audit committee report

 

 

The Group audit committee ("the committee") is pleased to present its report in terms of section 94 of the Companies Act, 71 of 2008 as amended ("the Companies Act), the King Code of Governance for South Africa, 2016 ("King IV") and the Johannesburg Stock Exchange (JSE) Listings Requirements for the financial year ended 30 June 2018. The committee has conducted its work in accordance with the written terms of reference approved by the board.

The Bidvest board has mandated the committee as the audit committee of all Group companies which have a statutory requirement to have an audit committee, with the exception of those which have established committees under banking or insurance legislation.

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

Composition

Ms S Masinga resigned from the committee with effect from 17 November 2017. Ms RD Mokate and Mr NW Thomson were appointed to the audit committee on 1 May 2018 as Independent Non-executive members. As at the date of this report 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) – appointed 2006
  • Mr EK Diack (Lead Independent Non-executive director) – appointed 2012
  • Ms RD Mokate (Independent Non-executive director) – appointed 2018
  • Mrs CWN Molope (Independent Non-executive director) – appointed 2017
  • Mr NW Thomson (Independent Non-executive director) – appointed 2018

The appointment of all members of the committee is subject to the shareholders' approval at the next annual general meeting to be held on Wednesday, 28 November 2018. The profiles of the members, including their qualifications, can be viewed in the governance report.

In addition to the Group audit committee, divisional audit committees have been established as sub-committees of the Group audit committee. 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, five meetings were held:

Audit 23 November
2017		     24 February
2018		     28 May
2018		     27 August
2018		     30 August
201827 August
 
NG Payne (chair) √     √     √     √     √
EK Diack √     √     √     √     √
CWN Molope √     A     √     √     A
NW Thomson1             √     √     √
RD Mokate1             √     √     √
A = Apology                          

1 Appointed as director 1 May 2018.

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 and other responsibilities.

There were no Reportable Irregularities for The Bidvest Group Limited, 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 2018 financial year.

The committee satisfied itself that the audit firm is accredited and included on the JSE List of Accredited auditors. The committee further satisfied itself that Deloitte & Touche was independent of the Group, which included consideration of compliance with criteria relating to independence proposed by the Independent Regulatory Board for auditors.

The committee ensured that the designated external audit partner has not exceeded five years in this role. The committee also considered requests by certain major shareholder to early adopt mandatory audit firm rotation given that Deloitte has serves as auditors for 11 years.

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

The committee ensured that the auditors did not provide any prohibited services, nor any services that include a threat of self-review. Non audit services are pre-approved by the chairman of the committee, are generally of an assurance nature, and are not material in relation to the external audit fee.

The committee has the following responsibilities for external audit:

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 performance against their audit plan; and
  • consider whether the audit firm and the individual auditor that will be responsible for performing the functions of auditor are accredited as such on the JSE List of Accredited auditors, as required by the JSE Listings Requirements.

Key audit matters

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 items, which required significant judgement, were:

  • accounting for the acquisition of Noonan, the allocation of its purchase price and identification and accounting for related intangible assets. The accounting for Noonan has resulted in intangibles of R1,6 billion and goodwill of R0,9 billion being recognised; and
  • key judgements and estimates used in the determination of the fair value of the unlisted investment in Mumbai International Airport Limited (MIAL). The Group's valuation of the investment in MIAL has been maintained at US$72 million converted to R988 million (2017: US$72 million converted to R940 million).

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.

The committee has reviewed the performance, qualifications and expertise of the Chief audit Executive, Lauren Berrington, and is satisfied with the appropriateness of her expertise.

Internal financial control

We have considered the reports of management, internal audit and external audit in arriving at our conclusion that the Company's system of internal controls and risk management is effective and that the internal financial controls form a sound basis for the preparation of reliable financial statements. No material breakdown in controls was identified during the year.

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. We have considered and relied on the work of the risk committee and the social and ethics committee on the non-financial-related risk areas.

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.

An anonymous ethics line is in place. The service is managed by Deloitte 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. The committee is satisfied that appropriate disciplinary, criminal and civil action has been taken.

Combined assurance

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

Expertise of the financial director and finance function

The committee has reviewed the current performance and future requirements for the financial management of the Group and concluded that the current team has the appropriate skills, experience and expertise required to fulfil the finance function. In compliance with 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 Chief Financial Officer, Mr MJ Steyn and is satisfied with the appropriateness thereof.

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 concurred with management's assessment and recommended acceptance of this conclusion to the board.

Recommendation of the annual financial statements for approval by the board

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

On behalf of the committee

NG Payne
Chairman

31 August 2018