Terms of Reference for the Audit and Risk Committee
1. Appointment and membership
The Audit and Risk Committee (the “Committee”) is appointed by the Supervisory Board of PricewaterhouseCoopers LLP from the members of the Board.
A quorum shall be four members for any meeting at which the Committee’s delegated powers are to be exercised and otherwise three members. In the event of difficulty in achieving a quorum, Supervisory Board members who are not members of the Committee may be co-opted as members for individual meetings, provided the majority of the quorum are full members of the Committee.
Supervisory Board members who are not members of the Committee may attend meetings where relevant after first liaising with the Committee Chair.
The Chairman of the Committee shall be appointed by the Supervisory Board.
In order to perform his or her role effectively, each Committee member should obtain an understanding of the detailed responsibilities of Committee membership as well as the PwC business, operations and risks.
2. Attendance of non-members at meetings
The CFO, the Finance Director, the Chair of the Risk Council, other individuals with oversight responsibility for risk, the Head of Internal Audit, and a representative of the external auditor shall attend meetings at the invitation of the Committee. Other members of management may also be invited to attend meetings.
The Committee shall meet with the external and internal auditor at least once a year without the presence of management.
3. Frequency of meetings
Meetings shall be held not less than three times a year and, where appropriate, will coincide with key dates in the firm’s financial reporting cycle.
The external auditor or the Head of Internal Audit or the Chair of the Risk Council may request a meeting if they consider that one is necessary.
4. Delegated Authority
The Committee is authorised by the Supervisory Board to investigate any activity within these terms of reference and, within its scope of responsibilities, to seek any information it requires and to ensure the attendance of management representatives at meetings as appropriate.
The Committee has delegated authority from the Supervisory Board for the approval of financial penalties on individual partners for independence infringements.
The Committee has the authority to obtain outside legal or independent professional advice. The advisers may attend meetings as necessary and the cost of the advisers shall be borne by the firm.
5. The Committee’s Responsibilities
The responsibilities of the Committee are set out in the Appendix to these terms
6. Reporting procedures
The minutes of meetings of the Committee shall be circulated to all members of the Supervisory Board.
The Committee shall, at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Supervisory Board for approval.
The Committee’s activities in fulfilment of its duties during the year shall be disclosed in the Annual Report.
April 2010
APPENDIXThe responsibilities of the Committee shall be:
Audit and the auditors
a. to assess annually the qualification, expertise and resources, and independence of the external auditor, taking account of relevant Ethical Standards and ensuring that key partners are rotated at appropriate intervals;
b. to assess annually the effectiveness of the audit process;
c. to review with management the audit fee and to ensure that the provision of non audit services does not impair the external auditor’s independence or objectivity;
d. to develop and implement a policy on the supply of non audit services by the external auditor and to agree with management a policy on the employment of former employees of the firm’s external auditor and monitor its implementation;
e. to discuss with the external auditor, before the audit commences, the nature and scope of the audit and to review the auditor’s quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements;
f. to make appropriate recommendations, if considered necessary, to the designated members regarding the continuation of the external auditor, to oversee the selection process for new auditors and, if an auditor resigns, to investigate the issues leading to this and decide whether any action is required;
g. to consider the need to include the risk of withdrawal of the external auditor from the market in the Committee’s risk assessment process;
h. to review the external auditor’s management letter and management’s response;
Risk and internal controls
i. to review the effectiveness of the firm’s internal control and risk management framework, in relation to the core strategic objectives of the firm;
j. to consider the risks associated with proposed strategic acquisitions or disposals;
k. to review regular risk management reports from management which enable the Committee to assess the risks involved in the firm’s business and how they are controlled and monitored by management; as part of this review the Committee shall receive Risk Council agendas, send a representative to attend Risk Council meetings and meet with the Chairman of the firm’s Risk Council, or his designate, at least once a year;
l. to monitor and review the effectiveness of the risk management and internal audit functions, to review the internal audit programme and internal auditor’s reports, and to seek such assurance as it may deem appropriate that the functions are adequately resourced and have appropriate standing within the firm;
m. to consider with management the appointment of the Head of Internal Audit;
n. to consider management’s response to any recommendations made by the external auditor or internal audit and review with internal audit and the external auditor any fraudulent or illegal acts, deficiencies in internal control or other similar issue, including reviewing the results of management’s investigation and follow up of any fraudulent acts;
Annual financial statements
o. to review, and challenge where necessary, the actions and judgements of management in relation to the annual financial statements, paying particular attention to:
(i) critical accounting policies and practices, and any changes in them
(ii) decisions requiring a major element of judgement
(iii) the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed
(iv) the clarity of disclosures
(v) significant adjustments resulting from the audit
(vi) the going concern assumption
(vii) compliance with accounting standards and related guidance
(viii) compliance with other legal requirements;
p. to review management’s statement on internal control systems prior to endorsement by the Executive Board, the effectiveness of the firm’s internal control systems and procedures for compliance with the firm’s compliance policy and whether management has discharged its duty to have an effective internal control system;
q. to review the content of the Risk Council report in the Annual Report; Other matters
r. to review the firm’s annual Transparency Report;
s. to review treasury policies from time to time;
t. to review the firm’s procedures for handling allegations from whistleblowers;
u. to review annually the process for monitoring the firm’s compliance with Network Standards;
v. to review the status, monitoring of and procedures for dealing with troublesome practice matters and the insurance arrangements;
w. to review mechanisms for informing and updating partners and staff on independence issues, to receive reports on monitoring of independence and the handling of any issues relating to non compliance and to approve independence penalties;
x. to review tax compliance and tax planning initiatives of the firm; and
y. to perform other oversight functions, as requested by the Supervisory Board.
