(Extracted from Annual Report 2016)
The Audit Committee, consisting of three Non-Executive Directors, P.K. Etchells, J.C.C. Chan and M. Cubbon, assists the Board in discharging its responsibilities for corporate governance and financial reporting. Two of the Committee members are Independent Non-Executive Directors, one of whom, P.K. Etchells, is Chairman. All the members served for the whole of 2016.
The terms of reference of the Audit Committee follow the guidelines set out by the Hong Kong Institute of Certified Public Accountants and comply with the CG Code. They are available on the Company’s website.
The Audit Committee met three times in 2016. Regular attendees at the meetings are the Finance Director, the Head of Internal Audit of the Swire group and the external auditors. The Audit Committee meets at least twice a year with the external auditors, and at least once a year with the Head of Internal Audit, without the presence of management. Each meeting receives written reports from the external auditors and Internal Audit. The valuer (DTZ Cushman & Wakefield Limited) also attended two of the meetings.
The work of the Committee during 2016 included reviews of the following matters:
- the completeness, accuracy and integrity of formal announcements relating to the Group’s performance including the 2015 annual and 2016 interim reports and announcements, with recommendations to the Board for approval
- the Group’s compliance with regulatory and statutory requirements
- the Group’s risk management and internal control systems
- the Group’s risk management processes
- the approval of the 2017 annual Internal Audit programme and review of progress on the 2016 programme
- periodic reports from Internal Audit and progress in resolving any matters identified in them
- significant accounting and audit issues
- the Company’s policy regarding connected transactions and the nature of such transactions
- the relationship with the external auditors as discussed on page 69
- the Company’s compliance with the CG Code
In 2017, the Committee has reviewed, and recommended to the Board for approval, the 2016 financial statements.
Assessing the Effectiveness of Risk Management and Internal Control Systems
On behalf of the Board, the Audit Committee reviews annually the continued effectiveness of the Group’s risk management and internal control systems dealing with risk and financial accounting and reporting, the effectiveness and efficiency of operations, compliance with laws and regulations, and risk management functions.
This assessment considers:
- the scope and quality of management’s ongoing monitoring of risks and of the risk management and internal control systems, the work and effectiveness of Internal Audit and the assurances provided by the Finance Director
- the changes in the nature and extent of significant risks since the previous review and the Group’s ability to respond to changes in its business and the external environment
- the extent and frequency with which the results of monitoring are communicated, enabling the Committee to build up a cumulative assessment of the state of control in the Group and the effectiveness with which risk is being managed
- the incidence of any significant control failings or weaknesses that have been identified at any time during the period and the extent to which they have resulted in unforeseen outcomes or contingencies that have had, could have had, or may in the future have, a material impact on the Company’s financial performance or condition
- the effectiveness of the Company’s processes in relation to financial reporting and statutory and regulatory compliance
- areas of risk identified by management
- significant risks reported by Internal Audit
- work programmes proposed by both Internal Audit and the external auditors
- significant issues arising from internal and external audit reports
- the results of management’s control self assessment exercise
As a result of the above review, the Board confirms, and management has also confirmed to the Board, that the Group’s risk management and internal control systems are effective and adequate and have complied with the CG Code provisions on risk management and internal control throughout the year and up to the date of this annual report.