home

• shareholder information |
• notice of AGM |
• proxy (pdf - 36kb) |
• glossary of financial terms |
• downloads

corporate governance

audit committee

The audit committee consists of three independent non-executive directors, including Mike Leeming who chairs the committee.

The main responsibilities of the committee are set out in the terms of reference and include:

• assisting the directors in fulfilling their responsibilities for ensuring that published financial reports are objective, complete and accurate and that the financial statements comply with International Financial Reporting Standards;
• the review and approval of the accounting policies and practices and any proposed changes thereto;
• receiving and dealing with complaints related to accounting and internal audit matters;
• assisting the directors in ensuring that there is an adequate and effective system of internal control in place;
• the review and approval of the scope of the external audit review and the external audit fee;
• evaluating the independence and effectiveness of the external audit;
• the review and approval of the external auditor independence policy;
• the review and approval of the internal audit coverage plan;
• evaluating the effectiveness of internal audit;
• assessing if there is an appropriate framework in place to ensure compliance with tax regulations;
• reviewing and making recommendations to the board on the corporate governance policies, including price sensitive information and insider trading policies;
• considering and making recommendations to the board on the appointment and retention of external auditors; and
• supporting the overall effectiveness of corporate governance processes.

To ensure that the committee can effectively comply with its terms of reference, the Director: Finance, the external auditors and the Head of internal audit attend the meetings as invitees. In addition, the audit committee holds separate meetings with management, external audit, and risk management and the Head of internal audit to ensure that all relevant matters have been identified and discussed without undue influence.

There is a strong integration and co-ordination between the activities of the risk and audit committees and Mike Leeming and Nigel Colne are members of both committees to ensure the appropriate exchange of information.

During the year, the audit committee implemented a formal complaints policy in line with the requirements of the Corporate Laws Amendment Act, (No. 24 of 2006). This policy is available on our investor relations website. In addition, in terms of the requirements of the Act:

• the board formally constituted the audit committee for the next financial year; and
• the audit committee assumed responsibility for all the South African subsidiary companies within the group.

The committee met a total of four times during the year. The details of individual attendance at the audit committee meetings are set out here. The Chairman of the audit committee attends the annual general meetings.

internal control

The board is accountable for the group’s system of internal control and has delegated this responsibility to management. The system of internal control is designed to ensure that the significant risks are being appropriately managed and provide reasonable assurance that:

• business objectives will be achieved in normal and adverse trading conditions;
• operations are efficient and effective;
• management and financial information is reliable;
• company assets and information are appropriately safeguarded; and
• there is compliance with applicable laws and regulations.

The internal control system consists of five key elements as set out below:

Management is focused on continuous improvements to the system of internal control. The implementation of the Oracle financial system over the next financial year will provide a good opportunity to improve the end-to-end financial controls and processes within the group.

independent assurance providers

A key element of the system of internal control is the reviews of the independent assurance providers to assess the adequacy and effectiveness of the controls. These independent assurance processes are outlined in more detail below.

internal audit

Internal audit provides independent assurance on the adequacy and effectiveness of the system of internal control in place to manage the significant risks down to an acceptable level.

Internal audit also engages proactively with management to drive meaningful and sustainable improvements in the control environment. This is achieved by using specialist risk and control knowledge to provide practical recommendations to improve the design of and compliance with key controls.

Internal audit is a higly valuable and effective monitoring activity and during the year internal audit improved its effectiveness by:

• increasing its use of business intelligence and data interrogation to drive the audit work and ensure audit remains focused on the key risk areas; and
• extending the secondment programme from the business to internal audit. This ensures that internal audit’s specialist risk and control knowledge is complemented with in-depth business experience, thereby ensuring that the reviews focus on the key process risks and that the control recommendations are practical and sustainable.

An internal audit coverage plan is reviewed and approved by the audit committee in May each year, and is revised quarterly to ensure that it remains relevant to the key business priorities and changing risk environment.

Key audit findings are reported to the audit committee quarterly in the red flag report. Progress in addressing these red flag items is audited quarterly and items are reported to the committee until they have been satisfactorily resolved. This enables the committee to ensure that prompt action has been taken to address the key areas of concern.

Internal audit retains its objectivity and independence by reporting functionally to the audit committee and administratively to the Group secretary.

external audit

Ernst & Young Inc and SAB&T Inc, the joint external auditors, provide stakeholders with an independent opinion on whether the annual financial statements fairly present, in all material respects, the financial position of the company and the group.

External audit regularly liaises with internal audit to understand the scope of their work and the results of their audits. It should be noted that any control work performed by external audit is limited to the work necessary to support their audit opinion.

external auditor independence policy

External audit is a key component of the independent assurance framework and therefore the audit committee needs to ensure that external audit is independent and objective. To govern this, the board has adopted an external auditor independence policy. This policy defines the prohibited and allowable non-audit services which the external auditors can perform and restrict the value of allowable non-audit services to 20% of the annual external audit fee. This policy has been updated to reflect the requirements of the Corporate Laws Amendment Act, (No. 24 of 2006), which requires that the audit committee pre-approve any proposed contract with the auditor for the provision of non-audit services to the company. The terms of this policy also comply with the minimum requirements as set out in the Auditing Profession Act, (No. 26 of 2005), and the requirements of the Code of Professional Conduct of the Independent Regulatory Board for Auditors, and in a number of cases are more restrictive.

In terms of the policy, the external audit partner from SAB&T Inc completed his fifth year on the group audit and as such a new partner has been appointed for the next financial year.

other independent assurance

Specialist assurance providers are used to assess the adequacy and effectiveness of controls in certain instances, including audits on product health, safety and hygiene at our stores and suppliers.

control opinion

The output of the risk management process, in conjunction with the work of the independent assurance providers, indicates to the directors that the controls in place are adequate and effective. Furthermore, no material losses, exposures or financial misstatements have been reported to the directors for the financial year.

This opinion recognises that the business is dynamic and that at any point in time there are new areas of risk exposure which may require management attention. As such, there is a continual focus on ensuring that the control environment within each business area is understood and maintained at the required level.