Audit & Risk Committee Charter
Excela Limited
ACN 108 069 003
Audit and Risk Committee Charter
1. Introduction
1.1 Excela Limited (“Company”) is a public Australian investment company.
1.2 The Company has also outsourced key aspects of its corporate administration to Fox Portfolio
Pty Ltd (“Administration Manager”) pursuant to an Administration Management Agreement
dated 20th May 2004.
1.3 The Audit and Risk Committee (“Committee”) is a committee of the Board of directors of the
Company.
1.4 The Board established the Committee under the Company’s constitution.
1.5 This charter sets out the scope of the Committee’s responsibilities in relation to the Company.
1.6 The role of the Committee is not an executive role.
2. Objective
2.1 The objective of the Committee is to assist the Board discharge its responsibilities in relation
to:
(a) effective management of financial and operational risks;
(b) compliance with laws and regulations;
(c) accurate management and financial reporting;
(d) maintenance of an effective and efficient audit; and
(e) high standards of business ethics and corporate governance.
2.2 The Committee will endeavour to:
(a) maintain and improve the quality, credibility and objectivity of the financial
accountability process;
(b) promote a culture of compliance;
(c) ensure effective communication between the Board, the Managers and the
Managers senior financial and compliance management;
(d) ensure effective audit functions and communications between the Board and the
auditors;
(e) ensure compliance strategies and compliance functions are effective; and
(f) ensure that directors are provided with financial and non-financial information that
is of high quality and relevant to the judgments to be made by them.
2.3 The Committee does not have responsibility for assisting the Board in overseeing the
effectiveness of the management of the Company’s market and credit risks. These matters are
dealt with directly at Board level.
2.4 In fulfilling its responsibilities, the Committee receives regular reports from the Investment
Manager and Administration Manager (collectively the “Managers”) and will periodically
meet with external auditors.
3. Internal control and risk management
The Committee will, except in relation to credit and market risks and taking into account 2.3
above:
(a) oversee the establishment and implementation of risk management and internal
compliance and control systems and ensure there is a mechanism for assessing the
efficiency and effectiveness of those systems;
(b) assess the overall effectiveness of the internal control and operational risk
management frameworks and consider whether recommendations made by the
external auditors have been implemented by the Managers;
(c) approve and recommend to the Board for adoption policies and procedures on risk
oversight and management to establish an effective and efficient system for:
(i) identifying, assessing, monitoring and managing risk; and
(ii) disclosing any material change to the risk profile;
(d) regularly review and update the risk profile;
(e) endeavour to ensure the risk management system takes into account all material
risks, including risks arising from:
(i) implementing strategies (strategic risk);
(ii) operations or external events (operational risk);
(iii) legal and regulatory compliance (legal risk);
(iv) changes in community expectation of corporate behaviour (reputation
risk);
(v) being unable to fund operations or convert assets into cash (liquidity
risk);
(f) review compliance reports and the adequacy of the Managers response to identified
breaches;
(g) assess whether the resources devoted to the Managers accounting functions are
adequate to ensure that reporting arrangements are of high quality – and to advise
the Board of any identified shortcomings;
(h) consider the completeness and quality of financial and operational information
being provided to the Board, and suggest ways in which those reports might be
improved;
(i) periodically seek advice from the external auditors regarding the completeness and
quality of financial and operational information being provided to the Board; and
(j) where appropriate and/or requested by the Board, undertake reviews of investments,
with the aim of assessing the adequacy of the analysis undertaken before decisions
were made to proceed with those investments, so that the Company can learn from
those experiences and improve relevant analytical capabilities and reporting
processes.
4. Financial Reporting
The Committee is responsible for:
(a) reviewing any half-yearly and annual financial reports and all other financial
information with the Managers, advisers and the external auditors (as appropriate)
before it is released to the market;
(b) reviewing and recommending to the Board proposed material changes in accounting
policies;
(c) assessing the appropriateness and application of the Company’s accounting policies
and principles and any changes to them, so that they accord with the applicable
financial reporting framework;
(d) obtaining an independent judgment from the external auditor about:
(i) the acceptability and appropriateness of accounting policies and
principles put forward by the Managers; and
(ii) the clarity of current or proposed financial disclosure practices as put
forward by the Managers; and
(e) assessing any significant estimates or judgments in the financial reports (including
those in any consolidated financial statements) by:
(i) asking management how they were made; and
(ii) asking the external auditors how they concluded that those estimates
were reasonable;
(f) receiving from the Managers confirmation that the integrity of financial reports is
founded on a sound system of risk management and internal compliance and
control;
(g) endeavouring to ensure that significant adjustments, adjusted differences,
disagreements with management and critical accounting policies and practice are
discussed with the external auditors;
(h) endeavouring to ensure that the Board is aware of matters which may significantly
impact the financial condition of the Group’s business;
(i) assessing information from the external auditors that may affect the quality of
financial reports (for example, actual and potential material audit adjustments,
financial report disclosures, non-compliance with laws and regulations, and internal
control issues);
(j) monitoring the continuous disclosure process adopted by the Board and
recommending to the Board any necessary changes; and
(k) reviewing compliance with all related party disclosures requirements (where
applicable) established by accounting standards and the Corporations Act 2001
(Cth).
5. External audit
The Committee is responsible for:
(a) approving and recommending to the Board for acceptance the terms of engagement
of the external auditor;
(b) regularly reviewing with the external auditor:
(i) the scope of the external audit;
(ii) identified risk areas; and
(iii) any other agreed procedures;
(c) approving and recommending to the Board for adoption policies and procedures for
appointing or removing an external auditor, including criteria for:
(i) technical and professional competency;
(ii) adequacy of resources; and
(iii) experience, integrity, objectivity and independence;
(d) recommending to the Board for approval the appointment or removal of an external
auditor;
(e) approving the remuneration of the external auditor;
(f) regularly reviewing the effectiveness and independence of the external auditor
taking into account:
(i) the length of appointment;
(ii) where appropriate, the last dates lead engagement partners were rotated;
(iii) an analysis and disclosure of fees paid to external auditors, including the
materiality of fees paid for non-audit services and the nature of those
services; and
(iv) any relationships with the Company or any other body or organisation
that may impair or appear to impair the external auditor’s independence;
(g) recommending to the Board for approval the types of non-audit services that the
external auditor may provide without impairing or appearing to impair the external
auditor’s independence, together with a process for the engagement of the external
auditor to provide any such services;
(h) meeting periodically with the external auditors (at least annually) and inviting them
to attend Committee meetings to:
(i) review their plans for carrying out internal control reviews;
(ii) identify if there have been any significant disagreements with the
Managers, whether or not they have been resolved;
(iii) consider any comments made in the external auditor’s management
letter, particularly, any comments about material weaknesses in internal
controls and the Managers response to those matters; and
(iv) make recommendations to the Board;
(i) where appropriate, ensuring that the external audit engagement partners are rotated
in accordance with relevant statutory requirements, and otherwise after a maximum
of five years’ service;
(j) monitoring and reporting to the Board on the Managers response to the external
auditor’s findings and recommendations; and
(k) receiving and reviewing the reports of the external auditor.
6. Internal audit
Where an internal audit function is considered appropriate, the Committee will review and
approve the appointment of an internal audit service provider. As at the date of this charter it
has been determined that an internal auditor is not appropriate for the Company.
The Committee is responsible for:
(a) the engagement and dismissal of any chief internal audit executive;
(b) ensuring any chief internal audit executive is independent of the external auditor;
(c) ensuring the external auditor does not provide internal audit services;
(d) overseeing the scope of the internal audit, including reviewing the internal audit
team’s mission, charter, qualifications and resources;
(e) reviewing and approving the scope of the internal audit plan and work programme;
(f) monitoring the progress of the internal audit work programme and considering the
implications of the internal audit findings for the control environment;
(g) monitoring and reporting to the Board on the Managers responsiveness to internal
audit findings and recommendations;
(h) evaluating the process for monitoring and assessing the effectiveness of the internal
audit function;
(i) overseeing the liaison between the internal audit team and the external auditor;
(j) receiving and reviewing the internal audit team’s reports; and
(k) ensuring the internal audit team reports directly to the Committee.
7. Other responsibilities
The Committee is responsible for:
(a) overseeing the implementation of the Company’s Corporate Governance Statement
and assessing compliance with it;
(b) overseeing the development and implementation of ethical guidelines and corporate
governance policies;
(c) assessing and recommending to the Board for adoption the scope, cover and cost of
insurance, including insurance relating to directors and officers liability; and
(d) reporting to the Board on any industry development affecting the control
environment.
8. Committee composition
8.1 The Committee must comprise:
(a) at least two directors;
(b) preferably non-executive directors; and
(c) if possible, a majority of independent directors.
8.2 The Board will appoint the chairperson who may not be the chairperson of the Board
8.3 The secretary of the Company will be the secretary of the Committee.
8.4 The Committee must be of sufficient size, independence and technical expertise to effectively
discharge its mandate.
8.5 Each member of the Committee should be able to read and understand financial statements and
at least one member must be a qualified accountant or other financial professional with
experience of financial and accounting matters.
8.6 Each member of the Committee should have an appropriate understanding of the funds
management industry.
8.7 A member may act by their alternate.
9. Performance Appraisal
9.1 The Committee will conduct an appraisal of the performance of its members, adherence to its
Charter and achievement of its objectives on an annual basis.
10. Committee meetings
10.1 The Committee will meet a minimum of two times each year.
10.2 A quorum for a Committee meeting is two Committee members.
10.3 Committee meetings may be held by any technological means allowing its members to
participate in discussions even if all of them are not physically present in the same place. A
member who is not physically present but participating by technological means is taken to be
present.
10.4 The Committee may pass or approve a resolution without holding a meeting in accordance
with the procedures (so far as they are appropriate) in section 248A of the Corporations Act
2001 (Cth).
10.5 The Committee may invite other persons it regards appropriate to attend Committee meetings.
That person may be invited by the chairperson to speak at meetings of the Committee, but will
not be entitled to vote on matters put to the Committee, and shall leave a meeting if requested
to do so by the chairperson.
10.6 The secretary will circulate the agenda and papers a reasonable period in advance of each
meeting.
11. Minutes of Committee meetings
11.1 The Committee must keep minutes of its meetings.
11.2 Draft minutes of each Committee meeting must be included in the papers for the next full
Board meeting after each meeting of the Committee.
11.3 Minutes must be distributed to all Committee members, after the Committee chairperson has
approved them.
11.4 Minutes, agenda and supporting papers are available to directors upon request to the
Committee secretary, except if there is a conflict of interest.
12. Reporting to the Board
The Committee chairperson must report the Committee’s findings to the Board after each
Committee meeting.
13. Access to information and independent advice
13.1 The Committee may seek any information it considers necessary to fulfil its responsibilities.
13.2 The Committee has access to:
(a) the Managers to seek explanations and information from the Managers; and
(b) the external auditors to seek explanations and information from them, without the
Managers being present.
13.3 The Committee may seek professional advice from the Managers and from appropriate
external advisers, at the Company’s cost. The Committee may meet with these external
advisers without the Managers being present.
14. Review and changes to this charter
14.1 The Committee will review this charter annually or as often as it considers necessary.
14.2 The Board may change this charter from time to time by resolution.
15. Approved and adopted
This charter was approved by the Board on 14th February 2008 for adoption by the Committee.
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