1.0 Introduction
1.1 These terms of reference govern the procedures and conduct of the Royal Mint Audit Committee.
2.0 Audit Committee objectives
2.1 The Audit Committee will give advice both to the Board of Directors and the Accounting Officer & Chief Executive on the adequacy of audit arrangements (internal and external) and on the implications of assurances provided in respect of risk and control in the Royal Mint.
2.2 In order to provide this advice, the Audit Committee will review the adequacy of the financial reporting process, the system of internal control and management of risks, the audit process and the Royal Mint's process for monitoring compliance with the Royal Mint Trading Fund Order 1975, other applicable laws and regulations and directions from HM Treasury to Trading Funds and Executive Agencies.
2.3 In performing its duties, the Committee will maintain effective working relationships with the Royal Mint's executive directors, management and the internal and external auditors.
2.4 In order to assist each committee member to perform his or her role effectively, the Chair of the Committee will make them aware of these terms of reference.Each Committee member should obtain an understanding of the Royal Mint's business and operations, corporate governance arrangements and management's processes for identifying and managing risks.
3.0 Authority
3.1 The Royal Mint Board of Directors and Accounting Officer authorise the Audit Committee, within the scope of its responsibilities to:
- seek any information it requires from:
- any employee (and all employees are directed to co-operate with any request made by the audit committee)
- external parties.
- obtain outside legal or other professional advice
- ensure the attendance of Royal Mint management at meetings as appropriate.
4.0 Organisation
Membership
4.1 The Audit Committee will comprise of at least three non-executive directors of the Royal Mint, all of whom are independent of management.The Chairman of the Board of Directors will not be a member of the Committee.
4.2 Committee members will be appointed by the Board of Directors, who will review members' tenure from time to time and at least every three years.New members will be given clear terms of appointment and provided with appropriate induction training.
4.3 The chair of the Audit Committee will be nominated by the Board of Directors.
4.4 A quorum for any meeting will be two members.
4.5 The secretary of the Audit Committee will be the Royal Mint Board of Directors secretary.
Committee meetings
4.6 The Audit Committee may invite such other persons to its meetings as it deems necessary.The Chairman of the board, the Chief Executive/ Accounting Officer and the Director of Finance will generally be invited to attend all Committee meetings.
4.7 The internal and external auditors should be invited to attend each meeting of the Committee and to make presentations as appropriate.
4.8 Meetings should be held not less than four times a year. Special meetings may be convened as required.
4.9 The Head of Internal Audit and the Director of the National Audit Office responsible for the Royal Mint's external audit have right of access to the audit committee.Internal audit or the external auditors may request the Chairman to convene a meeting if they consider that it is necessary.
4.10 The Chair of the Committee will hold private meetings with the internal and external auditors at least on an annual basis.
4.11 The proceedings of all meetings will be minuted.
4.12 The minutes of each meeting should be approved by the Chairman and distributed to all committee members, the Accounting Officer, all Board members, internal audit and external audit.
4.13 Meetings should be held to a predetermined agenda which should be distributed in good time along with supporting documents.
5.0 Roles and responsibilities
Risk management and internal control
The Audit Committee will:
5.1 Evaluate the adequacy of the mechanisms established by management for the assessment and management of risk.In this respect, a report on the activities of the Risk Management Committee will be presented to the audit committee at each meeting (by exception) and on an annual basis.
5.2 Evaluate the process established by management to establish and maintain an appropriate "control culture" for the embedding of risk management and for ensuring that all employees have an understanding of their roles and responsibilities in this regard.Risk management processes should include the setting, communication and enforcement of policies in respect of, for example, health and safety, fraud and whistleblowing.
5.3 Require management to report on whether recommendations for the improvement of internal controls made by internal and external auditors have been implemented.
Internal audit
The Audit Committee will:
5.4 Review the organisational structure of the internal audit function and ensure that:
- it is appropriate for the Royal Mint
- it complies with Government internal audit standards.
5.5 Ensure appropriate procedures are in place for the appointment, replacement, reassignment or dismissal of the Head of Internal Audit and any external organisation providing internal audit services to the Royal Mint, including the consideration of value for money.
5.6 Review the planned internal audit activities and consider their adequacy as a basis for providing the Accounting Officer with an independent and objective opinion on risk management, control and governance.In particular, advise the Accounting Officer on the adequacy of:
(a) the terms of reference for internal audit;
(b) the terms of engagement for internal audit where the service is fully or partially provided by an external supplier;
(c) the effectiveness of the internal audit strategy and periodic plan in addressing the organisational risks;
(d) the resourcing of internal audit;
(e) the periodic work plans of internal audit;
(f) the arrangements for and the results of quality assurance processes;
(g) the adequacy of management's response to internal audit advice and recommendations, including the monitoring of action plans; and
(h) the independence of the Head of Internal Audit and their internal audit function from other executive activities undertaken in the Royal Mint.
5.7 Review annually the effectiveness of the internal audit function.
5.8 Ensure that significant findings and recommendations made by the internal auditors are received and discussed on a timely basis.
5.9 Ensure that management responds on a timely basis to recommendations made by the internal auditors.
Financial reporting - annual financial statements
The Audit Committee will:
5.10 Review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on the financial statements.
5.11 Review the annual financial statements and determine whether they are complete and consistent with the information known to committee members; assess whether the financial statements reflect appropriate accounting principles, and that appropriate accounting policies have been adopted and adequately disclosed.
5.12 Focus on judgemental areas and pay particular attention to complex and/or unusual transactions.
5.13 Review the other sections of the annual report and, in particular, the Accounting Officer's corporate governance statement, and, where separate, Statement of Internal Control and consider whether the information is understandable and consistent with members' knowledge about the Royal Mint and its operations.
5.14 Review the other sections of the annual report and, in particular, the Accounting Officer's corporate governance statement, and, where separate, Statement of Internal Control and consider whether the information is understandable and consistent with members' knowledge about the Royal Mint and its operations.
External audit
The Audit Committee will:
5.15 Review the external auditors' proposed audit scope and approach and ensure that no unjustified restrictions or limitations have been placed on the scope.
5.16 Consider the co-operation between internal and external auditors and the external auditors' reliance on the internal audit, and ensure that the benefits to the Royal Mint from co-operation are maximised.
5.17 Review the results of the external audit and ensure that significant findings and recommendationsmade by the external auditors are received and discussed on a timely basis.
5.18 Ensure that management responds on a timely basis to recommendations made by the external auditors.
5.19 Review the external auditor's independence from the activities of the Royal Mint outside of their appointment as external auditors.
5.20 Review annually the performance of the external auditors.
Compliance with laws and regulations
The Audit Committee will:
5.21 Review the effectiveness of the system for monitoring compliance with laws and regulations.Receive reports of management's investigation and any action taken in respect of any fraudulent acts or non-compliance with laws and regulations.
5.22 Obtain regular updates from management regarding compliance matters.
5.23 Be satisfied that applicable regulatory compliance matters have been considered in the preparation of the financial statements.
5.24 Review the findings of any examinations by regulatory agencies.
Reporting responsibilities
The Audit Committee will:
5.25 Regularly update the Royal Mint Board of Directors and the Accounting Officer about Committee activities and make appropriate recommendations; and report annually on the work of the Committee.
Other responsibilities
The Audit Committee will:
5.26 Review the adequacy of management's processes for providing assurance to the Accounting Officer relating to the corporate governance requirements of the Royal Mint.
5.27 Perform other oversight functions as requested by the Board of Directors and the Accounting Officer.
5.28 Consideration should be given periodically to the ongoing training needs of Committee members.
5.29 Evaluate the Committee's own performance on a regular basis.
5.30 The Committee's terms of reference will be published (by placing a copy on the Royal Mint's website).They will be reviewed annually, or on other occasions as circumstances determine and any changes will require the approval of the Board and the Accounting Officer.
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