Audit & Risk Committee - Terms of Reference

1.0

  1.1

Introduction

These terms of reference govern the procedures and conduct of the Royal Mint Limited Audit and Risk Committee.

The Royal Mint Limited Audit and Risk Committee is responsible for Audit and Risk matters as described in these terms of reference regarding the Royal Mint Limited and its subsidiaries only. The Accounting Officer of the Royal Mint Trading Fund is responsible for Audit and Risk matters regarding the Royal Mint Trading Fund.

2.0

  2.1

Audit and Risk Committee objectives

The Audit and Risk Committee will report to the Board of Directors on the adequacy of audit arrangements (internal and external), on the implications of assurances provided in respect of risk and control in the Royal Mint Limited, and on any other issues on which the Board of Directors has requested the Committee’s opinion.

The Audit and Risk Committee shall advise the Board on any area it deems appropriate within its remit where action or improvement is needed.

2.2

To enable this, the Audit and Risk Committee will review the adequacy of the Royal Mint Limited’s financial reporting process, the system of internal control and management of risks, the internal and external audit process and shall monitor the integrity of the financial statements of the Royal Mint Limited.

2.3

In performing its duties, the Audit and Risk Committee will maintain effective working relationships with the Royal Mint Limited’s executive directors, management and the internal and external auditors.

2.4

To assist each Committee member to perform his or her role effectively, the Chair of the Audit and Risk Committee will make them aware of these terms of reference. Each Committee member should obtain an understanding of the Royal Mint Limited’s business and operations, corporate governance arrangements and management’s processes for identifying and managing risks.

3.0

  3.1

Authority

The Royal Mint Limited Board of Directors authorise the Audit and Risk Committee, within the scope of its responsibilities, to:

• seek any information it requires from:

–        any employee or director (and all such employees and directors will be directed to co-operate with any request made by the Audit and Risk Committee).

–        external parties.

• obtain, at the Company’s expense within agreed delegation limits, independent legal, accounting or other professional advice.
• conduct or authorise investigations into any company’s matters within the Committee’s scope of responsibilities.
• seek the attendance of Royal Mint Limited management at meetings as appropriate.

4.0

  4.1

Organisation

Membership

The Audit and Risk Committee shall consist of not less than three and no more than six members.

4.2

The Chair of the Audit and Risk Committee will be nominated by the Board of Directors from amongst the independent non-executive directors.

4.3

The Shareholder Non-Executive Director shall be a member of the Audit and Risk Committee. All other members of the Audit and Risk Committee shall be independent non-executive directors of the Royal Mint Limited. The Chair of the Board of Directors will not be a member of the Committee.

4.4

A quorum for any meeting will be two members, one of which must either be the Chair or any other member with relevant experience. In the absence of the Committee Chair or a deputy appointed by the Committee Chair in advance, the remaining members present in a meeting shall elect one of themselves as deputy to chair the meeting.

4.5

Committee members will be appointed by the Board of Directors on the recommendation of the Nomination Committee, in consultation with the Audit and Risk Committee Chair. The Board of Directors will review members’ tenure from time to time and at least every three years. New members will be given clear terms of appointment and provided with appropriate induction training. Members of the Committee should, collectively, have a good range of skills and competence relevant to accounting, audit, risk management, financial governance and to the sector in which the company operates. At least one member shall have recent and relevant financial experience.

4.6

The membership of the Audit and Risk Committee shall be published in the Royal Mint Limited’s annual report.

4.7

The secretary of the Audit and Risk Committee will be appointed by the Chair of the Audit and Risk Committee.

4.8

Committee meetings

The Audit and Risk Committee will invite Chair of the Board, the Chief Executive and the Chief Financial Officer, plus representatives from the internal and external auditors’ of the Royal Mint Limited and the Royal Mint Trading Fund to attend all meetings and to make presentations as appropriate.

4.9

Meetings should be held not less than three times a year. Special meetings may be convened as required, including meetings on internal and external auditors’ request.

4.10

The Chair of the Audit and Risk Committee will hold private meetings with the internal and external auditors at least on an annual basis.

4.11

The proceedings of all meetings will be minuted.

4.12

The minutes of each meeting shall be approved by the Chair and distributed to all Committee and Board members.

4.17

Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of the matters to be discussed at the meeting shall be forwarded to each Committee member and any other person required to attend no later than 5 days before the date of the meeting. Any supporting papers shall be sent to each member of the Audit and Risk Committee (as appropriate) at the same time.

Every attendee at the Audit and Risk Committee has a duty to declare any ‘conflict of interest’ i.e. any situation in which they have, or can have, a direct or indirect interest that conflict, or possibly may conflict, with the interests of the company. The declaration must be made at the start of each Committee meeting, giving details of how they believe they may be conflicted, stating both the nature and the extent of their interest. This must be considered by the Chair before proceeding with the Committee meeting.

Voting arrangements

Each member of the Audit and Risk Committee shall have one vote which may be cast on matters considered at the meeting. Votes can only be cast by members attending a meeting of the Audit and Risk Committee.

If a matter that is considered by the Audit and Risk Committee is one where a member of the Audit and Risk Committee, either directly or indirectly has a personal interest, that member shall not be permitted to vote at the meeting.

Save where they have a personal interest, the Chair of the Audit and Risk Committee will have a casting vote.

5.0

  5.1

Roles and responsibilities

Risk management and internal control

The Royal Mint Board has overall responsibility for the risk management.

Where delegated by the Board, the Audit and Risk Committee will:

• Evaluate the adequacy of the mechanisms established by management for the identification, monitoring, assessment and management of risk.
• Review the Royal Mint capability to identify and manage risks.
• Review performance against risk appetite and monitor key trends.
• Review management’s assessment of the degree of risk the Company incurs, and review areas of specific risk as highlighted by management.
• Review and approve policies in relation to its principal risks.

5.2

Evaluate the process set up by management to establish and maintain an appropriate “risk culture” for the embedding of risk management and for ensuring that all employees understand their roles and responsibilities in this regard.

5.3

Monitor management reporting on whether recommendations for the improvement of internal controls made by internal and external auditors have been implemented.

5.4

Internal audit

The Audit and Risk Committee will:

Review the organisational structure of the internal audit function and ensure that it is appropriate for the Royal Mint Limited in the context of the Royal Mint Limited’s overall risk management system.

5.5

Ensure appropriate procedures are in place for the appointment, replacement, reassignment or dismissal of the Head of Internal auditor or any external organisation providing internal audit services to the Royal Mint, including the consideration of value for money.

5.6

Review the planned internal audit activities and consider their adequacy as a basis for providing the Audit and Risk Committee with an independent and objective opinion on risk management, control and governance. In particular, the Audit and Risk Committee will consider and approve the adequacy of:

1. the terms of reference for internal audit;
2. the terms of engagement for internal audit where the service is fully or partially provided by an external supplier;
3. the effectiveness of the internal audit strategy and periodic plan in addressing the organisational risks;
4. the resourcing of internal audit;
5. the periodic work plans of internal audit;
6. the arrangements for and the results of quality assurance processes;
7. the adequacy of management’s response to internal audit advice and recommendations, including the monitoring of action plans; and
8. the independence of the Head of Internal Audit and their internal audit function from other executive activities undertaken in the Royal Mint.

5.7

Review annually the role and effectiveness of the internal audit function in the overall context of the company’s risk management system.

5.8

Review promptly all internal audit reports and ensure that all significant findings and recommendations made by the internal auditors are discussed.

5.9

Monitor that management responds on a timely basis to recommendations made by the internal auditors and provides updates on implementation of recommendations to the Audit and Risk Committee.

5.10

Financial reporting – annual financial statements

The Audit and Risk Committee will:

Review and report on to the Board on significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on the financial statements.

5.11

Review the annual financial statements and determine whether they are complete and consistent with the information known to Committee members; assess whether the financial statements reflect appropriate accounting principles, and that appropriate accounting policies have been adopted and adequately disclosed.

5.12

Review the clarity and completeness of disclosures in the financial statements and consider whether the disclosures made are set properly in context.

5.13

Focus on key accounting and audit judgements, and levels of errors identified during the audit and pay particular attention to complex and/or unusual transactions and where necessary challenge the methods used to account for such transactions where different approaches are possible.

5.14

Review and approve for recommendation to the Board the annual report sections such as financial statements, the strategic report and corporate governance statement relating to the audit and risk management and, where separate, any statement on internal controls and consider whether the information is understandable and consistent with members’ knowledge about the Royal Mint Limited and its operations; reports of the external auditor, any proposed changes in presentation of the financial statements or accompanying notes which the auditors may recommend and the management letter.

5.15

Meet with management and the external auditors to review the financial statements and the results of the audit and, where required, resolve any disagreements between management and the external auditors regarding financial reporting.

5.19

External audit

The Audit and Risk Committee will:

Oversee the Royal Mint Limited’s relations with the external auditor.

Consider, and make recommendations to the Board on the appointment, re-appointment and removal of the external auditor.

Approve the terms of engagement and the remuneration to be paid to the external auditor in respect of services provided. Review the external auditors’ proposed audit scope and approach and ensure that no unjustified restrictions or limitations have been placed on the scope.

5.20

Review and endorse the annual external audit work plan, including considering whether planned levels of materiality and proposed resources to execute the audit plan, appears consistent with the scope of the audit engagement, having regard also to the seniority, expertise and experience of the audit team.

5.21

Consider the co-operation between internal and external auditors and the external auditors’ reliance on the internal audit, and ensure that the benefits to the Royal Mint Limited from co-operation are maximised.

5.22

Review the results of the external audit including:

• discussing with the external auditor major issues that arose during the audit and have subsequently been resolved and those issues that have been left unresolved;
• asking the auditor to explain how they addressed the risks to audit quality identified earlier;
• weighing the evidence they have received in relation to each of the areas of significant judgment and review key accounting and audit judgements;
• asking the auditor for their perception of their interactions with senior management and other members of the finance team; and
• review levels of errors identified during the audit, obtaining explanations from management and, where necessary, the external auditors as to why certain errors might remain unadjusted.

5.23

Review and monitor management’s responsiveness to the recommendations made by the external auditors.

5.24

Review regularly, in line with the FRC guidance, the external auditor’s independence from the activities of the Royal Mint Limited outside of their appointment as external auditors, including obtaining statements from the auditors on relationships between the auditors and the company, including non-audit services, and discussing the relationships with the auditors.

5.25

Review annually the performance of the external auditors.

5.26

Review with management and the external auditors all matters required to be communicated to the committee under generally accepted auditing standards.

5.27

Provide written agreement to any proposed non-audit services to be provided by the external auditors (subject to a de minimis fee level of £15,000).

5.28

Compliance with laws and regulations

The Audit and Risk Committee will:

Review the effectiveness of the system for monitoring compliance with laws and regulations.

Receive reports of management’s investigation and any action taken in respect of any fraudulent acts or non-compliance with laws and regulations.

5.29

Obtain regular updates from management regarding compliance matters and receive internal audit reports in relation to compliance with company policies and procedures.

5.30

Be satisfied that applicable regulatory compliance matters have been considered in the preparation of the financial statements.

5.31

Review the significant findings of any examinations by regulatory agencies.

5.32

Review procedures and controls for detecting fraud and preventing bribery to ensure these arrangements are appropriate and receive reports on non-compliance.

5.33

Review the adequacy and security of the company’s arrangements for its employees and contractors and external parties to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters.

5.34

Reporting responsibilities

The Royal Mint Limited’s Board of Directors is kept up to date about Audit and Risk Committee activities as the Committee Chair will provide regular updates on Committee activities to the Board as appropriate following a meeting. The Audit and Risk Committee will also provide and report annually on the work of the Committee.

5.35

Other responsibilities

The Audit and Risk Committee will:

Perform other oversight functions as requested by the Board of Directors from time to time including support to the Royal Mint Trading Fund as appropriate.

5.36

Give consideration, periodically to the ongoing training needs of Committee members.

5.37

Annually review the Committee’s own performance and effectiveness, and evaluate the performance of its members on a regular basis, ensuring that all responsibilities in these terms of reference have been carried out.

5.39

Annually review (or on other occasions as circumstances determine) its terms of reference and recommend any necessary changes to the Board.

Where the Audit and Risk Committee identifies areas of concern it should report these, together with its findings, to the Board.