Audit Committee

Audit Committee: Terms of Reference

AS APPROVED by the AUDIT COMMITTEE on 2 November 2017

Constitution

The Board of Directors of Halfords Group plc (the “Company”) has established, in line with the April 2016 UK Corporate Governance Code, section C3, (the “Code”), a committee of the Board, henceforth known as the Audit Committee (the “Committee”). The Company’s Board shall appoint the Committee Chairman, who will be an independent director as defined by the Code.

Membership

Members of the Committee shall be appointed by the Company’s Board on the recommendation of the Nomination Committee, in consultation with the Chairman of the Committee.

The Committee shall consist of a minimum of three members. The Company Secretary or a nominee shall act as the Secretary to 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 the issues.

The Committee shall only comprise independent Non-Executive Directors of the Company. The Chairman of the Company’s Board shall not be a member of the Committee.

At least one member of the Committee shall have recent and relevant financial experience.

Appointments to the Committee shall be for a period of up to three years, which may be extended to a further two, three-year periods, provided the Director remains independent.

Quorum

The quorum necessary for the transaction of business by the Committee will be two members.

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 Chairman of the Committee, provided that such alternative Non-Executive Director is not the Chairman of the Company’s Board.

In the absence of the Chairman of the Committee, the members attending will elect one of their number to chair the meeting.

Meetings 

Meetings shall be held at least three times in each financial year, as well as at such other times as the Chairman of the Committee shall require.

Prior to the commencement of each financial year, the Chairman 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.

A meeting of the Committee may be called by the Secretary at the request of any member of the Committee, the Company’s Financial Officer, the Head of Internal Audit or the Company’s External Auditors and the Secretary shall agree the agenda for any meeting so called with the Chairman of the Committee.

No one other than a Committee member is entitled to attend meetings of the Committee. The Chairman of the Company's Board, Chief Executive, other executive and Non-Executive Directors, other senior management, the Secretary and external advisers may be invited to attend for all or part of any meeting of the Committee as and when appropriate.

At least once in each financial year, the Committee must meet with the Company’s External Auditors without any Executive Directors being present.

Meetings of the Committee shall be called by giving at least five working days’ written notice, unless all the members of the Committee agree to a meeting of the Committee being held on shorter notice.

Members may participate in a meeting of the Committee by means of a conference telephone, video conferencing facility or other suitable communications equipment.

The Secretary shall minute the proceedings and resolutions of all meetings of the Committee, as well as keeping appropriate records. Minutes of the meetings shall be circulated promptly to all members of the Committee.

Annual General Meeting 

The Chairman of the Committee, or an appointed deputy in his/her absence, shall attend the Company’s Annual General Meeting, being prepared to respond to any shareholder questions on the Committee’s activities.

Authority

The Committee is authorised by the Company’s Board to determine the Company’s policy within its Terms of Reference.

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.

Independent Advice and Resources

The Committee is authorised by the Company’s 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.

Decisions of the Committee

Any decisions of the Committee shall be taken on a simple majority basis. The Chairman of the Committee shall have a casting vote in the event of equality of voting.

Terms of Reference 

The duties of the Committee are as follows:

To ensure:

  1. that due consideration is given to laws and regulations, the provisions of the Code (as amended from time to time) and the requirements of the UK Listing Authority’s Listing Rules as appropriate, including the requirement for explanation in the event of any permitted non-compliance;
  2. that the External Auditors comply with relevant ethical and professional guidance on the rotation of audit partners, the level of fees paid by the Company compared to the overall fee income of the firm, office and partner and other related requirements;
  3. that there are no relationships (such as family, employment, investment, financial or business) between the External Auditors and the Company (other than in the ordinary course of business);
  4. that a tendering process in respect of the External Auditors’ contract is conducted at least every 10 years;
  5. the co-ordination of the activities of the Internal and External Auditors;
  6. that the Head of Internal Audit has the right of direct access to the Chairman of the Company’s Board and to the Chairman of Committee;
  7. the remit of the Internal Audit function is understood and ensure it has adequate resources and appropriate access to information to enable it to perform its function effectively and in accordance with the relevant professional standards;
  8. and monitor the maintenance of a sound system of internal control and risk management;
  9. any activities within its Terms of Reference are investigated as necessary;
  10. that the Chairman of the Committee reports formally to the Company’s Board on its proceedings after each meeting on all matters within its duties and responsibilities;
  11. that the Committee reports annually to the Company’s Board on how it has discharged its responsibilities including:
    1. the significant issues that it considered in relation to the financial statements and how these issues were addressed;

    2. its assessment of the effectiveness of the external audit process and the approach taken to the appointment or reappointment of the External Auditors; information on the length of tenure of the current audit firm, when a tender was last conducted and advance notice of any retendering plans;

    3. if the External Auditor provides non-audit services, an explanation of how auditor objectivity and independence are safeguarded; and

    4. any other issues on which the Company’s Board has requested the Committee’s opinion; and

  12. that the Committee’s Terms of Reference are made publicly available.

To review:

  1. and monitor the integrity of 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, particularly focusing upon any:
    1.  significant financial reporting issues;

    2. significant adjustments resulting from the audit; and

    3. the going concern assumption and major judgements which they contain. 

The Committee shall, if practical and prior to the submission to the Company’s Board for approval, also review summary financial statements and any financial information of a price-sensitive nature;

  1. and challenge where necessary:
    1. the consistency and appropriateness of accounting policies both on a year-on-year basis and across the Company and any company within the Company’s group of companies;

    2. the methods used to account for significant or unusual transactions where different approaches are possible;

    3. whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the External Auditors;

    4. the clarity of disclosure in the Company’s financial reports and the context in which statements are made; and

    5. all material information presented with the financial statements, such as the business review, the business model and the corporate governance statement (insofar as it relates to the audit and risk management);

  2. where requested by the Company’s Board, the content of the annual report and accounts and advise the Company’s 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;
  3. annually, the External Auditors qualifications, expertise and resources, their independence and objectivity and the effectiveness of the audit process, including a report from them on their own internal quality procedures taking into account relevant UK professional and regulatory requirements and also guidance from recognised bodies of good standing and the relationship with the External Auditors as a whole, including the provision of any non-audit services and the External Auditors’ compliance with applicable UK ethical guidance relating to the rotation of audit partners;
  4. regularly with the External Auditors, including once without management present, once at the planning stage before the audit and once after the audit at the reporting stage to:
    1. consider the annual audit plan and ensure that it is consistent with the scope of the audit engagement;

    2. examine the findings of the audit with the External Auditors, which shall include but not be limited to the following:

      (i) a discussion of any major issues which arose during the audit;

      (ii) any accounting and audit judgements;

      (iii) the levels of errors identified during the audit; and

      (iv) the appropriateness of management’s responsiveness to the findings and recommendations of the External Auditors;

    3. assess the effectiveness of the audit;

    4. consider any representation letter(s) requested by the External Auditors before they are signed by management; and

    5. consider the management letter and management’s response to the External Auditors’ findings and recommendations.

  5. with the Head of Internal Audit as appropriate, and in any event at least once a year, without the management being present, their remit and any issues that have arisen out of the internal audits that have been carried out and:

    1. assess the annual internal audit plan; and

    2. monitor the effectiveness of the Company’s internal audit function;

  6. and report to the Board no less than annually, the effectiveness of the Company’s internal controls (including financial, operational and compliance controls) and risk management systems and the monitoring thereof, as well as the Company’s policies and procedures for preventing and detecting fraud;
  7. promptly all reports on the Company from the internal auditors and monitor management’s responsiveness to the findings and recommendations of the internal auditor; and
  8. at least annually the Committee’s Terms of Reference and the effectiveness of the Committee and to report to the Company’s Board in respect thereof, including any recommendations.

To approve:

  1. the appointment and removal of the Head of Internal Audit;
  2. and implement a policy on the supply of non-audit services by the External Auditors, taking into account any relevant ethical guidance on the matter from recognised bodies of good standing;
  3. the Company’s arrangements for colleagues to raise concerns, in confidence, about whistleblowing and possible improprieties in matters of financial reporting or other matters and ensure that such arrangements allow proportionate and independent investigation of such matters and appropriate follow up action;
  4. the Company's systems and controls for the prevention of bribery and corruption, including the receipt of any reports on non-compliance;
  5. the Group's Treasury Policy, including foreign currency and interest rate exposure; and
  6. a statement for inclusion in the Annual Report on its duties and activities. This statement should include:

    a) commentary concerning internal controls and risk management;

    b) a report on the frequency of attendance by members of meeting;

    c) the significant issues that the Committee considered in relation to the financial statements, and how these issues were addressed;

    d) an explanation of how the Committee has assessed the effectiveness of the external audit process and the approach taken to the appointment or reappointment of the External Auditors, and information on the length of tenure of the current audit firm and when a tender was last conducted; and

    e) if the External Auditors provide non-audit services, an explanation of how auditor objectivity and independence is safeguarded.

To recommend to the Board:

  1. the approval of 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;  
  2. for approval at the Annual General Meeting, the appointment, re-appointment and removal of the Company’s External Auditors.  The Committee shall oversee the selection process for new auditors and if auditors resign the Committee shall investigate the issues and circumstances leading to this and decide whether any action is required;
  3. the External Auditors’ remuneration, whether fees for audit or non-audit services and that the level of fees is appropriate to enable an adequate audit to be conducted;
  4. the External Auditors’ terms of engagement, including any engagement letter issued at the start of each audit (ensuring that it has been updated to reflect changes in the circumstances arising since the previous year) and the scope of the audit;
  5. a policy on the employment of former employees of the Company’s External Auditors and monitoring the implementation of such policy; and
  6. any proposals it deems appropriate on any area within its remit where action or improvement is needed.