Audit Committee report
INTRODUCTION
The Audit Committee presents its report for the financial year ended 31 March 2013. The report is presented in accordance with the Group’s memorandum of incorporation, the requirements of the Companies Act, 71 of 2008 (the Companies Act), as well as the recommendations contained in the third King Report on Governance for South Africa (King III). Amongst others, the Audit Committee’s operations are also guided by a formal charter that is in line with the JSE Listings Requirements.
MEMBERSHIP
The membership of the committee comprised the following independent non-executive directors:
I Kgaboesele (chairman)
B du Plessis
K Mzondeki
F Petersen
LL von Zeuner
Resignations
PSC Luthuli – 24 October 2012 – retired
NP Mnxasana – 24 October 2012 – not re-elected by shareholders
NP Dongwana – 2 November 2012 – resigned
In addition, the chief executive officer; the chief financial officer, head of internal audit, head of risk management and the external auditors are also permanent invitees to meetings.
Qualification details of the current members of the Audit Committee are set out on pages 60 and 61.
Details of meeting attendance can be found on page 50.
DUTIES PERFORMED
During the financial year ended 31 March 2013, the committee convened six times to discharge both its statutory and board responsibilities. As an overview only, and not to be regarded as an exhaustive list, the committee carried out the following duties:
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Reviewed the appropriateness of the identified significant risks and the management and control thereof; |
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Discussed the Group’s major risk exposures and the steps management had undertaken to mitigate them; |
| • |
Reviewed the Group’s statement on internal control systems prior to endorsement by the Board; |
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Satisfied itself that the internal audit coverage plans made provision for effectively addressing the risk areas of the business; |
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Considered the results of work performed by, and the conclusions of, the internal audit function, in relation to:
– Corporate governance;
– Risk management;
– Financial systems, internal control and reporting; and
– Internal financial controls; |
| • |
Assessed and evaluated the independence and
effectiveness of the internal auditor functions, in
accordance with its mandate; |
| • |
Assessed the effectiveness of the combined
assurance forum; |
| • |
Reviewed the performance and expertise of the chief
financial officer; |
| • |
Responsible for the appointment of independent
external auditors, retention, compensation, resignation
or dismissal of the external auditors, as well as their
terms of engagement and oversight of the work of the
external auditors who report directly to the committee; |
| • |
Considered any material problems, reservations and
observations, or any potentially contentious accounting
treatments or judgements, or significant unusual
transactions, or going concern issues arising from the
external audit; |
| • |
Reviewed and recommended for adoption by the
Board the interim and annual financial information
that is publicly disclosed, including the integrated
annual report; |
| • |
Reviewed the adequacy of management’s corrective
action taken in response to significant internal and
external audit findings; |
| • |
Obtained regular updates from management regarding
compliance matters; |
| • |
Obtained regular updates on the status of material
open litigation and other proceedings and the
related reserves; |
| • |
Reviewed the adequacy and effectiveness of the control
framework and governance structures implemented
within the IT environment; and |
| • |
The committee has received reports on matters relating
to ethical conduct and the prevention, detection and
investigation of fraudulent activity or misconduct within
Telkom Group companies, received and dealt with
concerns and complaints through “whistle-blowing”
mechanisms that were reported to the committee by
the head of risk management. |
The committee is satisfied that it has fulfilled its obligations in respect of the Audit Committee charter.
CONCLUSION
Based on the results of the formal documented review of the Group’s system of internal controls and risk management, including the design, implementation and effectiveness of the internal financial controls conducted by Telkom audit services during the 2013 financial year and considering information and explanations given by management and discussions with the external auditor on the results of the audit, the Audit Committee has considered all significant control matters and associated action plans. Having regard to the aforementioned, nothing has come to the attention of the Audit Committee that leads it to conclude that the Group’s system of internal controls and risk management are not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements.
The Audit Committee is satisfied that Ernst & Young Inc. is independent and was appointed in terms of the requirements of section 90(2) of the Companies Act, No. 71 of 2008 and nominated there-appointment of Ernst & Young Inc. as registered auditors for the 2014 financial year.
The Audit Committee recommended the consolidated annual financial statements and the integrated report for the year ended 31 March 2013 for approval by the board of directors on 13 June 2013.
I Kgaboesele
Chairman of the Audit Committee
13 June 2013 |
