Pursuant to a resolution passed by the board of directors of the Company on 15 January 2007, the Audit Committee of the Company was established on the even date. The terms of reference for the Audit Committee were adopted on 15 January 2007 and amended by the Board on 23 March 2012.
AUDIT COMMITTEE TERMS OF REFERENCE
Constitution
1. The board of directors of the Company (the “Board”) hereby resolves to establish a committee to be known as the Audit Committee.
Membership
2. The Audit Committee shall be appointed by the Board from amongst the non-executive directors of the Company and must comprise a minimum of three members, at least one of
whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise as required under the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). The majority of the audit committee members must be independent
non-executive directors of the Company. A quorum shall be two members.
3. The chairman of the Audit Committee shall be appointed by the Board. The Audit Committee must be chaired by an impendent non-executive director.
Attendance at meetings and minutes
4. The qualified accountant of the Company and the representative(s) of the external auditors shall normally attend meetings. Other Directors of the Board shall also have the right of
attendance. However, at least once a year, the Audit Committee shall meet with the external auditors in the absence of management, to discuss matters relating to its audit fees, any
issue from the audit, and any other matters the auditor wish to raise.
5. The company secretary of the Company shall be the secretary of the Audit Committee.
6. Full minutes of meetings of the Audit Committee should be kept by the company secretary. Draft and final versions of minutes of the Audit Committee should be sent to all members
of the Audit Committee for their comments and records respectively, in both cases within a reasonable time after the meeting.
Frequency and meetings
7. Meetings shall be held not less than twice a year and the Audit Committee should meet the external auditor at least twice a year. The Audit Committee may meet to discuss the current
year’s audit plan and prior to the finalisation of the interim and annual accounts. The external auditors may request a meeting if they consider that it is necessary.
Authority
8. The Audit Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorized to seek any information it requires from any employee and all
employees are required to co-operate with any request made by the Audit Committee.
9. The Audit Committee is authorized by the Board to obtain external legal or other independent professional advice and to secure the attendance of such advisers with relevant
experience and expertise if it considers this necessary.
Duties
10. he Audit Committee shall have the following specific duties: Relationship with the Company’s auditors ﹕
(a) to be primarily responsible for making recommendation to the Board on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and
terms of engagement of the external auditor, and any questions of resignation or dismissal of that auditor;
note: Company are reminded that rule 13.51(4) of the Lasting Rules requires an announcement to be published when there is a change of auditors. The announcement must also include a statement as to whether there are any matters that need to be brought to holders of securities of the Company.
(b) to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process in accordance with applicable standard. The Audit Committee
should discuss with the auditor the nature and scope of the audit and reporting obligations before the audit commences;
(c) to develop and implement policy on the engagement of an external auditor to supply non-audit services. For this purpose. External auditor shall include any entity that is under
common control, ownership or management with the audit firm or any entity that a reasonably and informed third party having knowledge of all relevant information would
reasonably conclude as part of the audit firm nationally or internationally. The Audit Committee should report to the Board, identify any matters in respect of which it considers
that action or improvement is needed and making recommendations as to the steps to be taken;
Review of financial information of the Company
(d) to monitor integrity of financial statements of the Company and the Company’s annual report and accounts, half-year report and, if prepared for publication, quarterly reports,
and to review significant financial reporting judgments contained in them. In this regard, in reviewing the Company’s annual report and accounts, half-year report and, if
prepared for publication, quarterly reports before submission to the Board, the committee should focus particularly on﹕
(i) any changes in accounting policies and practices;
(ii) major judgmental areas;
(iii) significant adjustment resulting from audit;
(iv) the going concern assumption and any qualifications;
(v) compliance with accounting standards;
and (vi) compliance with the Listing Rules and other legal requirements in relation to financial reporting;
(e) In regard to (d) above: (i) members of the committee must liaise with the Company’s Board, senior management and the person appointed as the Company’s qualified accountant
and the committee must meet, at least once a year, with the Company’s auditors;and (ii) the committee should consider any significant or unusual items that are, or may need to
be, reflected in such reports and accounts and must give due consideration to any matters that have been raised by the Company’s qualified accountant, compliance officer or
auditors;
Oversight of the Company’s financial reporting system and internal control procedures
(f) to review the Company’s financial controls, internal control and risk management systems;
(g) to discuss with the management the system of internal control and ensure that management has discharged its duty to have an effective internal control system;
(h) to consider any findings of major investigations of internal control matters as delegated by the Board or on its own initiative and management’s response;
(i) where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced
and has appropriate standing with the Company, and to review and monitor the effectiveness of the internal audit function;
(j) to review the group’s financial and accounting policies and practices;
(k) to review the external auditor’s management letter, any material queries raised by the auditor to management in respect of the accounting records, financial accounts or systems
of control and management’s response;
(l) to ensure that the Board will provide a timely response to the issues raised in the external auditor’s management letter;
(m) to report to the Board on the matters set out in Appendix 14 of the Listing Rule, Code of Corporate Governance Practices;
(n) to consider other topics, as defined by the Board; and
(o) to establish a whistleblowing policy and system for employees and those who deal with the Company to raise concerns, in confidence, with the Audit Committee about possible
improprieties in any matter related to the Company and to ensure that arrangements are in place for fair and independent investigation of these matters for appropriate follow
up action.
Reporting procedures
11. The secretary shall circulate the minutes of meetings and reports of the Audit Committee to all directors of the Board.
Note: in the event of any inconsistency, the English language text of these terms of reference shall prevail over the Chinese language text.
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