to the Board; conduct or direct any investigation required to fulfil its responsibilities; obtain all information necessary for the performance of its duties; obtain (at the Company s expense) legal, accounting, financial, corporate governance or other advice to perform its duties; 11 July 2012 Page 1
(i) (j) require the attendance of members of management at Committee meetings; have direct access to any employee or contractor of the Virgin Australia Group and seek any information it requires from any employee in order to perform its duties; form and delegate full power and authority to sub-committees comprised of one or more Committee members; and meet with the External Auditors. 4. Responsibilities 4.1 Internal Audit The Committee s responsibilities with respect to Internal Audit include: approval of the appointment and dismissal of the General Manager, Internal Audit; periodic assessment of the performance of the Internal Audit function; ensuring the Internal Auditor has a reporting line and direct access to the Committee; review and approval of the Internal Audit Charter, scope, plans and budgets; monitoring Internal Audit s progress with regard to the approved internal audit work plan; monitoring the implementation of Internal Audit recommendations by management; considering significant findings reported by the Internal Audit function and review of management action plans to address those findings; and assessing the independence of the Internal Audit function. 4.2 Risk Management The Committee s responsibilities with respect to Risk Management include: The Committee will receive and review the risk management policies and programmes and submit a report of its review to the Board. When reviewing the system of risk management the Committee will consider: material business risks identified by management; whether risk management policies reflect the Virgin Australia Group risk profile/appetite: the elements of the risk management and internal control systems in place to address material business risks; strategies, policies, frameworks, models and procedures in place to govern the identification, management and mitigation of material business risks; the processes in place to ensure that current and emerging risks are identified and managed effectively; and oversee the structure and adequacy of insurances. 11 July 2012 Page 2
The Committee has no responsibility for airline safety issues, which remains the responsibility of the Board. 4.3 Compliance The Committee will assist the Board to fulfil its obligations in respect to compliance by: obtaining an assurance from management at least annually that policies and controls to maintain compliance with laws and regulatory obligations are in place and are adequate for the needs of the Virgin Australia Group; reviewing the compliance framework to consider whether compliance reporting structures and systems are in place and effective; monitoring and considering compliance breaches or incidents reported to the Committee and considering changes to be implemented to reduce the potential for future breaches; and reviewing financial information required by regulators including ASIC. 4.4 External Audit The Committee s responsibilities with respect to External Audit include: recommending to the Board the appointment, evaluation and removal of the External Auditors, including ensuring that the signing partner or lead audit partner is changed at least every 5 years; reviewing the External Auditor s proposed audit plan and audit approach, including materiality levels; reviewing and agreeing the terms of the engagement and the audit fees for the External Auditors prior to the commencement of each audit; evaluate the effectiveness and quality of, and level of co-ordination between, Internal and External Audit; satisfy itself that management has not placed inappropriate restrictions on External Audit; resolve any disagreements between the External Auditor and management in relation to financial reporting; when considered appropriate, meet with the External Auditor without management present; and review reports prepared by the External Auditor detailing the results and significant findings from the audit and management s responses. The Committee s responsibilities with respect to External Audit independence include: review, at least bi-annually, the External Auditor s independence declaration as required by the Corporations Act; and 11 July 2012 Page 3
approval of any proposal to engage the External Auditors for non-audit services where the fees exceed $20,000. 4.5 Financial Statements The Committee s responsibilities with respect to the assessment of financial information include: review the published half yearly and annual financial statements and any information which accompany published financial statements including any narrative reporting to be released to the market, in order to recommend approval by the Board; review with management the adequacy of accounting policies and any significant accounting and financial reporting issues raised by Internal and/or External Audit; review any regulatory, accounting and/or financial reporting issues of significance and advise the Board of any significant new policies or significant changes in policy that should be adopted by the Board; review significant judgements or estimates made by management in preparing the financial statements; satisfy itself that management jointly with the External Auditor and if necessary, General Counsel, have adequately reviewed any litigation, claim or other contingency, write-offs, asset impairments, provisions and changes in accounting policy and methodology which could have a material impact on Virgin Australia s financial statements; review and approve management s assertions with regard to going concern; and review at least annually, the written attestations provided by the Chief Executive Officer and Chief Financial Officer for financial reporting purposes that: (i) (ii) (iii) (iv) the financial records have been properly maintained; the financial statements and notes present a true and fair view, in all material respects, of the company s financial condition, and are in accordance with all relevant accounting standards; the financial statements are founded on a sound system of risk management and internal compliance and control, and that the system is operating effectively in all material respects in relation to financial reporting risk; and the risk management, internal control and compliance systems are operating effectively and efficiently in respect to its material business risks. 5. Committee Membership 5.1 Structure The Committee shall comprise at least three members, each of whom shall be appointed by the Board. 11 July 2012 Page 4
A majority of the members of the Committee shall be Independent Directors (as determined by the Board from time to time). All members of the Committee shall be non-executive directors. The Board shall appoint the Chairman of the Committee. The Chairman of the Committee shall be an Independent Director, who is not Chairman of the Board. The Chairman will be ratified on an annual basis. 5.2 Expertise Each member will be financially literate (that is, able to read and understand financial statements), have familiarity with financial management and an understanding of the industry in which the Virgin Australia Group operates. At least one member will have relevant qualifications and experience (that is, a qualified accountant or other finance professional with experience of financial and accounting matters). If a member ceases to be a Director of the Board, that member ceases to be a member of the Committee. 5.3 Term With the exception of the Chairman, Committee Members will be appointed for an initial term of up to two years with the appointment being subject to review annually, or earlier, if circumstances dictate. 5.4 Fees Committee members are entitled to receive remuneration as determined from time to time by the Board. 6. Secretary The Company Secretary shall act as the Secretary of the Committee, unless otherwise determined by the Committee. 7. Meetings The Committee will meet at least four times per annum. Additional Committee meetings may be convened as the Chairman of the Committee considers necessary, taking into account requests from any Committee Member, the Chief Executive Officer, the Chief Financial Officer, the General Manager, Internal Audit or the External Auditor. A quorum of the Committee will comprise any two members. If the Chairman of the Committee is unable to attend a Committee meeting, the Chairman, or the Committee Members present, will appoint another member who is an Independent Director to act as Chairman at that meeting. All members are expected to participate in all Committee meetings. Committee meetings may be held or participated in by conference call or similar means, and decisions may be made by 11 July 2012 Page 5
circular or written resolution. A circular or written resolution signed by a majority of members will be effective as a resolution duly passed at a Committee meeting and may consist of several documents in like form, each signed by one or more Committee Members. The expression written includes fax or other electronic means. The Chairman of the Committee will report to the next Board meeting on the proceedings of the Committee meeting, bringing forward all Committee recommendations requiring Board approval. The Committee Chairman may invite any person or persons (other than duly appointed members) to attend meetings of the Committee, but not necessarily for the full duration of the meeting. A standing invitation may be issued to: other Directors; Chief Executive Officer; Chief Financial Officer; Company Secretary; External Auditor; and Internal Audit. Non-Committee attendees do not have the right to vote and may be asked to withdraw for all or part of any meeting. 8. Minutes The Committee Secretary or delegate will prepare minutes of the Committee meeting within seven (7) working days. After the Chairman has given preliminary approval, the draft minutes are to be circulated to all Committee Members. The minutes of meetings must be confirmed and signed at the next Committee meeting. 9. Meeting timetable The Company Secretary is to distribute a meeting timetable for each forthcoming calendar year. 10. Review The Committee will, at least once each year, undertake an evaluation of its performance and effectiveness, and review its membership and this Charter to determine its adequacy for current circumstances, and make recommendations to the Board. The Committee will consider and review the report of the Committee s membership, authority responsibilities and discharge of those responsibilities for inclusion in the annual report and oversee the preparation of any report or other disclosures to be included in the annual report or other communications to security holders relating to the External Auditor and to risk management. 11 July 2012 Page 6
The Chairman will perform an annual assessment of each Committee member s performance (the Committee Chairman should provide a report of the assessment to the Board Chairman). This Charter was approved by the Board on 11 July 2012. 11 July 2012 Page 7