Terms of Reference of Audit and Risk Committee
- The Board of Directors of ESB (the "Board") shall, in consultation with the Chairman of the Committee, appoint the members of the Audit and Risk Committee (the "Committee"). All members of the Committee shall be independent non-executive directors of ESB. The Committee shall consist of no less than three members. Appointments to the Committee should be for a period of three years which may be renewed for a further three years, up to a maximum of six years in total. A quorum shall be two members.
- The Board shall appoint the Chairman of the Committee from amongst the independent non-executive directors. A Board member, other than the Chairman of the Board, should chair the committee.
- At least one member of the Committee should have recent and relevant financial experience and all should have relevant business and career experience.
- There should be a standard letter of appointment for each new Audit and Risk Committee member setting out: i. role of the Audit and Risk Committee; ii. duration of appointment and renewal provisions; iii. support and training to be provided; iv. the time commitment involved; v. level of remuneration (where appropriate); vi. rules regarding conflict of interests; vii. performance management arrangements; and viii. termination arrangements.
- Members should have or acquire after appointment an understanding of the Company and its strategy and values, of its stakeholders and of the Company's governance framework.
2. Secretary, Minutes and Conflicts of Interest
- The Secretary of ESB shall be the Secretary of the Committee.
- The Secretary of the Committee shall minute the proceedings and decisions of all meetings of the Committee.
- Draft minutes of Committee meetings shall be circulated promptly to all Committee members. Once approved, minutes should be circulated to all other members of the Board unless, in the Committee Chairman's opinion, it would be inappropriate to do so.
- The process for recording declarations of conflicts of interest in the Committee shall be the same as at Board level.
3. Attendance at Meetings
- No one other than the Committee members shall be entitled to attend Committee meetings.
- The Chairman and other non-executive directors may be invited to attend and may also request to attend meetings of the Committee.
- As the business of the Committee requires the Chief Executive, Deputy Chief Executive, Executive Director - Finance and Commercial, Head of Internal Audit, Manager Group Compliance Risk & Environment and representatives of the external auditors, should be requested by the Committee Chairman to attend for specific meetings of the Committee or agenda items except for any meetings or part meetings which the Chairman of the Committee wishes to reserve for Committee members only. The Committee may from time to time invite other persons to attend at all or part of and/or to present to, the Committee.
- At least once per calendar year the Committee should meet (i) the external auditors and (ii) the internal auditors without executive Board members present. This need not be the same meeting.
4. Frequency of Meetings
- Meetings shall be held no less than four times a year (to coincide with key dates in ESB's financial reporting cycle).
- External auditors, internal auditors or senior management may request a meeting if they consider that one is necessary.
The Committee is authorised by the Board to:
- Investigate any activity within these Terms of Reference.
- Seek any information that it requires from any employee of ESB Group¹ and all employees are directed to co-operate with any request made by the Committee.
- Obtain outside legal or independent professional advice, at ESB's expense, and secure the attendance of outsiders with relevant experience and expertise if it considers this to be necessary.
The duties of the Committee shall be as follows:
a. Financial Reporting
i The Committee shall monitor the integrity of the annual and half-yearly financial statements of ESB, and the annual financial statements of ESB Finance Limited, reviewing and reporting to the Board on all significant financial reporting issues and judgements which they contain having regard to matters communicated to it by the external auditor.
In particular, the Committee shall review and challenge where necessary:
a. the consistency of, and any changes to, significant accounting policies on a year-on-year basis across the ESB Group;
b. the methods used to account for significant or unusual transactions where different approaches are possible;
c. whether ESB has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;
d. the clarity and completeness of disclosures in the financial statements of ESB and ESB Finance Limited and the context in which the disclosures are made; and
e. all material information presented with the financial statements of ESB and ESB Finance Limited, such as the business review and the corporate governance statements relating to the audit and to risk management.
ii. The Committee shall review the content of the ESB annual report (including the ESB financial statements) and advise the Board on whether, taken as a whole, (i) it is fair, balanced and understandable, (ii) provides the information necessary for shareholders to assess the ESB's Group performance, business model and strategy and (iii) satisfies the requirements in relation to the preparation of an annual report applying under the code of Practice for the Governance of State Bodies and/or the ESB Regulations.
iii. Where the Committee is not satisfied with any aspect of the proposed financial statements of either ESB or ESB Finance Limited, it shall report its views to the board(s) of ESB and/or ESB Finance Limited, as applicable.
Audit and Risk Committee of the ESB Board
ESB has an Audit and Risk Committee in place to assist the Board with its responsibilities in relation to financial reporting, internal control, risk management and its interactions with the external and internal auditor.
7. Role of Committee Chairman and Secretary
The Chairman has particular responsibility for ensuring:
- that the Committee is appropriately resourced;
- the Committee reviews Internal Audit Reports and management responses and ensures that actions are followed up;
- reports to the Committee contain relevant information and are provided at the right time in an appropriate format;
- absent Committee members are briefed on meetings and attendance records are maintained and reviewed annually;
- they report at Board meetings and submit regular written reports, normally by way of Committee minutes, to the Board containing relevant information;
- matters arising are reported on at each subsequent meeting; and
- they are involved in the appointment of new Committee members.
Appraisal: Appraisal of the Chairperson of the Audit and Risk Committee should be overseen by the Chairperson of the Board.
The Secretary to the Audit and Risk Committee should:
- request papers as necessary and support the Chairman in reporting to the Committee;
- circulate documents and keep and circulate minutes of meetings to Committee members and to internal and external audit as necessary in good time for meetings;
- for any agreed actions, document the owner, deadline and any advice given by stakeholders and monitor between meetings;
- together with senior management keep the Committee abreast of developments in the State body; and
- maintain a record of members' appointments and termination/renewal dates and ensure that appropriate appointment procedures are initiated when necessary.