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Audit Committee TOR Bd App 26 Jan 06

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7 pages
Prudential plc Group Audit Committee – Terms of Reference The Group’s audit committee structure reflects and reinforces the delegation of authority from the Company to its operating units. The Group Audit Committee deals with Group level matters and oversight of the Group’s audit processes. Individual business unit audit committees monitor business unit processes and activities. The Group Chief Internal Auditor reviews the effectiveness of business unit audit committees and audit processes on behalf of the Group Audit Committee and ensures that material business unit audit issues are reported to it. 1. Constitution 1.1 The Board of Directors hereby resolves to establish a Committee of the Board to be known as the Audit Committee. 2. Membership 2.1 The Audit Committee shall be appointed by the Board of Directors. The membership shall be drawn from non-executive directors, each of whom shall in the judgement of the Board be independent (as such term is defined under applicable law/regulations). The Committee shall consist of not less than three members. 2.2 The Board shall appoint a Chairman of the Committee from amongst the membership of the Committee. 2.3 The Board may nominate one or more of the Committee’s members as a designated “audit committee financial expert.” 2.4 The quorum for a meeting of the Committee is two members. 3. Authority The Committee is authorised by the Board to: 3.1 establish an Auditor ...
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Prudential plc Group Audit Committee – Terms of Reference
The Group’s audit committee structure reflects and reinforces the delegation of authority from the Company
to its operating units.
The Group Audit Committee deals with Group level matters and oversight of the
Group’s audit processes.
Individual business unit audit committees monitor business unit processes and
activities.
The Group Chief Internal Auditor reviews the effectiveness of business unit audit committees and
audit processes on behalf of the Group Audit Committee and ensures that material business unit audit issues
are reported to it.
1. Constitution
1.1
The Board of Directors hereby resolves to establish a Committee of the Board to be
known as the
Audit Committee.
2. Membership
2.1 The Audit Committee shall be appointed by the Board of Directors. The membership shall be
drawn from non-executive directors, each of whom shall in the judgement of the Board be
independent (as such term is defined under applicable law/regulations). The Committee shall
consist of not less than three members.
2.2 The Board shall appoint a Chairman of the Committee from amongst the membership of the
Committee.
2.3 The Board may nominate one or more of the Committee’s members as a designated “audit
committee financial expert.”
2.4 The quorum for a meeting of the Committee is two members.
3. Authority
The Committee is authorised by the Board to:
3.1 establish an Auditor Independence Policy;
3.2 approve the external auditors’ fees and terms of engagement of the external auditors in respect of
statutory audit work, and to pre-approve any fees and authorisations with respect to permissible
non-audit services provided by the external auditors in compliance with the Auditor Independence
Policy, and to ensure that the provision of permissible non-audit services does not impair the
external auditors’ independence or objectivity;
3.3 ensure that the hire of personnel from the existing external auditors is in line with the Auditor
Independence Policy;
3.4 investigate any activity within its terms of reference
3.5 seek any information that it requires from any employee of the Group, board of a subsidiary
company or committee of the board of a subsidiary company and all employees are directed to co-
operate with any request made by the Committee; and
3.6 obtain at the Group’s expense appropriate external professional advice, through the Company
Secretary, and if necessary to invite external advisers with relevant experience to attend meetings
of the Committee.
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4.
Responsibilities
The responsibilities of the Committee shall be:
External Audit
4.1 at the beginning of each audit cycle, to ensure that appropriate plans are in place for the audit
and that the scope of the audit plans reflects the terms of the engagement letter.
Following the
audit, to discuss and review the findings of their work with the external auditors;
4.2 to recommend to the Board the appointment, re-appointment or removal of the external auditors;
4.3 to assess the performance and review and monitor the independence and objectivity of the
external auditors and the effectiveness of the audit process;
4.4 to review on an annual basis the qualification, expertise and resources and economic service of
the Group’s external auditors and the audit process;
4.5 to discuss with the external auditors, before the audit commences, the nature and scope of the
audit and to review the auditors’ quality control procedures and steps taken by the auditors to
respond to changes in regulatory and other requirements;
4.6 to review and agree the engagement letter issued by the external auditor’s at the start of each
audit; and
4.7 to consider management’s response to any major external recommendations.
Internal Audit
4.8
to review the effectiveness and economic service of the Group’s internal auditors;
4.9
to review the internal audit programme and ensure that the internal audit function is adequately
resourced and has appropriate standing within the Group, and where appropriate to request that
internal audit undertakes specific work;
4.10 to consider management’s response to any major internal audit recommendations; and
4.11 to approve the appointment or dismissal of the Group Chief Internal Auditor.
Compliance
4.12 to consider compliance and its controls and to review the Group’s policies for ensuring
compliance with relevant regulations, industry codes and legal requirements in each of the
markets where the Group is represented and the effectiveness of the policies and procedures;
and
4.13 to request that Group Compliance undertakes specific work where appropriate.
Confidential Reporting
4.14 to review the procedures operated by Group Security for handling allegations from whistleblowers
and, upon request, a log of all complaints within the ambit of applicable law requiring the
Committee to establish such procedures.
Internal Control
4.15
to review the framework and effectiveness of the Group’s systems of internal control.
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External financial reporting
4.16 to receive and review the following documents before their submission to the Board:
-
interim and year end financial statements, together with the related press releases
-
other financial statements and material financial information, such as that required for US
reporting or associated with a major corporate transaction, together with the related press
releases
-
statements on the directors’ review of the effectiveness of the Group’s system of internal
control and on corporate governance (for inclusion in the annual accounts).
4.17 to review the accounting and tax policies adopted, their appropriateness, their presentation and
the impact of any proposed changes;
4.18 to review the extent of compliance with appropriate legislation, with Accounting Standards and
other guidance and the reasons for any deviations therefrom;
4.19 to receive and review the following reports from the Disclosure Committee:
-
minutes of the meetings of the Disclosure Committee
-
confirmation before the publication of any financial statements that the Disclosure
Committee has completed its reviews of the financial statements and the related press
releases and that it recommends their submission to the Board.
4.20 to receive and review representations from the Group Chief Executive and Group Finance
Director before the publication of any financial statements to the effect that they have disclosed to
the Committee and to the external auditors:
-
all significant deficiencies and material weaknesses in internal controls over financial
reporting which could adversely affect the Company’s ability to record, process, summarise
and report financial information; and
-
any fraud (whether or not material) that involves management or other employees who have
a significant role in the Group’s internal controls over financial reporting.
4.21 to review management’s and the external and internal auditors’ reports on the effectiveness of
systems for internal control, financial reporting and risk management;
4.22 to review, and challenge where necessary, the actions and judgements of management, in
relation to the interim and annual financial statements before submission to the Board, paying
particular attention to:
-
critical accounting policies and practices, and any changes in them;
-
decisions requiring a major element of judgement;
-
the extent to which the financial statements are affected by any unusual transactions in the year
and how they are disclosed;
-
the clarity of disclosures;
-
significant adjustments resulting from the audit;
-
the going concern assumption;
-
compliance with accounting standards;
-
compliance with obligations under the Combined Code as contained within the UK listing
authority rules and obligations under other applicable laws and regulations;
-
reviewing the Group’s statement on internal control systems prior to endorsement by the Board
(the Board as a whole remains responsible for forming its view on the effectiveness of internal
controls); and
-
management’s and the external and internal auditors’ reports on the effectiveness of systems for
internal control, financial reporting and risk management.
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Group Risk Framework
4.23
to review the effectiveness of the Group Risk Framework, and any approvals for deviation(s)
from the Group-wide minimum requirements of the Group Risk Framework; and
4.24
to review the policies and process for identifying and assessing business risks and the
management of those risks by the Group.
Group Governance Framework
4.25
to review the effectiveness of the Group Governance Framework, and any approvals for
deviation(s) from Group policies as defined by the Group Governance Framework.
Other
4.26 to ensure that the Committee is provided with sufficient resources to undertake its duties and
that training is provided to members on appointment and on an on-going basis; and
4.27 to consider other topics, as defined by the Board
4.28 to establish procedures for the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing matters and for the
confidential, anonymous submission by employees of concerns regarding questionable
accounting matters.
5.
Frequency of meetings
5.1
Meetings shall normally be scheduled six times a year and shall be held not less than three
times a year, and where appropriate shall coincide with key dates in the Group’s financial
reporting cycle.
5.2
External auditors, internal auditors or any member of the Committee may request a meeting if
they consider that one is necessary.
5.3
The Chairman of the Committee may call additional meetings to examine and consider such
other matters related to its responsibilities as the Committee may consider desirable.
6.
Attendance at meetings
6.1
The Chairman of the Board, the Group Chief Executive and the Group Finance Director shall
attend meetings at the invitation of the Committee, except when the Committee wishes to meet
alone.
6.2
Other Board members are generally welcome to attend Committee meetings, except when the
Committee wishes to meet alone, and shall attend meetings if invited by the Committee.
6.3
The Group Legal Services Director, the Group Chief Risk Officer, the Group Chief Internal
Auditor and the external auditors shall attend meetings at the invitation of the Committee, except
when the Committee wishes to meet alone.
6.4
The Committee shall meet with the external auditors in private at least once a
year to ensure
that there are no unresolved issues of concern.
6.5
The Committee shall meet with the Group Chief Internal Auditor in private
at least once a year
to ensure that there are no unresolved issues of concern.
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7.
Agenda
7.1
The agenda for Committee meetings shall be determined by the Chairman of the Committee in
consultation with other members of the Committee as appropriate.
The agenda and papers for
the meeting shall
normally be circulated several days in advance to the persons attending the
meeting and copied to the Chairman of the Board and the Group Chief Executive.
7.2
The agenda shall be established to enable the Committee, in the course of a year’s meetings, to
discharge its responsibilities and to report all matters of significance to the Board.
8.
Reporting procedures
8.1
The minutes of meetings of the Committee shall be circulated to all members of the Board.
8.2
The Chairman of the Committee or, as a minimum, another member of the Committee shall
report to the Board as appropriate after each meeting, and shall attend the Board meeting at
which the accounts are approved.
8.3
The Committee members shall conduct an annual review of their performance and these terms
of reference and make recommendations to the Board.
8.4
The Committee’s duties and activities during the year shall be disclosed in the annual financial
statements.
This report will also explain to shareholders how, given that the external auditors
also provide non-audit services, auditor objectivity and independence is safeguarded.
8.5
The Chairman of the Committee shall attend the AGM and shall answer questions, through the
Chairman of the Board, on the Committee’s activities and their responsibilities.
Approved by the Board on 26 January 2006
Chairman: _________________________________
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Schedule 1
Reports received and reviewed by the Committee
The Committee shall make arrangements with management to ensure the reports set out below are
presented to its scheduled meetings for consideration:
External auditors
To receive and review the following reports from the external auditors:
annual scope of work (risk analysis and audit plan)
audit memoranda on the interim and year end audits
interim and year end internal control reports (findings and recommendations)
progress on implementation of recommendations.
To ensure that the external auditors include the following in their reports to the Committee:
all critical accounting policies and practices used by the Group;
all material alternative accounting treatments which have been discussed with management and the
resulting conclusion by the external auditors,
all material written communications between the external auditors and management,
any points of disagreement with management;
any restrictions on access to information; and
co-operation received.
Group Internal Audit
To receive and review the following reports from Group Internal Audit:
annual internal audit plan
annual internal audit report
quarterly internal audit progress reports (incorporating any significant issues which audit committees of
group subsidiaries wish to escalate to the Group Audit Committee)
reports on significant control issues (findings and recommendations)
progress on implementation of recommendations.
Group Compliance
To receive and review the following reports from Group Compliance:
annual plan
semi-annual performance report against the annual plan (including significant deviations to the annual
plan from new and significant regulatory developments).
Group Risk
To receive and review the following reports from the Group Risk function:
annual risk report
half-yearly key risk reports.
To receive and review the following reports from the Group Operational Risk Committee:
minutes of the meetings of the Group Operational Risk Committee
half-yearly confirmation that the Group Operational Risk Committee has completed its review of the
key risk reports.
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Group Security
To receive and review the following annual reports from Group Security:
business continuity status
fraud statement
anti bribery statement
anti-money laundering report
information risk report.
To receive and review at each meeting a report from Group Security on the number of calls to the
confidential reporting line received and investigated since the last meeting, and actions taken in response to
these calls.
To receive and review the following ad hoc reports from Group Security:
any major fraud
any major unbudgeted loss
the reasons for dismissal for specific cause of any direct report of any BU Chief Executive.
Corporate Communications
To receive and review the annual report from Corporate Communications:
political donations.
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