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As approved by the Audit Committee on 15th November 2023
The Board of Directors (the “Board”) of Halfords Group plc (the “Company”) has established, in line with the UK Corporate Governance Code 2018, (the “Code”), a Committee of the Board, henceforth known as the Audit Committee (the “Committee”).
1.1. The Committee shall comprise at least three members, all of whom shall be independent non-executive directors.
1.2. Members of the Committee shall be appointed by the Board on the recommendation of the Nomination Committee, in consultation with the Chair of the Committee. The chair of the Board shall not be a member of the Committee.
1.3. At least one member of the Committee shall have recent and relevant financial experience and the Committee as a whole shall have competence relevant to the sector in which the company operates.
1.4. Members of the Committee shall be appointed by the Board, on the recommendation of the nomination Committee in consultation with the chair of the audit Committee. Appointments shall be for a period of up to three years which may be extended for up to two additional three-year periods, provided members continue to be independent.
1.5. Only members of the Committee have the right to attend Committee meetings. However, the Chief Financial Officer, head of internal audit and external audit lead partner will be invited to attend meetings of the Committee on a regular basis and other individuals may be invited to attend all or part of any meeting as and when appropriate.
1.6. The Board shall appoint the Committee chair. In the absence of the Committee chair and/or an appointed deputy at a Committee meeting, the remaining members present shall elect one of themselves to chair the meeting.
2.1. The company Secretary, or their nominee, shall act as the Secretary of the Committee and will ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration to be given to issues.
3.1. The quorum necessary for the transaction of business by the Committee shall be two members.
3.2. In the event that a meeting of the Committee is required but a quorum might not be secured, an existing member of the Committee shall be empowered to appoint another Non-Executive Director(s) to attend such meeting in consultation with the Chair of the Committee, provided that such alternative Non-Executive Director is not the Chair of the Board.
3.3. Members may participate in a meeting of the Committee by means of a conference telephone, video conferencing facility or other suitable communications equipment.
3.4. Any decisions of the Committee shall be taken on a simple majority basis. The Chair of the Committee shall have a casting vote in the event of equality of voting.
4.1. The Committee is authorised by the Board to determine the Company’s policy within its Terms of Reference.
4.2. The Committee is authorised to seek any information it requires from any employee of the Company and all employees shall be directed to co-operate with any request made by the Committee, provided that their role in providing such co-operation is clearly separated from their role within the Company.
4.3. The Committee should have oversight of the Group as a whole and, unless required otherwise by regulation, carry out the duties below for the parent company, major subsidiary undertakings and the Group as a whole, as appropriate.
5.1. The Committee shall meet at least three times each financial year at appropriate intervals in the financial reporting and audit cycle and otherwise as required.
5.2. Prior to the commencement of each financial year, the Chair of the Committee and the Secretary shall review the frequency of and the dates for the Committee’s meetings for the subsequent financial year and propose such dates for agreement by other members of the Committee.
5.3. Outside of the formal meeting programme, the Committee chair will maintain a dialogue with key individuals involved in the company’s governance, including the Board chair, the chief executive officer, the Chief Financial Officer, the external audit lead partner and the head of internal audit.
6.1. Meetings of the Committee shall be called by the Secretary of the Committee at the request of the Committee chair or any of its members, or at the request of the external audit lead partner or Chief Financial Officer or head of internal audit if they consider it necessary and the Secretary shall agree the agenda for any meeting so called with the Chair of the Committee.
6.2. Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee and any other person required to attend no later than five working days before the date of the meeting. Supporting papers shall be sent to Committee members and to other attendees, as appropriate, at the same time.
7.1. The Secretary shall minute the proceedings and resolution of all Committee meetings, as well as keeping appropriate records including recording the names of those present and in attendance.
7.2. Draft minutes of Committee meetings shall be circulated to all members of the Committee. Once approved, minutes should be circulated to all other members of the Board by the company Secretary unless, exceptionally, it would be inappropriate to do so.
8.1. The Committee chair, or an appointed deputy in their absence, shall attend the Company’s annual general meeting to answer any shareholder questions on the Committee’s activities. In addition, the Committee chair should seek engagement with shareholders on significant matters related to the Committee’s areas of responsibility.
9.1. Financial Reporting
9.1.1. The Committee shall monitor the integrity of the financial statements of the company, including its annual and half-yearly reports, preliminary announcements and any other formal statements relating to its financial performance, and review and report to the Board on significant financial reporting issues and judgements which those statements contain having regard to matters communicated to it by the auditor, with particular focus on:
a) any significant financial reporting issues.
b) any significant adjustments resulting from the audit; and,
c) the going concern assumption and major judgements which they contain.
9.1.2. In particular, the Committee shall review and challenge where necessary:
a) the application of significant accounting policies and any changes to them; the methods used to account for significant or unusual transactions where different approaches are possible.
b) whether the Company has adopted appropriate accounting policies and made appropriate estimates and judgements, taking into account the external Auditor’s views on the financial statements;
c) the clarity of and completeness of the disclosures in the Company’s financial statements and the context in which statements are made; and,
d) all material information presented with the financial statements, including the strategic report and the corporate governance statements relating to the audit and risk management.
e) any other statements requiring Board approval which contain financial information first, where to carry out a review prior to Board approval would be practicable and consistent with any prompt reporting requirements under any law or regulation including the Listing Rules, Prospectus Rules and Disclosure Guidance and Transparency Rules sourcebook.
9.2. Narrative Reporting
9.2.1. Where requested by the Board, the Committee should review the content of the annual report and accounts and advise the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance, business model and strategy and whether it informs the Board’s statement in the annual report on these matters that is required under the Code.
9.3. Internal Controls and Risk Management Systems
9.3.1. The Committee shall keep under review the company’s internal financial controls systems that identify, assess, manage and monitor financial risks, and other internal control and risk management system.
9.3.2. The Committee shall review and approve the statements to be included in the annual report concerning internal control, risk management, including the assessment of principal risks and emerging risks, and the viability statement.
9.3.3. The Committee is also responsible for ensuing the company has adequate compliance, whistleblowing and fraud controls.
9.3.4. The Committee shall review the adequacy and security of the company’s arrangements for its employees, contractors and external parties to raise concerns, in confidence, about whistleblowing and possible wrongdoing in financial reporting or other matters. The Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action.
9.3.5. The Committee shall review the company’s procedures for detecting fraud, the company’s systems and controls for the prevention of bribery and receive reports on non-compliance.
9.3.6. The Committee should ensure that it receives regular reports from the Money Laundering Reporting Officer and the adequacy and effectiveness of the company’s anti-money laundering systems and controls; and regular reports from the Head of Internal Audit and keep under review the adequacy and effectiveness of the company’s compliance function.
9.4. Internal Audit
9.4.1. The Committee shall approve the appointment or termination of appointment of the head of internal audit.
9.4.2. The Committee shall review and approve the role and mandate of internal audit, monitor and review the effectiveness of its work, ensuring that the Committee has adequate resources and appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards.
9.4.3. It is the responsibility of the Committee to review and approve the annual internal audit plan to ensure it is aligned to the key risks of the business, and receive regular reports on work carried out ensuring internal audit has unrestricted scope, the necessary resources and access to information to enable it to fulfil its mandate, ensure there is open communication between different functions and that the internal audit function evaluates the effectiveness of these functions as part of its internal audit plan, and ensure that the internal audit function is equipped to perform in accordance with appropriate professional standards for internal auditors.
9.4.4. The Committee must ensure the internal auditor has direct access to the Board chair and to the Committee chair, providing independence from the executive and accountability to the Committee.
9.4.5. The Committee should carry out an annual assessment of the effectiveness of the internal audit function and as part of this assessment meet with the head of internal audit without the presence of management to discuss the effectiveness of the function and review and assess the annual internal audit work plan.
9.4.6. The Committee should receive a report on the results of the internal auditor’s work, determine whether it is satisfied that the quality, experience and expertise of internal audit is appropriate for the business.
9.4.7. The Committee should review the actions taken by management to implement the recommendations of internal audit and to support the effective working of the internal audit function.
9.4.8. The Committee shall monitor and assess the role and effectiveness of the internal audit function in the overall context of the company’s risk management system and the work of compliance, finance and the external auditor.
9.4.9. Where appropriate the Committee should consider and subsequently recommend to the Board whether an independent, third-party review of processes is appropriate.
9.5. External Audit
9.5.1. The Committee shall consider and make recommendations to the Board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment, removal, remuneration and terms of engagement of the company’s external auditor.
9.5.2. The Committee will develop and oversee the selection procedure for the appointment of the audit firm in accordance with applicable Code and regulatory requirements, ensuring that all tendering firms have access to all necessary information and individuals during the tendering process.
9.5.3. If an external auditor resigns, the Committee shou investigate the issues and circumstances leading to this and decide whether any action is required.
9.5.4. The Committee is responsible for overseeing the relationship with the external auditor. In this context the Committee shall:
a) approve their remuneration, including both fees for audit and non-audit services, and ensure that the level of fees is appropriate to enable an effective and high-quality audit to be conducted.
b) approve their terms of engagement, including any engagement letter issued at the start of each audit (ensuring that it has been updated to reflect and change in the circumstances arising since the previous year) and the scope of the audit.
9.5.5. The Committee shall review annually the external auditor’s qualifications, expertise and resources, their independence and objectivity and the effectiveness of the external audit process, including a report from them on their own internal quality procedure ; taking into account relevant UK professional and regulatory requirements and also guidance from recognised bodies of good standing and the relationship with the external Auditor as a whole, including the provision of any non-audit services and the external Auditor’s compliance with applicable UK ethical guidance relating to the rotation of audit partner.
9.5.6. The Committee needs to satisfy itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the company (other than in the ordinary course of business) which could adversely affect the auditor’s independence and objectivity.
9.5.7. The Committee should agree with the Board a policy on the employment of former employees of the company’s auditor, taking into account the Ethical Standard and legal requirements, and monitor the application of this policy
9.5.8. The Committee should monitor the auditor’s processes for maintaining independence, its compliance with relevant law, regulation, other professional requirements and the Ethical Standard, including the guidance on the rotation of audit partner and staff
9.5.9. It should also monitor the level of fees paid by the company to the external auditor compared to the overall fee income of the firm, office and partner and assess these in the context of relevant legal, professional and regulatory requirements, guidance and the Ethical Standards.
9.5.10. The Committee should seek to ensure coordination of the external audit with the activities of the internal audit function.
9.5.11. It is the Committee’s responsibility to develop and implement the company’s formal policy on the provision of non-audit services by the auditor, ensuring there is prior approval of non-audit services by the Committee and specifying the types of non-audit service to be preapproved, and assessment of whether non-audit services have a direct or material effect on the audited financial statements. The policy should include consideration of the following matters:
a) threats to the independence and objectivity of the external auditor and any safeguards in place.
b) the nature of the non-audit services
c) whether the external audit firm is the most suitable supplier of the non-audit service
d) the fees for the non-audit services, both individually and in aggregate, relative to the audit fee
e) the criteria governing compensation
9.5.12. The Committee should meet regularly with the external auditor (including once at the planning stage before the audit and once after the audit at the reporting stage) and, at least once a year, meet with the external auditor without management being present, to discuss the auditor’s remit and any issues arising from the audit, factors that could affect audit quality and review and approve the annual audit plan, ensuring it is consistent with the scope of the audit engagement, having regard to the seniority, expertise and experience of the audit team; and to review the findings of the audit. This review shall include but not be limited to, the following:
a) a discussion of any major issues which arose during the audit .
b) the auditor’s explanation of how the risks to audit quality were addressed.
c) key accounting and audit judgements
d) the auditor’s view of their interactions with senior management.
e) levels of errors identified during the audit.
f) any representation letter(s) requested by the external auditor before it is (they are) signed by management.
g) the management letter and management’s response to the auditor’s findings and recommendations.
h) the effectiveness of the audit process, including an assessment of the quality of the audit, the handling of key judgements by the auditor, and the auditor’s response to questions from the Committee.
9.6. Reporting Requirements
9.6.1. The Committee chair shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and shall also formally report to the Board annually on how it has discharged its responsibilities. This report shall include:
a) the significant issues that it considered in relation to the financial statements and how these were addressed
b) its assessment of the effectiveness of the external audit process, the approach taken to the appointment or reappointment of the external auditor, length of tenure of audit firm, when a tender was last conducted and advance notice of any retendering plans
c) if the External Auditor provides non-audit services, an explanation of how auditor objectivity and independence are safeguarded
d) any other issues on which the Board has requested the Committee’s opinion
9.6.2. The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
9.6.3. The Committee shall compile a report on its activities to be included in the company’s annual report and recommend this statement to the Board for its approval. The report should describe the work of the audit Committee, including:
a) how it has assessed the prospects of the Company, over what period it has done so and why it considers that period to be appropriate. The statement should also set out whether the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, drawing attention to any qualifications or assumptions as necessary;
b) the significant issues that the Committee considered in relation to the financial statements and how these issues were addressed .
c) an explanation of how the Committee has assessed the independence and effectiveness of the external audit process and the approach taken to the appointment or reappointment of the external auditor, information on the length of tenure of the current audit firm, when a tender was last conducted and advance notice of any retendering plans.
d) an explanation of how auditor independence and objectivity are safeguarded if the external auditor provides non-audit services, having regard to matters communicated to it by the auditor and all other information requirements set out in the Code.
e) a report on the frequency of attendance by members of meeting.
f) confirmation that the Committee has completed its assessment of the Company’s emerging and principal risks, what procedures are in place to identify emerging risks, and an explanation of how these are being managed or mitigated.
9.7. In compiling the reports referred to above, the Committee should exercise judgement in deciding which of the issues it considers in relation to the financial statements are significant, but should include at least those matters that have informed the Board’s assessment of whether the company is a going concern and the inputs to the Board’s viability statement. The report to shareholders need not repeat information disclosed elsewhere in the annual report and accounts but could provide cross-references to that information.
9.8. The Committee must approve and recommend to the Board the financial statements of the Company, including its annual and interim reports, preliminary results announcements and any other formal announcement relating to its financial performance.
9.9. Where the Committee is not satisfied with any aspect of the proposed financial reporting by the Company, it shall report its views to the Board.
10.1. Have access to sufficient resources in order to carry out its duties, including access to the company secretarial team for advice and assistance as required.
10.2. The Committee is authorised by the Board to obtain such external legal or other independent professional advice as it considers necessary to undertake its duties and to secure the attendance of any such advisers at any meetings of the Committee. (The Committee is exclusively responsible for establishing the selection criteria for such advisers and their appointment and Terms of Reference. The appointment and performance of the advisers shall be reviewed by the Committee on a regular basis and at least annually.)
10.3. The Committee must be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members.
10.4. The Committee shall give due consideration to all relevant laws and regulations, the provisions of the Code and published guidance, the requirements of the FCA’s Listing Rules, Prospectus Rules and Disclosure Guidance and Transparency Rules sourcebook and any other applicable rules, as appropriate.
10.5. The Committee is responsible for overseeing any investigation of activities which are within its terms of reference.
10.6. The Committee shall work and liaise as necessary with all other Board Committees ensuring interaction between Committees and with the Board is reviewed regularly, taking particular account of the impact of risk management and internal controls being delegated to different Committees.
10.7. The Committee shall review the Company’s systems and controls for the prevention of bribery and corruption, including the policy and receipt of any reports on non-compliance; the Group Tax Policy and Group Treasury Policy, including foreign currency and interest rate exposure; any significant changes in accounting policies or practice and recommend these to the Board,
10.8. The Committee shall report to the Board annually on the effectiveness of the internal controls (including financial, operational and compliance controls) and internal control and risk management systems and the monitoring thereof, as well as the Company’s policies and procedures for preventing and detecting fraud; and ensure that a periodic evaluation of the Committee’s performance is carried out.
10.9. At least annually, review its terms of reference and that these are made publicly available and to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
11.1. The Committee is authorised to seek any information it requires from any employee of the company in order to perform its duties. Including to obtain, at the company’s expense, independent legal, accounting or other professional advice on any matter if it believes it necessary to do so and to call any employee to be questioned at a meeting of the Committee as and when required.
11.2. The Committee has the right to publish in the company’s annual report, details of any issues that cannot be resolved between the Committee and the Board. If the Board has not accepted the Committee’s recommendation on the external auditor appointment, reappointment or removal, the annual report should include a statement explaining the Committee’s recommendation and the reasons why the Board has taken a different position.
The Committee shall have regard to the Principles and Provisions of the Code as well as the UK Listing Authority's Listing, Prospectus and Disclosure and Transparency Rules and associated guidance, in carrying out the following duties: