Audit committee report

Introduction

The audit committee presents its report for the financial year ended 31 March 2015. The report is presented in accordance with the group’s memorandum of incorporation, the requirements of the Companies Act, No 71 of 2008 as amended (the Act), as well as the recommendations contained in the third King Report on Governance for South Africa (King lll). Among 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)
KW Mzondeki
LL von Zeuner
RG Tomlinson
T Dingaan


Resignations

F Petersen-Lurie

In addition, the group 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 36 and 39. Details of meeting attendance can be found on page 103.

Duties performed

During the financial year ended 31 March 2015, 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:

  • Reviewed the appropriateness of the identified significant risks and the management and control thereof
  • 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
  • Satisfied itself that the Telkom audit services’ coverage plans made provision for effectively addressing the risk areas of the business
  • 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
    • 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 and the finance function and satisfied itself that the resources and expertise within the finance junction
  • Took responsibility 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 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
  • 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.

Going concern

Based on the results and the committee’s assessment and that the going concern basis of accounting was appropriately applied, the committee is comfortable in recommending to the board that no material uncertainties existed to negatively impact the going concern of the group and all entities in the group.

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 2015 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 as amended and nominated the re-appointment of Ernst & Young Inc. as registered auditors for the 2016 financial year.

The audit committee recommended the consolidated annual financial statements and the integrated report for the year ended 31 March 2015 for approval by the board of directors on 5 June 2015.

I Kgaboesele
Chairman of the audit committee
5 June 2015