audit committee charter - term of reference of the audit committee (draft)

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/16/12ways: AUDIT COMMITTEE CHARTER /

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Karachi Urban Transport CorporationKarachi Urban Transport CorporationLimited Karachi Circular RailwaysLimited Karachi Circular Railways

Wednesday, 16 May 2012Wednesday, 16 May 2012

AUDIT COMMITTEE CHARTER / TERM OF REFERENCE

OF THE AUDIT COMMITTEE (DRAFT)

1. Statement of Purpose

The Audit Committee of Karachi Urban Transport Corporation Limited ("Corporation") shall provide

assistance to the Board of Directors ("Board") in the general oversight of corporate accounting,

financial reporting processes and practices of the Corporation, the quality and integrity of the

financial reports of the Corporation, and the Corporation's internal controls and procedures

designed to promote compliance with accounting standards and applicable laws and regulations.

In so doing, it is the responsibility of the Audit Committee to maintain free and open means of

communication between the directors, the external auditors, the internal auditors, and the

financial management of the Corporation.

1.2. The Audit Committee is not responsible for planning or conducting the audit or determining

whether the Corporation's financial statements are complete and accurate and are in accordance

with the approved accounting standards as applicable in Pakistan. Approved accounting

standards comprise of such International Financial Reporting Standards (IFRS) issued by the

International Accounting Standards Board as are notified under the Companies Ordinance, 1984,

provisions of and directives issued under the Companies Ordinance, 1984. Such activities are the

responsibility of management and the Corporation's external auditors. The Audit Committee does

not itself prepare financial statements or perform audits or auditing services, and its members are

not auditors, certifiers of the Corporation's financial statements or guarantors of the reports of the

Corporation's external auditors.

1.3.The Audit Committee has authority to obtain advice and assis tance from outside legal, accounting

or other advisors as the Audit Committee deems necessary to carry out its duties, and the AuditCommittee shall receive appropriate funding, as determined by the Audit Committee, from the

Corporation for payment of compensation to the outside legal, accounting or other advisors

employed by the Audit Committee.

2. Organization and Structure

2.1.Composition

The Audit Committee shall be composed of at least three directors, including the chairman,

determined by the Board to meet the independence. Appointment to the Audit Committee,

including the designation of the Chair and the designation of any committee members as "audit

committee financial experts" shall be made on an annual basis by the Board. Majority of the

members of the Committee shall be from among the non-executive directors of the Corporation

and the chairman of the Audit Committee shall preferably be a non-executive director. The Audit

Committee shall be supported by the Corporation's Chief Financial Officer (CFO) and Internal

Auditors. The names of members of the Audit Committee shall be disclosed in each annual report

of the Corporation.

2.2.Decision & voting powers:

All the decision of the committee shall be taken by vote of majority.

Members of the committee shall be entitled to vote and in case of equality, the Chairman shall

have one additional casting vote.

The Company Secretary (Secretary), Internal Auditor and CFO of the Corporation shall attend

and participate at the meeting but shall not have the right to vote.

2.3.Tenure:

The Audit Committee shall continue to be in function as a committee of the Board until otherwise

resolved by the Board, to carry on the functions of the Audit Committee in relation of the

accounts of the Corporation.

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2.4.Frequency of Meetings:

Meetings of the Audit Committee shall be held at such times and places, but not less than three

times per year, as the Audit Committee shall determine, including by written consent. When

necessary, the Audit Committee shall meet in executive session outside of the presence of any

executive officer of the Corporation. The Chair of the Audit Committee shall report on activities of

the Audit Committee to the Board.

These meetings shall be held prior to the approval of interim results (if any) of the Corporation by

its Board of Directors and before and after completion of external audit. A meeting of the Audit

Committee shall also be held, if requested by the external auditors or internal auditor.

2.5.Attendance at MeetingsThe CFO, the head of internal audit and a representative of the external auditors shall attend

meetings of the Audit Committee at which issues relating to accounts and audit are discussed.

Provided that at least once a year, the Audit Committee shall meet the external auditors without

the CFO and the Internal Auditor being present.

Provided further that at least once a year, the Audit Committee shall meet the head of internal

audit and other members of the internal audit function without the CFO and the external auditors

being present.

2.6.Reporting Procedure

The secretary shall circulate minutes of meetings of the Audit Committee to all members,

directors and the CFO within a fortnight.

3. Responsibilities and DutiesIn carrying out its responsibilities, the Audit Committee believes its policies and procedures

should remain flexible, in order to best react to changing conditions and to ensure to the directors

and shareholders that the corporate accounting and reporting practices of the Corporation are in

accordance with all requirements and are of the highest quality. In discharging the function of the

Audit Committee, the committee shall have authority to investigate into any matter in relation to

any items specified in Companies Ordinance, 1984 or referred to it by the Board.

The committee shall be responsible for and in carrying out these responsibilities, the Audit

Committee will:

Recommend human resource management policies to the board;

Recommend to the board the selection, evaluation, compensation (including retirement

benefits if any) and succession planning of the Managing Director;

Recommend to the board the selection, evaluation, compensation (including retirementbenefits if any) of Managing Director, CFO, Company Secretary and Head of Internal

Audit;

Consideration and approval on recommendations of Managing Director on such matters for

key management positions who report directly to Managing Director.

Recommend to the Board of Directors the appointment of external auditors by the Corporationsshareholders and shall consider any questions of resignation or removal of external auditors, audit

fees and provision by external auditors of any service to the Corporation in addition to audit of its

financial statements. In the absence of strong grounds to proceed otherwise, the Board of Directors

shall act in accordance with the recommendations of the Audit Committee in all these matters. The

external auditors shall report directly to the Audit Committee.

Preapprove all auditing services and permitted non-audit services (including the fees and termsthereof) to be performed for the Corporation by its external auditors if not disallowed in any applicable

law.

Meet with the external auditors and financial management of the Corporation to review the scope ofthe proposed audit for the current year and the audit procedures to be utilized, and at the conclusion

thereof, review such audit, including any comments or recommendations of the external auditors.

Review and discuss with the external auditors its annual written statement delineating allrelationships or services between the external auditors and the Corporation, or any other relationships

or services that may impact its objectivity and independence.

Review with management and the external auditors firm the Corporation's annual audited or any otheraudit, including the Corporation's disclosures and review with management and the external auditors:

i. the results of the audit and the opinion on the annual financial statements;

ii. the judgments of the external auditors firm on the quality and consistent

application of the Corporation's accounting principles, the reasonableness of significant

judgments, c larity of disclosures and underlying estimates in the financial statements;

iii. changes in accounting principles or application thereof, significant judgment areas,


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and significant and complex transactions;

iv. the effectiveness and adequacy of the Corporation's internal auditing; and

v. any disagreements between management and the external auditors, about matters

that individually or in the aggregate could be significant to the Corporation's financial

statements or the report of the external auditors, and any serious difficulties the external

auditors encountered in dealing with management related to the performance of the audit

and management's response;

vi. all known and likely uncorrected misstatements identified by the external auditors

during the audit, other than those that the external auditors believes are trivial, and the

propriety of correcting the misstatements and implications of not correcting them and all

material misstatements identified by the external auditors firm that were not corrected;

vii.

managements consultation with other accountants; and viii. significant issues, if any, arising from the audit that were discussed, or were the

subject of correspondence, with management, such as business conditions affecting the

Corporation, and business plans and strategies that may affect the risks of material

misstatement, the retention of the external auditors and the application of accounting

principles and auditing standards.

Recommend to the Board whether the audited financial statements should be included in theCorporation's Annual Report prior to filing with the Securities and Exchange Commission of Pakistan

(SECP) and review with management and the external auditors the Corporation's other Reports (if

any).

Discuss each of the Corporation's earnings press releases with management and the externalauditors prior to its issuance, as well as corporate policies with respect to the disclosure of financial

information. In particular, the Committee shall periodically review with management and the external

auditors the type of presentation and information to be included in the Corporation's earnings press

releases and, to the extent applicable, earnings guidance provided to analysts and ratings agencies

(if required). Periodically meet with the external auditors without members of management present. Among the

items to be discussed in these meetings, among others, are the evaluation of the Corporations

financial, accounting, and internal auditing personnel, and the cooperation that the external auditors

received during the course of the audit.

Resolve any disagreements between management and the external auditors regarding financialreporting.

Review and report to the Board the propriety and ethical implications of any transactions, as reportedor disclosed to the Committee by the external auditors, employees, officers, members of the Board or

otherwise, between (a) the Corporation and (b) any employee, officer or member of the Board of the

Corporation or any affiliates of the foregoing.

Review accounting and financial human resources succession planning within the Corporation. At least annually, obtain from and review a report by the external auditors describing (i) its internal

quality control procedures, and (ii) any material issues raised by the most recent internal quality

control review, or peer review, or by any professional inquiry or investigation within the preceding five

years regarding any audit performed by the external auditors, and any steps taken to deal with any

such issues.

Review the adequacy and effectiveness of the Corporation's disclosure controls and procedures. Review the adequacy and effectiveness of the Corporation's internal controls, including any significant

deficiencies in such controls and significant changes or material weaknesses in such controls

reported by the external auditors, internal auditors or management, and any fraud, whether or not

material, that involves management or other Corporation employees. Review with the appropriate

member of the Internal Auditors the scope, qualifications, resources, activities and effectiveness of

the internal audit function, and approve the appointment, replacement or dismissal of the Internal

Auditors.

Periodically meet separately with the appropriate member of the Internal Auditors outside thepresence of management and the external auditors.

Annually review and approve the Corporations internal audit charter. Annually review and approve the Corporations internal audit plan. Submit, or cause to be submitted, the minutes of all meetings of the Audit Committee to, or discuss

the matters discussed at each committee meeting with, the board of directors.

Investigate any matter brought to its attention within the scope of its duties, with the power to retainoutside counsel for this purpose if, in its judgment, doing so is appropriate.

Annually review the adequacy of the Committee formal written term of reference of the AuditCommittee and recommend any proposed changes to the Board.

The Board may assign any matter of important nature relating to the accounts, finance. Taxation,inspection and investigation from time to time and may require a report to be submitted to the Board

on such matters within stipulated time.

The Committee on any matter relating to financial management including audit report shall submit areport to the Board from time to time, The Chairman of the Audit Committee shall attend the annual

general meeting of the Corporation to provide any clarification on matter relating to Audit.

Determination of appropriate measures to safeguard the Corporations assets. Review of preliminary announcements of results prior to publication. Review of quarterly (if any), half-yearly (if any) and annual financial statements of the Corporation.


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Posted by Shabbir Ahmed Pasha at 08:45

Labels:Audit Committee

Prior to their approval by the Board of Directors, focusing on:o major judgmental areas;o significant adjustments resulting from the audit;o the going -concern assumption;o any changes in accounting policies and practices;o compliance with applicable accounting standards; ando compliance with listing regulations and other statutory and regulatory requirements.

Facilitating the external audit and discussion with external auditors of major observations arising frominterim and final audits and any matter that the auditors may wish to highlight (in the absence of

management, where necessary).

Review of management letter issued by external auditors and managements response thereto. Ensuring coordination between the internal and external auditors of the Corporation. Review of the scope and extent of internal audit and ensuring that the internal audit function has

adequate resources and is appropriately placed within the Corporation.

Consideration of major findings of internal investigations and management's response thereto. Ascertaining that the internal control system including financial and operational controls, accounting

system and reporting structure are adequate and effective.

Review of the Corporations statement on internal control systems prior to endorsement by the Boardof Directors.

Instituting special projects, value for money studies or other investigations on any matter specified bythe Board of Directors, in consultation with the Chief Executive and to consider remittance of any

matter to the external auditors or to any other external body.

Determination of compliance with relevant statutory requirements. Monitoring compliance with the best practices of corporate governance and identification of significant

violations thereof; and

Consideration of any other issue or matter as may be assigned by the Board of Directors.

4. Whistleblowe r Responsibilities

The Audit Committee shall establish and annually review written procedures that provide for,

among other things, the receipt, retention and treatment of any and all complaints received by the

Corporation regarding accounting, internal accounting controls, internal and external auditing

matters, fraud or illegal acts, and which provide for the confidential, anonymous submission by

Corporation employees of any concerns regarding questionable accounting or auditing matters or

fraud or illegal acts. The Audit Committee shall adopt such procedures which, in its discretion,

provide assurances that all credible serious complaints received by the Corporation are conveyed

to the Committee or the Chairman of the Committee.

5. Disclosures From External auditors and Management

The Audit Committee shall ensure that in connection with the filing of any periodic financial

statement with the SECP that the Committee has obtained all the certifications and written

disclosures required of management and or the external auditors, prerequisite to the filing of any

such reports.

6. Annual Performance Review

The Audit Committee shall conduct an annual evaluation and review of its performance in carrying

out its responsibilities hereunder.

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Shabbir Ahmed Pasha

Mr. Shabbir Ahmed Pasha, B.Com., M.A in Economics,M.Phil Scholar, FITM, FICS, APFA, CPFA(CA), ACMA(NG), AMIA, AMRP, ACSP is Chief

Financial Officer at Karachi Circular Railways (Karachi Urban Transport Corporation)and Part-time Director of HERITAGE Financial Management

Pakistan. He is a Researcher in the field of Public Finance and Accounting. He is the Chartered Secretary, Management Consultant, Financial,

Corporate Law and Tax Consultant.

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