TERMS OF REFERENCE – AUDIT COMMITTEE

1. Membership and attendance

• 1.1

  The Committee shall comprise at least two members, who shall be independent nonexecutive directors at least one of whom shall have recent and relevant financial experience. The Chairman of the Board may also be a member of the Committee if he or she was considered independent on appointment as Chairman.

• 1.2

  The Board shall appoint the Committee members and the Committee Chairman. In the absence of the Committee Chairman, the remaining members present shall elect one of themselves to chair the meeting.

• 1.3

  Only Committee members have the right to attend Committee meetings; the Group Finance Director and Company Secretary, although not members of the Committee will attend meetings with the agreement of the Committee Chairman. The Company’s external auditors will normally attend, although they will not be present at meetings when the Committee discusses their performance and/or remuneration.

• 1.4

  Other Board directors may be invited to attend all or part of any meeting with the agreement of the Committee Chairman.

2. Quorum and proceedings of meetings

• 2.1

  The quorum for Committee meetings shall be two members.

• 2.2

  The Committee shall meet at least twice yearly at appropriate times.

• 2.3

  Any Committee member may call meetings outside the normal cycle. The Company’s external auditors may also request additional meetings.

• 2.4

  The Committee will meet at least once per annum with the external auditors without Company management being present.

3. Principal duties

• 3.1 Financial reporting

  3.1.1 Review the annual and half year financial results, the Annual Report and any other published information relating to the Group’s financial performance including the going concern statement to satisfy itself that they meet statutory and other regulatory requirements including Financial Reporting Standards and, where applicable, the requirements of the UK Listing Authority, AIM Rules for Companies and the QCA Corporate Governance Code.

  3.1.2 Review the disclosure made by the Chief Executive Officer and Group Finance Director in relation to the Audit and internal financial controls and fraud.

  3.1.3 Review the following matters:

  the consistency of, and any changes to, significant accounting policies;
  the methods used to account for significant or unusual transactions;
  whether the Group has followed appropriate accounting standards and made appropriate estimates and judgements;
  the clarity and completeness of disclosure in the Group’s externally published financial reports; and
  all significant information presented within the Annual Report and financial statements, including the strategic review and the corporate governance statements relating to the audit.

• 3.2 Internal control

  3.2.1 Monitor and review the standards of internal control, including the identification of internal control risks, the effectiveness of internal control, financial reporting, accounting policies and procedures, and the Company’s statements on internal controls.

  3.2.2 Establishing and reviewing the effectiveness of all processes for dealing with:

  •  Any communication received by the Group regarding accounting, internal accountingcontrols or auditing matters; and
  •  ‘Whistleblowing’ procedures
• 3.3 Internal audit

  3.3.1 Review the need for internal audit.

  3.3.2 If it is decided that an internal audit function is appropriate, to agree the plan for internal audit work and its relationship with the external auditors.

• 3.4 External audit

  3.4.1 Review and make recommendations to the Board, to be put to the shareholders for approval at the Annual General Meeting, in relation to the appointment, re-appointment and removal of the Company’s auditors.

  3.4.2 Manage any process in relation to tendering of the external audit contract.

  3.4.3 Review the performance of the external auditors including their independence, the scope of their audit and fee.

  3.4.4 Review, at least annually, the effectiveness of the audit.

  3.4.5 Review the nature and extent of non-audit and consultancy services provided by the external auditors.

  3.4.6 Review and approve the audit plan issued at the start of each audit cycle.

  3.4.7 Review the scope and results of the external audit and any significant findings reported in the auditor’s Report to the Audit Committee.

  3.4.8 Review and discuss any reports from the external auditors on critical accounting policies and judgemental matters.

  3.4.9 Review and make recommendation to the Board on any Letter of Representation required by the external auditors in relation to the Audit process.

4. Reporting responsibilities

• 4.1

  After each meeting, the Committee Chairman shall report formally to the Board on its work and how it has discharged its responsibilities.

• 4.2

  A report to the shareholders on the activities of the Committee in discharging its responsibilities may be included in the Annual Report.

• 4.3

  The Committee Chairman shall attend the Annual General Meeting to answer shareholder questions on the Committee’s activities.

5. Authority

• The Committee has authority to:

  5.1 oversee any investigation of activities which are within its terms of reference;

  5.2 require provision of any necessary information to fulfill the above;

  5.3 obtain, following consultation with the Chairman of the Company, outside legal help and any professional advice, at the Group’s expense, which is deemed necessary to enable it to fulfill its duties;

  5.4 call any employee, through the Company Secretary, to be questioned at a meeting of the Committee as and when required; and