Audit committee report

This report is provided by the audit committee appointed for the 2015 financial year in compliance with the Companies Act 71 of 2008, as amended. The committee’s operation is guided by a detailed charter informed by the Companies Act and King III, and approved by the board.

The committee has executed its duties and responsibilities for the review period in line with its terms of reference relating to the group’s accounting, internal control, external auditing and financial reporting practices.

Structure

The committee comprises three independent non-executive directors. During the year, Richard Dunne resigned as chairman and member of the audit committee. Rob Nisbet, who has been a member of the committee since November 2010, was appointed chairman on 1 June 2015. Yunus Suleman was appointed as a member of the board and audit committee on 13 July 2015.

The chairman of the audit committee is not the chairman of the board of the company. The following directors served on the committee during the period:

  • Richard Dunne (chairman) – resigned on 31 May 2015
  • Rob Nisbet (chairman) – appointed as chairman on 1 June 2015
  • Khotso Mokhele
  • Yunus Suleman – appointed 13 July 2015.

Biographical details of committee members appear on pages 13 and 14. Fees paid to committee members are outlined in the remuneration report on page 91.

The year under review
External audit

The committee, among other matters:

  • Nominated Ernst & Young Inc to shareholders for appointment as the external auditor, and W Kinnear as the designated auditor, for the financial year ended 30 September 2015. It ensured that the appointment complied with all applicable legal and regulatory requirements, and that the auditor and designated auditor are accredited by the JSE Limited
  • Approved the external audit engagement letter, plan and budgeted audit fees payable to the external auditor. Fees paid to the auditor are detailed in note 4.1 of the group annual financial statements
  • Reviewed the audit, evaluated the effectiveness of the auditor and its independence, and evaluated the external auditor’s internal quality control procedures
  • Obtained an annual written statement from the auditor that its independence was not impaired
  • Considered the reports of the external auditor on the group’s systems of internal control, including financial controls
  • Determined the nature and extent of all non-audit services provided by the external auditor and pre-approved all non-audit services to be undertaken
  • Obtained assurances from the external auditor that adequate accounting records were being maintained
  • Considered whether any reportable irregularities were identified and reported by the external auditor in terms of the Auditing Profession Act 26 of 2005, and determined that there were none
  • Nominated the external auditor and designated independent auditor for the company.
Independence of the external auditor

The audit committee is satisfied that Ernst & Young Inc is independent of the group after considering the following factors:

  • Representations made by Ernst & Young Inc to the audit committee
  • The auditor does not, except as external auditor or in rendering permitted non-audit services, receive any remuneration or other benefit from the company
  • The auditor’s independence was not impaired by any consultancy, advisory or other work undertaken
  • The auditor’s independence was not prejudiced by any previous appointment as auditor
  • Criteria specified for independence by the Independent Regulatory Board for Auditors and international regulatory bodies.
Financial statements

In respect of the financial statements, the committee:

  • Confirmed the going-concern requirement as the basis of preparing interim and annual financial statements
  • Reviewed compliance with the financial conditions of loan covenants and determined that the capital and debt facilities of the group are adequate
  • Examined and reviewed the interim and annual financial statements, as well as all financial information disclosed to the public prior to submission to and approval by the board
  • Ensured the annual financial statements fairly present the financial position of the company and group at the end of the financial year and the results of operations and cash flows for that financial year, and considered the basis on which the company and group were determined to be a going concern
  • Considered accounting treatments, significant unusual transactions and accounting judgements
  • Considered the appropriateness of accounting policies adopted and any changes
  • Reviewed the external auditor’s audit report
  • Reviewed the representation letter on the group financial statements signed by management
  • Considered any problems identified and reviewed any significant legal and tax matters that could have a material impact on the financial statements
  • Met separately with management and external audit to review and discuss the annual financial statements
  • Received and considered reports from the internal auditors.
Internal controls and internal audit

For internal controls and internal audit, including forensic audit, the committee:

  • Reviewed and approved the internal audit charter and annual audit plan and evaluated the independence, effectiveness and performance of the internal audit function and compliance with its charter
  • Considered reports of the internal auditor on the group’s systems of internal control including financial controls, business risk management and maintaining effective internal control systems
  • Received assurance that proper and adequate accounting records were maintained and that the systems safeguarded assets against unauthorised use or disposal
  • Reviewed significant issues raised by internal and forensic audit processes and the adequacy of corrective action in response to significant internal and forensic audit findings
  • Assessed the performance of the internal audit function and found it satisfactory
  • Based on the above, and despite the incidence of fraud uncovered at Haco and the Snacks & Treats division, the audit committee confirms it has no reason to believe there were any material breakdowns in the design and operating effectiveness of internal financial controls during this financial year which have not been addressed or are not being addressed by management.

In terms of risk management and information technology relevant to its functions, the committee:

  • Reviewed the group’s policies on risk assessment and risk management, including fraud risks and information technology risks as they relate to financial reporting and the going-concern assessment, and found them sound
  • Considered and reviewed the findings and recommendations of the risk and sustainability committee.

In respect of sustainability issues, the committee:

  • Considered the findings and recommendations of the risk and sustainability committee
  • Met with senior management to consider findings on assurance, and made appropriate enquiries from management. Through this process, it has received the necessary assurances that material disclosures are reliable and do not conflict with financial information.

For legal and regulatory requirements, to the extent that these may have an impact on the financial statements, the committee:

  • Reviewed, with management, legal matters that could have a material impact on the group
  • Reviewed, with the company’s internal counsel, the adequacy and effectiveness of the group’s procedures to ensure compliance with legal and regulatory responsibilities
  • Monitored concerns on accounting matters, internal audit, internal accounting controls, contents of the financial statements, potential violations of the law and questionable accounting or auditing matters
  • Considered reports provided by management, internal auditor and external auditor on compliance with legal and regulatory requirements.

In terms of coordinating assurance activities, the committee reviewed the plans and work outputs of the external and internal auditors and concluded that these were adequate to address all significant financial risks facing the business.

Chief financial officer expertise and experience

The committee also considered the expertise, resources and experience of the chief financial officer, Ms Funke Ighodaro, and concluded that these were appropriate. Biographical details appear on page 14.

Company secretary

During the period, Ian Isdale (BA, LLB, EDP) retired after more than 30 years with the group and was succeeded by Thiroshnee Naidoo on 15 May 2015. In terms of section 3.84 of the JSE Listings Requirements, we have determined that both have the competence, qualifications and experience to hold the position of company secretary for their respective periods of appointment during the year. Biographical details appear on page 15.

All directors have unlimited access to the services of the company secretary, who is responsible to the board for ensuring that proper corporate governance principles are adhered to.

The company secretary is also responsible for ensuring the proper administration of proceedings and matters relating to the board, the company and shareholders in line with applicable legislation and procedures.

The committee confirms that the company secretary maintains an arm’s-length relationship with the board and directors, taking into account that the company secretary is not a director of the company and is not related to any of the directors.

Annual financial statements

Following its review of the annual financial statements of Tiger Brands Limited for the year ended 30 September 2015, the audit committee believes that, in all material respects, these comply with the relevant provisions of the Companies Act and IFRS and fairly present the consolidated and separate financial position of the company at that date and the results of its operations and cash flows for that year. The committee has also satisfied itself of the integrity of the remainder of this integrated annual report 2015.

Having achieved its objectives, the audit committee recommended the annual financial statements and integrated annual report for approval by the board. The board has since approved the annual financial statements and integrated annual report 2015, which will be open for discussion at the upcoming annual general meeting.

Robert Nisbet
Chairman
Audit committee

15 December 2015