Audit committee report

The audit committee (the committee) is pleased to present its report in terms of section 94 of the Companies Act, No 71 of 2008, as amended (the Companies Act), the King Code of Governance for South Africa (King IV) and the Johannesburg Stock Exchange (JSE) Listings Requirements for the financial year ended 30 June 2017. The committee has conducted its work in accordance with the written terms of reference approved by the board.

The committee's main objective is to assist the board in fulfilling its oversight responsibilities, in particular with regard to evaluation of the adequacy and efficiency of accounting policies, internal controls and financial and corporate reporting processes. In addition, the committee assesses the effectiveness of the internal auditors and the independence and effectiveness of the external auditors.

Composition

Mrs CWN Molope was appointed to the audit committee on 2 August 2017 as an independent non-executive member. The committee comprises the following members who have the necessary skills and experience to fulfil the duties of the committee:

  • Mr NG Payne (independent non-executive director and chairman)
  • Mr EK Diack (independent non-executive director)
  • Ms S Masinga (independent non-executive director) and
  • Mrs CWN Molope (independent non-executive director).

The appointment of all members of the committee is subject to the shareholders' approval at the next annual general meeting to be held on Monday, 27 November 2017. The profiles of the members, including their qualifications, can be viewed in the annual integrated report.

In addition to the Group audit committee, divisional audit committees have been established. The divisional audit committees are chaired by competent independent non-executives who participate in the Group audit committee.

Frequency and attendance of meetings

During the year under review, six meetings were held.

Audit 15 September
2016		 2 November
2016		 23 February
2017		 25 May
2017		 22 August
2017		 24 August
2017		  
NG Payne (chair) ✔ ✔ ✔ ✔ ✔ ✔  
EK Diack ✔ ✔ ✔ ✔ ✔ A  
S Masinga ✔ ✔ ✔ ✔ A A  
CWN Molope (appointed 2/8/2017) A ✔  

A = Apology

Statutory duties

The committee is satisfied that it has performed the statutory requirements for an audit committee as set out in the Companies Act as well as the functions set out in the terms of reference and that it has therefore complied with its legal, regulatory or other responsibilities as may be assigned by the board.

There were no reportable irregularities during the year, nor were any complaints or queries about our financial reporting brought to the attention of the audit committee.

External auditor

The committee nominated and recommended the appointment of the external auditor, Deloitte & Touche, to the shareholders in compliance with the Companies Act and the JSE Listings Requirements and the appointment of Mr MH Holme as designated auditor for the 2017 financial year.

The committee satisfied itself that the audit firm and designated auditor are accredited and appear on the JSE List of Accredited Auditors. The committee further satisfied itself that Deloitte & Touche was independent of the Company, which includes consideration of compliance with criteria relating to independence proposed by the Independent Regulatory Board for Auditors.

The committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees.

The committee has the following responsibilities for external audit:

1.

Recommends the appointment of external auditor and oversees the external audit process and in this regard the committee must:

  • nominate the external auditor for appointment by the shareholders;
  • approve the annual audit fee and terms of engagement of the external auditor;
  • monitor and report on the independence of the external auditor in the annual financial statements;
  • define a policy for non-audit services and pre-approve non-audit services to be provided by the external auditor;
  • ensure that there is a process for the committee to be informed of any reportable irregularities as defined in the Auditing Profession Act, 2005, identified and reported by the external auditor;
  • review the quality and effectiveness of the external audit process; and
  • consider whether the audit firm and where appropriate the individual auditor that will be responsible for performing the functions of auditor are accredited as such on the JSE List of Accredited Auditors and their advisers as required by the JSE Listings Requirements.
2.

The committee has applied its mind to the key audit areas and key audit matters identified by the external auditors and is comfortable that they have been adequately addressed and disclosed. These tems, which required significant judgement, were:

  • accounting for, valuation of and disclosures relating to the Group's unlisted 6,75% interest in Mumbai International Airport Private Limited (MIAL), at US$72 million converted to R940 million (2016: US$60 million converted to R853 million); and
  • accounting for the acquisition of Brandcorp, which resulted in intangibles of R684 million and goodwill of R436 million being recognised.
Internal audit

The committee has satisfied itself that the internal audit function was appropriately independent. The internal audit charter and the internal audit plan were approved by the committee. Internal audit has access to the committee, primarily through its chairman.

The committee has the following responsibilities for internal audit:

  • the appointment, performance assessment and/or dismissal of the internal auditor;
  • to approve the internal audit charter and the internal audit plan; and
  • to ensure that the internal audit function is subject to an independent quality review as and when the committee determines appropriate.
Internal financial control

Nothing has come to the attention of the committee that caused it to believe that the company's system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements.

Risk management

The committee is responsible for reviewing the effectiveness of systems for internal control, financial reporting and financial risk management and considering the major findings of any internal investigations into control weaknesses, fraud or misconduct and management's response thereto. The committee receives, in conjunction with the risk committee, regular reports provided as part of the enterprise-wide risk management framework to assist in evaluating the Group's internal controls.

Combined assurance

The committee is of the view that the arrangements in place for combined assurance are adequate and are achieving the objective of an effective, integrated approach across the disciplines of risk management, compliance and audit.

Duties assigned by the board

The committee oversees the preparation of the Company's annual integrated report and the reporting process, including the system of internal financial control. During the year under review, the committee met with the external auditor without management being present.

Expertise of the financial director and finance function

The committee has reviewed the current performance and future requirements for the financial management of the Company and concluded that the current team has the appropriate skills, experience and expertise required to fulfil the finance function. In compliance with paragraph 3.84(h) of the JSE Listings Requirements, the committee satisfied itself of the appropriateness of the expertise and experience of the financial management team as a whole.

The committee has reviewed the performance, qualifications and expertise of the Group financial director, Mr HP Meijer, and is satisfied with the appropriateness of the expertise and experience of the Group financial director.

Going concern

The committee reviewed the documents prepared by management in which they assessed the going concern status of the Company and its subsidiaries at year-end and the foreseeable future. Management has concluded that the Group is a going concern. The committee resolved and recommended acceptance of this conclusion to the board.

Consolidated financial statements

In our opinion, the consolidated financial statements present fairly, in all material respects the consolidated financial position of the Company and its subsidiaries as at 30 June 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Fraud prevention

An anonymous ethics line is in place. The service is managed by Deloitte & Touche and is independent of Bidvest. All calls reported are in total anonymity and without fear of discrimination. Monthly reports are provided by the independent service provider. The monitoring of reports from this service is shared between this committee and the social and ethics committee.

Information technology governance

The committee, in conjunction with the risk committee, is responsible for:

  • obtaining independent assurance on the effectiveness of the IT internal controls;
  • overseeing the value delivery on IT and monitoring the return on investments on significant IT projects; and
  • ensuring that IT forms an integral part of the Company's risk management.
Recommendation of the annual financial statements for approval by the board

The committee recommended the Group annual financial statements and Company annual financial statements for approval by the board.

On behalf of the committee

N Payne
Chairman