Role of the Audit Committee
The role of the Committee, which has specific terms of reference, is described in the Corporate Governance Report.
Composition of the Audit Committee
The Audit Committee, appointed by and responsible to the Board of Directors, comprises three Independent Non-Executive Directors and a Non-Executive Director as follows.
Mr. M.D.S. Goonatilake (IND/NED) - (Chairman)
Mr. N. Perera (NED)
Dr. H. Cabral (IND/NED)
Mr. R.P. Pathirana (Resigned w.e.f. 31st January, 2014) (IND/NED)
Mr. M.H. Jamaldeen (Appointed w.e.f. 21st April, 2014) (IND/NED)
IND - Independent Director, NED - Non-Executive Director)
The Chairman of the committee, Mr. M.D.S. Goonatilake, an Independent Non-Executive Director, is a finance professional with over 25 years of post-qualification experience. He is a member of the Institute of Chartered Management Accountants (U.K), passed finalist of the Institute of Chartered Accountants (Sri Lanka) and has a Postgraduate Diploma in Management from PIM of University of Sri Jayawardenepura.
Brief profiles of each member are given in the Stewardship section of this report. Their individual and collective financial knowledge and business acumen and the independence of the Committee, are brought to bear on their deliberations and judgments on matters that come within the Committee’s purview.
Hayleys Group Services (Pvt) Ltd. act as the Secretary to the Audit Committee. The Chairman & Chief Executive, Group Chief Finance Officer and Head - Group Management Audit & System Review attend meetings of the Committee by invitation.
Charter of The Audit Committee
The audit committee Charter is periodically reviewed and revised with the concurrence of Board of Directors. The terms of reference of the committee are clearly defined in the Charter of the Audit Committee.
‘Rules on Corporate Governance’ under listing rules of Colombo Stock Exchange and ‘Code of Best Practice on Corporate Governance’ issued jointly by Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka further regulate the composition, role and functions of the Board Audit Committee.
Meetings of the Audit Committee
The Committee met 9 times during the year. The attendance of the members at these meetings is stated in the table given at the end of Corporate Governance.
Other members of the Board and the Group Management Committee, as well as the External Auditors were present at discussions where this was appropriate. The proceedings of the Audit Committee are regularly reported to the Board of Directors.
Tasks of the Audit Committee
Financial Reporting System
The Committee reviewed the financial reporting system adopted by the Group in the preparation of its quarterly and annual Financial Statements to ensure reliability of the processes and consistency of the accounting policies and methods adopted and their compliance with the Sri Lanka Accounting Standards. The methodology included obtaining statements of compliance from Heads of Finance and Directors in charge of operating units. The Committee recommended the Financial Statements to the Board for Its deliberations and issuance. The Committee, in its evaluation of the financial reporting system, also recognised the adequacy of the content and quality of routine management information reports forwarded to its members.
Internal Audits
The committee reviewed the process to assess the effectiveness of the Internal financial controls that have been designed to provide reasonable assurance to the Directors that assets are safeguarded, and that the financial reporting system can be relied upon in preparation and presentation of Financial Statements. The Group Management Audit and Systems Review Department reports on key control elements and procedures in Group companies that are selected according to an annual plan were reviewed.
Internal Audits are outsourced to leading audit firms in line with an agreed annual audit plan. Follow-up reviews are scheduled to ascertain that audit recommendations are being acted upon. The Committee appraised the independence of the Group MA & SRD and other Internal Auditors, in the conduct of their assignments.
The Committee obtained and reviewed statements from the heads of business sectors identifying their respective major business risks, mitigatory action taken or contemplated for management of these risks. The COSO Enterprise Risk Reporting Process is presently being implemented within the Group.
The Committee obtained representations from Group companies on the adequacy of provisions made for possible liabilities and reviewed reports tabled by Group companies certifying their compliance with relevant statutory requirements.
Subsidiary Company Audit Committees
Certain listed subsidiaries and also some of the unlisted subsidiaries have appointed their own Audit Committees comprising Independent Non-Executive Directors. These Audit Committees function independently of the Audit Committee of Hayleys PLC, but have similar terms of reference. The minutes of their meetings are made available to Hayleys Audit Committee.
External Audits
The Committee held meetings with the External Auditors to review the nature, approach, scope of the audit and the Audit Management Letters of Group companies. Actions taken by the management in response to the issues raised, as well as the effectiveness of the internal controls in place, were discussed with the heads of business units. Remedial action was recommended wherever necessary.
The Audit Committee has reviewed the other services provided by the External Auditors to the Group to ensure that their independence as Auditors has not been compromised.
Appointment of External Auditors
The Audit Committee has recommended to the Board of Directors that Messrs Ernst & Young, continue as Auditors for the financial year ending 31st March 2015.
Support to the Committee
The Committee received information and support from management during the year to enable it to carry out its duties and responsibilities effectively.
Changes to New Sri Lanka Accounting Standards
With the convergence of Sri Lanka Accounting Standards to International Financial Reporting Standards (IFRS’s) and its mandatory implementation with effect from 1st January, 2012 the Group has complied with the requirements of new Sri Lanka Accounting Standards (SLFRS/LKAS). The committee has pursued the support of Messrs Ernst and Young to assess and review the existing SLFRS policies and procedures adopted by the Group.
Evaluation of the Committee
The Audit Committee is satisfied that the Group’s accounting policies and operational controls provide reasonable assurance that the affairs of the Group are managed in accordance with Group policies and that Group assets are properly accounted for and adequately safeguarded.
M.D.S. Goonatilake
Chairman
Audit Committee
16th May, 2014