- Objective
The Committee of the Company is to assist the board of directors of the Company (the "Board") in (i) ensuring that an effective system of internal control and compliance with the Company's obligations (including external financial reporting obligations) under stock exchange listing rules and applicable laws and regulations is in place; and (ii) overseeing the integrity of the financial statements of the Company.
The Committee shall also be directly responsible on behalf of the Board for (i) the selection, oversight and remuneration of the Company's external auditor, (ii) the assessment of the independence and qualifications of the external auditor, and (iii) the oversight of the performance of the Company's internal audit function and external auditor.
- Membership
The Committee shall be appointed by the Board and shall comprise a minimum of three Non-executive Directors.
The majority of the members of the Committee (the "Members") shall be Independent Non-executive Directors, at least one of whom has to be an Independent Non-executive Director with appropriate professional qualifications or accounting or related financial management expertise as required under rule 3.10(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").
The chairman of the Committee shall be appointed by the Board and must be an Independent Non-executive Director.
All members of the Committee are appointed by the Board and can be removed by the Board at its sole discretion. The Board shall from time to time vary the composition of the Committee as may be required by the Listing Rules (as modified from time to time) or the rules of any other stock exchange in respect of which the shares of the Company are listed or quoted, or other codes, rules and regulations as may be prescribed by the Hong Kong Securities and Futures Commission or any other applicable regulatory authority from time to time (the "Applicable Rules").
A former partner of the existing auditing firm of the Company is prohibited from acting as a member of the Committee for a period of one (1) year commencing on the later of (a) the date of his ceasing to be a partner of the firm; and (b) the date of his ceasing to have any financial interest in the firm.
The Company Secretary of the Company shall be the secretary of the Committee.
- Authority
The Committee shall report directly to the Board on its decisions or recommendations, unless there are legal or regulatory restrictions on its ability to do so (such as a restriction on disclosure due to regulatory requirements).
The Committee is authorised to inspect all accounts, books and records of the Company and the Committee shall have the right to require the management of the Company to furnish all information requested by the Committee as may be required for the purposes of discharging its duties.
The Committee is authorised to obtain outside legal and other independent professional advice and to secure the assistance of outsiders with relevant experience and expertise if it considers necessary. The Committee shall have sole authority to approve related fees and retention terms.
The Committee shall be provided with sufficient resources to discharge its duties.
- Duties
The duties of the Committee shall include the following aspects:
- Relationship with the Company's external auditor
- to be primarily responsible for making recommendation to the Board on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor, and any questions of resignation or dismissal of the external auditor;
- to act as the key representative body for overseeing the relation of the Company with the external auditor;
- to review and monitor the independence and objectivity of the external auditor. The Committee shall:
- consider all relationships between the Company and the audit firm (including the provision of non-audit services);
- seek from the audit firm, on an annual basis, information about policies and processes for maintaining independence and monitoring compliance with relevant requirements, including current requirements regarding rotation of audit partners and staff; and
- meet with the external auditor, at least annually, in the absence of management of the Company, to discuss matters relating to the audit fees, any issues arising from the audit and any other matters the external auditor or the Committee may wish to raise;
- to review and monitor the effectiveness of the audit process in accordance with applicable standards. The Committee shall discuss with the external auditor the nature and scope of the audit and reporting obligations before the audit commences;
- to develop and implement policy on the engagement of external auditor to supply non-audit services. For this purpose, external auditor shall include any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as part of the audit firm nationally or internationally;
- to be primarily responsible for making recommendation to the Board for the approval of any non-audit services provided to the Company by the external auditor. The Committee should ensure that the provision of such non-audit services does not impair the external auditor's independence or objectivity. When assessing the independence or objectivity of the external auditor in relation to the provision of non-audit services, the Committee should consider:
- whether the skills and experience of the audit firm make it a suitable supplier of the non-audit services;
- whether there are safeguards in place to ensure that there is no threat to objectivity and independence in the conduct of the audit resulting from the provision of such non-audit services by the external auditor;
- the criteria which govern the compensation of the individuals performing the audit; and
- to set policies regarding the hiring of employees or former employees of the external auditor and monitor the application of such policies.
- Relationship with the Company's external auditor
- 1. to monitor the integrity of financial statements of the Company and the annual report and accounts and half-year report and accounts of the Company, to discuss such annual report and audited accounts and half-year report and accounts with management and the external auditor, and to review significant financial reporting judgments contained in them. In this regard, in reviewing such reports and accounts of the Company before submission to the Board, the Committee shall focus particularly on:
- financial reporting and accounting policies and practices;
- any changes in financial reporting and accounting policies and practices;
- major judgmental areas;
- significant adjustments resulting from audit;
- the going concern assumption and any qualifications;
- compliance with accounting standards; and
- compliance with the Listing Rules, the Applicable Rules and any other legal requirements in relation to financial reporting;
- with regard to the preparation of the reports and accounts referred to above, to liaise with the Board and senior management and to meet, at least once a year, with the external auditor; and
- to consider any significant or unusual items that are, or may need to be, reflected in the reports and accounts referred to above and must give due consideration to any matters that have been raised by the staff responsible for the accounting and financial reporting function, compliance officer or auditors of the Company.
- Oversight of the Company's financial reporting system, internal control and risk management procedures
- to review the group's financial and accounting policies and practices;
- to review the financial controls, internal control and risk management systems of the Company with particular regard to their effectiveness;
- to discuss with the management of the Company the system of internal control and ensure that management has discharged its duty to have an effective internal control system including the adequacy of resources, qualifications and experience of staff of the Company's accounting and financial reporting function, and their training programmes and budget;
- to consider any findings of major investigations of internal control matters as delegated by the Board or on its own initiative and the response of management of the Company;
- where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, and to review and monitor the effectiveness of the internal audit function;
- to review the statement of the Company on internal control systems (where one is included in the annual report) prior to endorsement by the Board;
- to discuss any problems and reservations which the external auditor may have arising from the interim and final audits, and any interim audits or otherwise, and any response of management in connection therewith;
- to meet with the external auditor and with the head of internal audit at least once each year to ensure that there are no unresolved issues or concerns, and from time to time with the external auditor as the external auditor may request;
- to review the management letter of the external auditor, any material queries raised by the auditor to management of the Company in respect of the accounting records, financial accounts or systems of control and the response of management of the Company; and
- to ensure that the Board will provide a timely response to the issues raised in the management letter of the external auditor.
- Other duties
- to ensure the Company's practices and procedures with respect to related party transactions are adequate for compliance with the requirements under the Listing Rules and the Applicable Rules;
- to review from time to time as appropriate these Terms of Reference and the effectiveness of the Committee and recommend to the Board any necessary changes;
- to report to the Board on the matters set out in these Terms of Reference and where the monitoring activities of the Committee reveal cause for concern or scope for improvement, the Committee shall make recommendations to the Board to address the issue or to make improvements;
- to provide to the Board such assurances as it may reasonably require regarding compliance by the Company's subsidiaries and associates for which the Company provides management services with all supervisory and other regulations to which they are subject; and
- to consider other topics or matters, as defined or referred to the Committee by the Board.
- Committee Meetings
- Frequency
The Committee shall meet at least twice a year. Additional meetings should be held if the Committee shall so request
- Notice
Notice of any meetings of the Committee has to be given 14 days prior to any such meeting being held, unless all Members unanimously waive such notice. Irrespective of the length of notice being given, attendance of a meeting by a Member shall be deemed waiver of the requisite length of notice by the Member. Notice of any adjourned meeting is not required if the adjournment is less than 14 days.
- Quorum
The quorum for decisions of the Committee should be any two Members, of whom one has to be an Independent Non-Executive Director.
- Attendance
The following persons will normally attend all the meetings of the Committee, unless requested otherwise by the Committee:
- external auditor;
- internal auditor;
- CFO;
- Company Secretary; and
- legal counsel.
Other members of the Board may attend meetings of the Committee although only Members are entitled to vote at such meetings
- Resolutions
Resolutions of the Committee shall be passed by a majority of votes which can also be passed by way of unanimous written resolutions. Meetings can be held in person, by telephone or by video conference.
- Minutes
The secretary of the Committee should keep full minutes of all Committee meetings. Draft and final versions of minutes of meetings of the Committee should be sent to all Members for their comment and records respectively, in both cases within a reasonable time after the meeting.
Minutes of all Committee meetings will also be sent to other members of the Board at the same time when they are sent to Members.
- Publication of These Terms of Reference
A copy of these Terms of Reference will be made available to any person without charge upon request, and both notice as to such availability and these Terms of Reference will be posted on the website of the Company.
