Johnston Press plc
Terms of Reference
1. The Board of Directors (the Board) have resolved to establish a Committee of the Board to be known as the Audit Committee (the Committee).
2. The Committee shall be appointed by the Board from amongst the independent non‑executive directors of the Company and shall consist of not less than three members. A quorum shall be two members. At least one member of the Committee should have recent and relevant financial experience.
3. The Chairman of the Committee (the Chairman) shall be appointed by the Board. In the absence of the Chairman and/or any appointed deputy, the remaining members of the Committee shall elect one of their number to chair any meeting of the Committee.
4. Appointments to the Committee shall be for a period of up to three years, which may be extended for further periods of up to three years, provided the director still meets the criteria for membership of the Committee.
Attendance at Meetings
5. Only the members of the Committee have the right to attend Committee meetings. However, others including the chairman of the Board, other non-executive directors, the Chief Executive Officer, the Chief Financial Officer, the Group Head of Finance, representatives from the Company’s finance department and representatives of the external auditors (the “Auditors”) may be invited to attend all or part of Committee meetings when appropriate.
6. Conduct of Meetings
6.1 The Company Secretary (or, in his absence, his nominee) shall be the Secretary of the Committee.
6.2 Meetings of the Committee shall be called by the Secretary of the Committee at the request of any of its members, or at the request of the external auditor if they consider it necessary.
6.3 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee and to any other person required to attend no later than five working days before the date of the meeting. Supporting papers shall be sent to committee members and to other attendees as appropriate at the same time.
6.4 A Committee member may participate in a meeting of the Committee via conference telephone, teleconference, videoconference or similar form of communication equipment if all persons participating in the meeting are able to hear and speak to each other throughout the meeting. A member participating in this way is deemed to be present in person at the meeting and is counted in a quorum and is entitled to vote.
Minutes of Meetings
7. The Secretary shall:
(i) minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance;
(ii) circulate the minutes of meetings promptly to the Chairman and thereafter to all members of the Committee and, once agreed, to all members of the Board unless a conflict of interest exists.
Frequency of Meetings
8. The Committee shall meet at least three times a year. The Auditors or the Chief Financial Officer may request a meeting if they consider that one is necessary. At least once a year the Committee shall meet the Auditors without any executives being present.
Powers of Investigation
9. 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 of the Company or any of its subsidiaries and to call any employee to be questioned at a meeting of the Committee when required. All employees are required to cooperate with any request made by the Committee.
10. The Committee is authorised by the Board to obtain, at the cost of the Company, outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.
11. The Committee shall carry out the following duties, as appropriate, for the Company, its major subsidiaries and the Group as a whole:
I. Financial Reporting
A. The Committee shall review the half-year and annual financial statements before submission to the Board, focusing particularly on:
i. the consistency of, and any changes to, accounting policies and practices both on a year on year basis and across the Company/Group;
ii. major judgemental areas;
iii. significant adjustments resulting from the audit;
iv. review of one-off major exceptional items;
v. the going concern assumption;
vi. compliance with appropriate accounting standards and whether the Company has made appropriate estimates and judgements, taking into account the views of the Auditor;
vii. compliance with stock exchange and legal requirements;
viii. valuation of intangible assets;
ix. the method used to account for significant or unusual transactions where different approaches are possible;
x. the clarity of disclosure in the Company’s financial reports and the context in which statements are made; and
xi. all material information presented with the financial statements, such as the operating and financial review and the corporate governance statement (insofar as it relates to the audit and risk management)
II. External Audit
The Committee shall:
i. consider and make recommendations to the Board, to be put to shareholders for approval at the Annual General Meeting, in relation to the appointment, re-appointment and removal of the Group’s Auditor. The Committee shall oversee the selection process for new auditors and if an auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required.
ii. approve the terms of engagement of the Auditors, including any engagement letter issued at the start of each audit and the scope of the audit;
iii. oversee the relationship with the Auditor including (but not limited to) the level and adequacy of audit and non-audit fees, and any questions of resignation or dismissal of the Auditors;
iv. review the Auditor’s management letter and management’s response to the Auditor’s findings and recommendations;
v. review any representation letter(s) requested by the Auditor before they are signed by management;
vi. keep under review the nature and extent of non-audit services supplied by the Auditors, so as to ensure that value for money is obtained without compromise to the Auditors’ independence and objectivity. The Committee shall annually assess the Auditors’:
(a) independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the Auditor as a whole, including the provision of any non-audit services; and
(b) their qualification, expertise, and resources and the effectiveness of the audit process which shall include a report from the Auditor on their own internal quality procedures
vii. discuss problems and reservations raised by the Auditor arising from the interim review and final audit, and any matters the auditor may wish to discuss, and the Committee and/or members shall meet with the Auditors when necessary and in the absence of management at least annually. The review of the audit shall include but not be limited to:
(a) a discussion of any major issues which arose during the audit
(b) any accounting and audit judgements
(c) levels of errors identified during the audit
(d) the effectiveness of the audit
viii. satisfy itself that there are no relationships (such as family, employment, investment, financial or business) between the Auditor and the Company (other than in the ordinary course of business);
ix. agree with the Board a policy on the employment of former employees of the Company’s Auditor, then monitor implementation of this policy;
x. monitor the Auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company compared with the overall fee income of the firm, office and partner and other related requirements;
xi. seek to ensure co-ordination with the activities of the internal audit function;
xii. consider the risk of the withdrawal of the Company’s present Auditor from the market;
xiii. review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement;
xiv. develop and implement a policy on the supply of non-audit services by the Auditor, taking into account any relevant ethical guidance on the matter.
III. Review of Internal Controls and Risk Management Systems and Treasury Policies
The Committee shall:
i. review the effectiveness of the Company’s internal control and riskmanagement systems prior to endorsement by the Board;
ii. review the effectiveness of the Company’s treasury management policies;and
iii. review and approve the statements to be included in the Annual Reportconcerning internal controls and risk management.
IV. Internal Audit
The Committee shall:
i. consider and approve the remit of the internal audit function as performed by the Internal Financial Control Committee (“IFCC”) and ensure it has adequate resources and appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards. The Committee shall also ensure the function has adequate standing and is free from management or other restrictions;
ii. review the IFCC’s internal audit programme, ensure co-ordination between the IFCC and the Auditors and promptly review all reports on the Company from the IFCC;
iii. monitor and review the effectiveness of the Company’s internal audit function including management’s responsiveness to the findings and recommendations of the IFCC in the context of the Company’s overall risk management system;
iv. meet the Group Head of Finance at least once a year, without other management being present, to discuss their remit and any issues arising from the internal audits carried out. In addition, the Group Head of Finance shall have the right of direct access to the chairman of the Board and to the Committee;
v. consider the major findings of other internal investigations and management’s response.
V. Whistleblowing, Fraud and Bribery and Corruption
The Committee shall review the Company’s:
i. arrangements by which employees may, in confidence, raise concerns about possible improprieties in matters of formal reporting or other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action;
ii. procedures for detecting fraud; and
iii. systems and controls for the prevention of bribery and receive reports on non-compliance.
VI. Other Matters
The Committee shall:
i. consider other topics, as defined by the Board;
ii. have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
iii. be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;
iv. give due consideration to laws and regulations, the provisions of the UK Corporate Governance Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules as appropriate;
v. be responsible for co-ordination of the IFCC and Auditors;
vi. oversee any investigation of activities which are within its terms of reference and act for internal purposes as a court of the last resort;
vii. at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
12. The Chairman shall:
i. report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities;
ii. attend the Company’s Annual General meeting to answer shareholders’ questions on the Committee’s activities.
13. The Committee shall:
i. report to the Board and make recommendations as appropriate in respect of all the items detailed in paragraph 11 where action or improvement is needed;
ii. compile a report to shareholders on its activities to be included in the Company’s Annual Report;
iii. have the right to publish in the Company’s Annual Report details of any issues that cannot be resolved between the Committee and the Board.
Approved by the Board
19 August 2011