BOARD POLICY ON INDEPENDENCE OF EXTERNAL AUDITORS

Transcription

1 BOARD POLICY ON INDEPENDENCE OF EXTERNAL AUDITORS

2 1. Introduction This document explains the procedures to follow to obtain Audit Committee approval for the use of Sanford s appointed external audit firm for non-audit services. Some answers to common implementation issues are also provided. These procedures will be reviewed by the Audit Committee in October 2003, after 12 months of operation. 2. Purpose Audit Committee policy defines the services that may or may not normally be conducted by our external auditing firm. This paper sets out: Clarification of services included within each category of the policy Details of the approval process to be followed where Sanford wish to engage the external audit firm for approved non-audit services Other matters requiring clarification 3. Audit and audit related services items included The auditing firm may provide audit and audit-related services that, while outside the scope of the statutory audit, are consistent with the role of auditor. Examples are: Examples Includes Financial audits Financial statements of Sanford and all subsidiaries Half year reviews Financial reviews Financial reviews of statements of entities that Sanford may have interest in acquiring to determine consistency of accounting policies with Sanford and other matters that may affect the audit of Sanford if the entity is acquired by Sanford Accounting policy reviews Reviews of changes of accounting policies contemplated by Sanford that may affect the audit of Sanford Completion audits Completion audits on entities acquired by Sanford 4. Services permitted by the external audit firm subject to approval The auditing firm may provide non-audit services that are not perceived to be materially in conflict with the role of auditor, subject to the approval of the Audit Committee.

3 The Audit Committee will specifically confirm activities in this category. Examples are: Category Category includes Advice on appropriate Assistance with introduction of new standards accounting standards Review of accounting for significant transactions Review of legislation and advice on its application to Assistance with implementation of new financial reporting legislation or standards Sanford Compilation of accounting Assistance with summarising records for Tax audit purposes records to assist with queries from revenue authorities Tax compliance services Data gathering and review of historic records Review of the adequacy of Audits of compliance plans controls and recommendations for improvements Reviews of Internal Controls 5. Services that should be provided by the external audit firm The auditing firm should not provide services that are perceived to be materially in conflict with the role of auditor These include investigations and consulting advice and subcontracting of operational activities normally undertaken by management, and on which the external audit firm may ultimately be required to express and opinion on its own work. Examples are: Category Category includes Due diligence on potential new business activities, Relates to any acquisitions of any asset or business or venture, regardless of the % acquired potential company acquisitions or new or expanded investments Advice on deal structuring and assistance in deal Involvement of external audit firm in proposed mergers or acquisitions documentation Tax planning and strategy Interpretation of tax legislation and its application to Sanford Designing or implementing new IT systems or financial Investigations, recommendations or implementations services with respect to IT services for Sanford controls Book-keeping Provision of accounting or book-keeping services to Sanford Valuations Valuations completed to support business acquisitions Executive recruitment and All recruitments of staff at Senior Manager level or above appointments Senior management secondments Partners and senior managers from the external audit team

4 6. Use of external audit firm for non-audit services The use of the external audit firm may be permitted to provide non-audit services that are not perceived to be materially in conflict with the role of auditor, subject to the approval of the Audit Committee. Such engagements need approval from the Audit Committee. The Audit Committee has authorised the following procedures: 6.1. Where the anticipated fee is greater than $50,000, approval must be sought from the Chairman of the Audit Committee, or in his absence the Chairman of the Board. The Managing Director, on receipt of the relevant information, will contact the Chairman of the Audit Committee Where the anticipated fee is over $25,000, but under $50,000, approval must be sought from the Managing Director, or in his absence the Finance Manager Engagements that may be undertaken by the external audit firm, and where the fee is less than $25,000, do not require approval All approvals under 6.1 and 6.2 must be notified to the first Board meeting following. Approval process permitted services Please complete the following form and submit to the Managing Director Confirm that this activity does not fall within those identified in the Audit as services that should not be provided by Explain the service the external audit firm will provide Approximate fee to be paid to the external audit firm Was this engagement subject to tender? In light of the examples in Sanford s policy, do you perceive this engagement as potentially conflicting with the role of the external audit firm? 7. Other matters requiring clarification 7.1. A list of potential services provided by our external audit firm has been included with this policy. What about services that are not covered in the list? If a service does not fall within the category audit or audit-related, nor within the list of services which the external audit firm should not provide, then approval should be sough as per the procedures listed on page 7 before it is engaged to undertake the service

5 7.2. What should happen if the assignment is going to tender? If an assignment is to go to tender, and the external audit firm are expected to tender, approval to appoint the external audit firm (should their tender prove to be the best) should be obtained prior to the commencement of the tender. This ensures that there is a level playing field that is, all tenderers may be appointed to the engagement 7.3. Grandfathered Services All existing services provided by the external audit firm, that are subject to a current engagement letter, are grandfathered for the purposes of this policy. In addition to the above the Board should receive at each meeting a report on all consultancy expenditure related to corporate governance issues in progress for a cost expected to be in excess of $25,000. Details to be included in the report should be: Assignment Date Contractor Amount carried forward from previous years This year expenditure budget and actual Contract price Percentage complete Completed price Amount over / under budget