Annual Report 2009
 
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Financials       
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Corporate governance    
 
 
     
 

REPORT OF THE AUDIT COMMITTEE TO THE MEMBERS OF THE MVELAPHANDA GROUP LIMITED

The audit committee assists the board in discharging its responsibilities with regard to safeguarding the Group’s assets and ensuring that proper accounting records are maintained.

The audit committee operates in accordance with a written charter authorised by the board, and provides assistance to the board with regard to:

  • all matters to be dealt with by the audit committee in terms of the South African Corporate Laws Amendment Act, 2006 (promulgated on 14 December 2007);
  • reviewing and recommending to the board for approval, the Group’s annual report, interim report and provisional report;
  • receiving the internal and external auditors’ report;
  • reviewing material litigation cases;
  • evaluating the effectiveness of the internal audit function and approving the internal audit plan;
  • reviewing alleged incidents reported through the whistle-blower facility;
  • ensuring that non-audit services are not performed by the external auditor where the provision of such services could be seen to impair the auditor’s independence; and
  • satisfying itself regarding the independence of the Group’s external auditors and the respective audit partners.

The committee reports its findings to the board at the next board meeting, which is always held within a week of the respective committee meeting. In addition, the committee chairman maintains regular contact with key executives to keep abreast of emerging issues.

In terms of the JSE Listings Requirements, the committee must satisfy itself, on an annual basis, of the appropriateness of the expertise and experience of the Chief Financial Officer (“CFO”) and the Company must confirm this by reporting to the shareholders in its annual report that the audit committee has fulfilled this responsibility.

In respect of the above, we believe that Ernst Röth, the CFO, possessed the appropriate expertise and experience to meet the responsibilities in that position.

 

Audit committee
1 September 2009

  

RISK MANAGEMENT AND INTERNAL CONTROL

Effective risk management is integral to the Group’s objective of consistently adding value to its businesses. The board of directors is ultimately responsible for the management of risk. The audit committee is responsible for overseeing the risk management procedures within the Group. The audit committee is continuously developing and enhancing its risk and control procedures to improve the mechanisms for identifying and monitoring risks and has established the minimum standards required of each business in identifying, analysing and monitoring the risks which each business faces. The results of these procedures are communicated to the audit committee regularly.

Operating risk is the potential for loss to occur through a breakdown in control information, business processes and compliance systems. Key policies and procedures are in place at each of the businesses to manage operating risk and include segregation of duties, transaction authorisation, supervision, monitoring, and financial and managerial reporting.

Financial risk management is disclosed here in the financial statements. The Group meets its responsibility of providing reliable financial information by maintaining, at each business level, financial and operational systems of internal control.

A business continuity plan exists at each of the operating businesses.

INTERNAL AUDIT

While management is responsible for the development, implementation and monitoring of effective control systems, internal audit assists management in fulfilling this commitment. This is done by evaluating the adequacy and effectiveness of controls to support management in pursuit of sustainable achievement of business objectives. Its scope includes the appraisal of performance measures, the reliability of management information, operational controls and safeguarding of assets.

The purpose, authority and responsibility of the internal audit function are formally defined in an internal audit charter, which has been approved by the audit committee. The charter conforms to the International Standards for the Professional Practice of Internal Auditing as defined by the Institute of Internal Auditors. The function is independent from all other organisational functions and reports directly to the audit committee and administratively to the Chief Executive Officer. Internal audit has easy and regular access to the Chief Executive Officer and the chairman of the audit committee, and free and unrestricted access to all areas within the Group.

A risk-based audit approach has been adopted and is continually being refined. Risk-focused audit plans are developed with input from the audit committee as well as management requests. Material significant control weaknesses and planned management remedial actions are reported to the audit committee and management. These issues are tracked to ensure that agreed remedial actions have been implemented.

There is communication between the internal audit function and the external auditors, who have full access to the results of the internal audit reports. Initiatives are being developed to increase the external auditor’s reliance on the work performed by internal audit. The internal audit processes for the year did not highlight any breakdowns in internal control that were known to have had a material impact on the reported financial information.

SUSTAINABILITY

The Group supports the concept of triple bottomline reporting as set out in King II. For more information of the Group’s social, transformation, environmental and ethical policies and procedures refer to the sustainable report here.

ACCOUNTING AND AUDITING

The board places strong emphasis on achieving the highest level of financial management, accounting and reporting to shareholders. The board is committed to compliance with International Financial Reporting Standards. The board is of the opinion that the external auditors observed the highest level of business and professional ethics and their independence has not been impaired in any way. The external auditors complement the work of the internal audit department and review all internal audit reports.

TAXATION

The board considers accountability an important characteristic of the Group and, as such, has placed significant emphasis on the importance of effective tax management. The board is formalising its approach to tax management by developing control procedures that will identify and limit its tax risks to an acceptable level.

STAKEHOLDER COMMUNICATION

The Group supports a policy of open communication with all stakeholders on matters of both a financial and non-financial nature. Regular communication sessions are held internally with management and senior executives, and externally with institutional shareholders and investment analysts.

DEALINGS IN SECURITY

The Group complies with the Listings Requirements of the JSE (“the JSE Listings Requirements”) in relation to the restrictions applicable to trading in Mvelaphanda Group shares by directors and employees during closed periods. Closed periods endure from the end of a financial reporting period until the publication of financial results for that period. Additional closed periods, as defined in the JSE Listings Requirements, may be declared should such circumstances prevail. During non-closed periods directors and employees may only deal in Mvelaphanda Group shares with the approval of the deal approval committee.

   
 
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