32.
AUDIT AND FINANCE COMMITTEE
32.1
Terms of Reference
There shall be an
Audit and Finance Committee. Subject to the
direction of the Board, the terms of reference of the Audit and
Finance Committee are as follows.
The Committee's purpose is to assist the Board of Governors in
its oversight of the integrity of the financial statements and the
underlying process and accounting policies, the independent
auditors' qualifications, performance and independence,
compliance with legal and regulatory requirements and the
performance of the internal audit function. The Committee shall fulfill its responsibilities within the context of the following principles:
(a) institutional values;
(b) open dialogue with management and external auditors;
(c) financial literacy;
(d) adherence to the annual audit Committee work plan;
(e) accountability and reporting to the Board of Governors; and
(f) committee self assessment in the spirit of continuous improvement.
Each member of the Committee shall be financially literate or must become financially literate within a reasonable period of time. In this regard, the CFO or other financial expert will ensure each new member receives an appropriate orientation to reading and understanding the financial statements.
At least one member of the Committee shall have accounting or related financial experience.
Under its specific responsibilities and duties, the Committee shall:
Financial Reporting
(a) review the annual financial statements with management and the External Auditors to gain reasonable assurance that the statements are accurate, complete, represent fairly the financial position and performance and are in accordance with GAAP and report thereon to the Board before such financial statements are approved by the Board;
(b) receive from the External Auditors reports on their audit of the financial statements;
(c) receive from management a copy of any material audit related communications with the External Auditors, including the representation letter;
(d) review, and, if appropriate, recommend approval to the Board of any financial news releases, other filings (for example offering documents) or other reports of financial information to be publicly released;
(e) review the annual budget with management and recommend approval to the Board.
Accounting Policies
(f) review with management and the external auditors the appropriateness under GAAP of the University's accounting policies, disclosures, reserves, key estimates and judgments, including changes or variations thereto. The review should include a discussion about alternative treatments considered, related party transactions and off balance sheet arrangements if any;
Financial Risk Assessment and Management
(g) review with management its assessment of the significant financial risks;
(h) review with management the University's plans, processes, and programs to manage and control such risks, for example:
i. interest rate risk mitigation strategies, including use of derivative instrument;
ii. insurance coverage maintained;
iii. any legal claim or contingency, that could have a material effect upon the financial statements.
Financial Controls and Control Deficiencies
(i) review the plans of the internal and external auditors to gain reasonable assurance that the combined evaluation and testing of internal financial controls is comprehensive, coordinated and cost-effective;
(j) review the reports of the University's Internal and External auditors with respect to control and financial risk, and any other matters appropriate to the Committee's duties. The Committee shall review the adequacy and appropriateness of management's response, including the implementation thereof.
Relationship with External Auditors
(k) receive regular reports from management, the external auditors and legal counsel, if appropriate, on all significant deficiencies or indications/detection of fraud and the corrective activity undertaken in respect thereto;
(l) Establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters;
(m) annually review the performance of the auditors and recommend to the Board the appointment of auditors;
(n) approve the remuneration and the terms of engagement of the external auditors as set forth in the engagement letter;
(o) receive a report annually from the external auditors with respect to their independence, such report include a disclosure of all engagements (and fees related thereto) for audit and non-audit services;
(p) review with the external auditors the scope of the audit, the areas of special emphasis to be addressed in the audit, the extent to which the external audit can be coordinated with internal audit activities and the materiality levels which the external auditors propose to employ;
(q) ensure that the external auditors have direct access to the audit Committee chair as required, to ensure that no management restrictions have been placed on the scope and extent of the audit examinations by the external auditors or the reporting of their findings;
(r) pre-approve any proposed non-audit services to be provided by the External Auditor. Annually the auditor and management shall present the Committee with a list of proposed or potential non-audit services for pre approval. If additional services arise during the year which were not on the pre-approval list, the Chair may approve such services between Committee meetings and report such approvals at the next meeting;
(s) establish a policy setting out the restrictions on hiring employees and former employees of the external auditor;
Compliance with Laws and Regulations
(t) review regular reports from management and others (e.g. internal and external auditors) with respect to compliance with laws and regulations having a material impact on the financial statements;
Accountability
(u) review and update this Charter on an annual basis for
approval by the Board;
(v) from time to time, as requested by the Board, disclose its Mandate and this Charter in the statement of corporate governance practices;
(w) review the description of the Committee's activities as set forth in any statement of corporate governance practices;
(x) annually, review and assess the performance of the Committee;
Internal Audit
(y) review the Internal auditor's terms of reference;
(z) review the annual plan of the Internal auditor and the adequacy of allocated resources;
(aa) review and approve the reporting relationship of the Internal auditor to ensure that an appropriate
segregation of duties is maintained and that the Internal auditor has an obligation to report directly to the
Committee on matters affecting the Committee's duties, irrespective of his or her other reporting relationships;
(bb) review and report to the Board on the appointment, replacement, reassignment or dismissal of the Internal auditor;
Other Responsibilities
(cc) periodically review the form, content and level of detail of financial reports to the Board;
(dd) after consultation with the Chief Financial Officer and the external auditors, gain reasonable assurance, at least annually, of the quality and sufficiency of the University's accounting and financial personnel and other resources;
(ee) review in advance the appointment of the University's senior financial executives;
(ff) investigate any matters that, in the Committee's discretion, fall within the Committee's duties;
(gg) perform such other functions as may from time to time be assigned to the Committee by the Board.
[excerpt from Durham College By-law No. 1, approved June 13, 2007]
