AUDIT COMMITTEE REPORT
The legal responsibilities of the Nedbank Group Audit Committee ( the
committee ) are set out in the Companies Act, 61 of 1973 (as amended), and the Banks Act, 94 of 1990 (as amended). These responsibilities, together with the requirements of parent company Old Mutual plcs audit committee and compliance with appropriate governance and international best practice, are incorporated in the committees charter, which is reviewed annually and approved by the board.
Composition of the committee
All independent non-executive directors, with the exception of the Chairman of the board, are eligible to serve on the committee. The Directors Affairs Committee recommends to the board any appointments to or removals from the board, which in turn is responsible for the composition of the committee. The committee has three or more members, all of whom are financially literate, with three members forming a quorum. Access to training is provided on an ongoing basis to assist members in discharging their duties.
The committee comprised the following members during the year and to the date of this report, except where noted otherwise:
- CJW ball (Chairman)
- TCC Chikane
- Np Mnxasana
- PJ Moleketi (appointed 19 November 2009)
- MI Wyman (appointed 19 November 2009)
- JB Magwaza (resigned 19 November 2009)
Biographical details of the current members of the committee are set out
here. Members fees are included in the
table of directorsí remuneration here.
The Chief Executive, Chief Financial Officer, Chief Operating
Governance and Compliance Officer and representatives of the external auditors are invited to attend the committee meetings. The external auditors attend all committee meetings and separate meetings are held to afford them the opportunity to meet with the committee without the presence of management or internal auditors. The internal auditors attend all committee meetings and are similarly afforded separate meetings with the committee.
Internal audit is an independent assurance function, forming
part of the third line of defence as set out in the groupís
Enterprisewide Risk Management Framework (ERMF). the Chief
Internal Auditor has a functional reporting line to the committee
chairperson and an operational reporting line to the Chief
Executive Officer. Further details on the internal audit function
are contained in the Enterprise Governance and Compliance
The groupís external auditors are Deloitte & Touche and KPMG
Inc. Fees paid to the auditors are disclosed in note 15 to the
annual financial statements. Further details are
contained in the Enterprise Governance and Compliance Report.
Key functions and responsibilities of the committee
The key functions and responsibilities of the committee as
outlined in the charter are to:
- assist the board of directors in its evaluation of the adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied within the group in the day-to-day management of its business;
- facilitate and promote communication between the board, management, the external auditors and the Chief Internal Auditor;
- introduce such measures as in the committees opinion may serve to enhance the credibility and objectivity of financial statements and reports prepared with reference to the affairs of the group;
- nominate for appointment as auditors of the company registered auditors who, in the opinion of the committee, are independent of the group;
- determine the fees to be paid to the auditors and the auditors terms of engagement;
- ensure that the appointment of the auditors complies with the Companies Act and any other legislation relating to the appointment of auditors;
- determine the nature and extent of any non-audit the nature services to the
- receive and deal appropriately with any complaints (whether from within or outside the group) relating either to the accounting practices and internal audit of the group or to the contents or auditing of its financial statements, or any other related matters thereto; and
- perform such further functions as may be prescribed.
The committee reports that it has adopted appropriate formal terms of reference to discharge its responsibilities, has regulated its affairs in compliance with its charter and has discharged all its responsibilities as contained therein.
Effectiveness of internal control
The committee monitors the groups internal controls for effectiveness and adherence to the ERMF for pragmatic and consistent application, as these form the foundation of successful risk management.
The emphasis on risk governance is based on a three-lines-of-defence concept, which is the backbone of the groups ERMF. The ERMF places weight on accountability, responsibility, independence, reporting, communication and transparency, both internally and with all our key external stakeholders.
The functions of the three lines of defence, as well as the principal responsibilities that extend across the group, are set out in the
Risk and Balance Sheet Management
Specific responsibilities of the committee include the following:
- Monitoring managements success at creating and maintaining an effective internal control environment throughout the group and at demonstrating and stimulating the necessary respect for this control environment.
- Monitoring the identification and correction of weaknesses and breakdowns of systems and internal controls.
Financial control, accounting and reporting
- Monitoring the adequacy and reliability of management information and the efficiency of management information systems.
- Delegating to the Board Strategic Information Technology
Committee the monitoring of the adequacy and efficiency
of the groupís information systems and receiving from them
- Satisfy itself of the expertise, resources and experience of
the finance function.
- Reviewing quarterly, interim and final financial results and
statements and reporting for proper and complete disclosure
of timely, reliable and consistent information.
- Evaluating on an ongoing basis the appropriateness,
adequacy and efficiency of accounting policies and
procedures, compliance with generally accepted accounting
practice and overall accounting standards as well as any
- Discussing and resolving any significant or unusual
- Reviewing and monitoring capital expenditure throughout
the group for adequate control, monitoring and reporting.
- Reviewing reports from the Group Credit Committee
regarding the effectiveness and efficiency of the credit monitoring
process, exposures and related impairments and
adequacy of impairment provisions to discharge its board
and Banks Act obligations satisfactorily.
- Monitoring the management and reporting of tax-related
- Monitoring the management and effectiveness of the
accounting and taxation risks as set out in the groupís ERMF.
- Reviewing and monitoring all key performance indicators
to ensure the decision making capabilities and the accuracy
of the related reporting and financial results they aid are
maintained at industry levels.
- Direct reporting by the Chief Internal Auditor to the
Chairman of the committee.
- Monitoring the effectiveness of the internal audit function
in terms of its scope, plans, coverage, independence, skills,
staffing, overall performance and position within the
- Monitoring and challenging, where appropriate, action
taken by management with regard to adverse internal audit
- Forming a view on the adequacy and effectiveness of the
- Monitoring the bankís compliance with the Basel II Accord.
- Recommending to the board the selection of the external
auditors and approving their audit fees.
- Monitoring the effectiveness of external auditors in terms of
their skills, independence, audit plan, reporting and overall
- Approving non-audit services to be rendered by the external
auditors and monitoring conflicts of interest.
- Considering whether the extent of reliance placed on
internal audit by the external auditors is appropriate and
whether there are any significant gaps between internal and
- Reviewing the adequacy of the regulatory reporting
processes, including the quality of the Banks Act reporting
and the adequacy of systems and people to perform these
- Considering the contents of any regulatory reports relating
to the key functions of the committee and monitoring
management actions to resolve any issues identified.
- Performing such other functions as are prescribed in the
regulations relating to the Banks Act.
Having considered, analysed, reviewed and debated information
provided by management, internal audit and external audit, the
committee confirmed that:
- the internal controls of the group have been effective in all
material aspects throughout the year under review;
- these controls have ensured that the groupís assets have
- proper accounting records have been maintained;
- resources have been utilised efficiently; and
- the skills, independence, audit plan, reporting and overall
performance of the external auditors are acceptable and
that it recommends their reappointment in 2010.
Corporate Laws Amendment Act
In terms of the Companies Act, 61 of 1973 (as amended), the
committee is responsible, as set out above, for all subsidiary
companies without their own audit committees which
- reviewing the formalised process to perform functions on
behalf of subsidiaries; and
- ratifying annually the list of subsidiaries for which
responsibility is assumed.
Appropriateness of the expertise and
experience of the Chief Financial Officer
In terms of the JSE Listings Requirements the committee had,
at its meeting held on 25 January 2010, satisfied itself as to
the appropriateness of the expertise and experience of the Chief
Annual financial statements
The committee has:
- reviewed and discussed the audited annual financial
statements included in the annual report with the external
auditors, the Chief Executive and the Chief Financial officer;
- reviewed the external auditorsí management letter and
managementís response thereto;
- reviewed significant adjustments resulting from external
audit queries and accepted any unadjusted audit differences;
- received and considered reports from the internal auditors.
The committee concurs with and accepts the external auditorsí
report on the annual financial statements and has recommended
the approval thereof to the board. The board has subsequently
approved the financial statements, which will be open for
discussion at the forthcoming annual general meeting.
Audit Committee Chairman
24 February 2010