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 2019. 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.
Ms CWN (Nosipho) Molope resigned from the committee with effect from 31 March 2019. 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
- 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 Thursday, 28 November 2019. The profiles of the members, including their qualifications, can be viewed in the Integrated report.
Frequency and attendance of meetings
During the year under review, six meetings were held:
|NG Payne (chair)||✓||✓||✓||✓||✓||✓|
|1||Resigned as director with effect from 31 March 2019.|
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.
In June 2017, the Independent Regulatory Board of Auditors published a rule prescribing that auditors of public interest entities in South Africa must comply with mandatory audit firm rotation whereby audit firms shall not serve as the appointed auditors of a public interest entity for more than 10 consecutive years, with effect from 1 April 2023. Given the aforementioned, increasing shareholder pressure, prevailing market practices and the fact that Deloitte & Touche (Deloitte) had been Bidvest’s external auditors for 11 years, The Bidvest Group Limited board in November 2018 mandated the audit committee to recommend a new external auditor.
Following a comprehensive tender process, PricewaterhouseCoopers Inc. (PwC) with Mr Craig West as designated audit partner, was nominated as the new external auditor with effect from 28 November 2018.
The committee nominated and recommended the re-appointment of the external auditor, PwC, to the shareholders in compliance with the Companies Act and the appointment of Mr C West as designated auditor for the 2020 financial year.
The committee satisfied itself that the audit firm is accredited, and the committee further satisfied itself that PwC 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, 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; and
- review the quality and effectiveness of the external audit process and performance against their audit plan.
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:
- key judgements and estimates used in assessing the impairment of indefinite useful life intangible assets and goodwill; and
- assessment of judgements used to assess whether Bidvest controlled Adcock Ingram Holdings Limited at year end.
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.
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.
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.
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 the Company annual financial statements for approval by the board.
On behalf of the committee
30 August 2019