1 Role and Objectives

The primary role of the Committee is to monitor and review, on behalf of the Board, the effectiveness of the control environment in the Colorpak Limited Group (the Group) in the areas of operational and balance sheet risk, legal/regulatory compliance and financial reporting.

The objectives of the Committee include:

• overseeing the Group’s discharge of its responsibilities with respect to:

1. the financial statements, financial report and annual report;
2. legal/regulatory compliance;
3. protection of Group capital; and
4. risk management systems,

• overseeing the Group’s relationship with external auditors; and
• overseeing the Group’s relationship with external auditors; and
• determining the independence of the external auditors.

The Committee meets and receives regular reports from its external auditors concerning matters that arise in connection with their audit. The Committee is also responsible for review of performance and nomination of the external auditors.

2 Membership of the Committee

Unless otherwise determined by the Board, the Committee comprises a minimum of 3 non-executive directors. It is intended that a majority of the directors will be independent directors.

The Chair should be an independent director and not the Chair of the board of directors. The Board will appoint the Chair of the Committee.

The Board may appoint such additional non-executive directors to the Committee or remove and replace members of the Committee by resolution. Members may withdraw from membership by written notification to the Board.

The Managing Director and the Chief Financial Officer will be invited to attend all Committee Meetings.

The Chair of the board of directors may also attend meetings at his or her discretion, in an ex-officio capacity. Other non-executive directors who are not Committee members may attend meetings of the Committee should they wish. Members of management may attend meetings of the Committee at the invitation of the Committee Chairman, but must not be appointed members of the Committee.

All persons appointed to the Committee will be financially literate (able to read and understand financial statements) and have sufficient financial knowledge and understanding to allow them to discharge their responsibilities.

The External Auditors will be invited to attend when:

• tabling the External Audit Plan;
• reviewing Half Yearly and Annual Accounts;
• specifically requested by the Committee; and
• the External Auditor deems it to be appropriate and requests the right to attend.

 

3 Administrative matters

Any member may, and the Company Secretary must on request from a member, convene a meeting of the Committee. Notice must be given to every Committee Member of every Committee meeting but there is no minimum notice period and acknowledgment of receipt by all members is not required before the meeting may be validly held.

It is intended that the Committee will meet quarterly. The Meetings will be set in order to allow adequate time for preparation of substantive reporting to the Board.

The quorum is at least 2 members. Where a quorum cannot be formed in relation to a matter before the Committee, the Chairman of the Committee may appoint a non-executive director such that a quorum is formed in relation to that matter.

Following endorsement by the Committee Chairman, the agenda and Committee papers will be distributed to all members of the Committee and meeting invitees in advance of each meeting.

The Committee has rights of access to management and to auditors (external and internal) without management present and rights to seek explanations and additional information.

The Committee may, upon notifying the Board or the Chairman, seek the advice of the Group’s auditors or solicitors as to any matter pertaining to the powers or duties of the Committee.

The Committee may, with the prior approval of the Board, instruct the Managing Director to engage such other independent advisers in relation to any matter pertaining to the responsibilities of the Committee, as the Committee may require.

The Company Secretary will attend all Committee meetings as minute secretary. All minutes of the Committee will be entered into a minute book maintained for that purpose and will be open at all times for inspection by any director.

An annual Plan of Committee Meetings will be promulgated after approval by the Chairman.

4 Reporting

that the Committee Chair will prepare a report of the actions of the Committee and/or a copy of the minutes of the Committee meeting will be included in the Board papers for the Board meeting next following a meeting of the Committee.

The Committee Chairman will, if requested, provide a brief oral report as to any material matters arising out of the Committee meeting. All directors will be permitted, within the Board meeting, to request information of the Committee Chairman or members of the committee.

5 Responsibilities and functions

5.1 Audit

The Committee’s role is primarily to assist the Board in relation to the reporting of financial information, the appropriate application and amendment of accounting policies, and the appointment, independence and remuneration of the external auditors.

The following are intended to form part of the normal procedures for the Committee’s audit responsibility and will be undertaken to the extent necessary and consistent with the Group’s size and scope of activities:

• engaging in the pro-active oversight of the Group’s financial reporting and disclosure processes and overseeing and reviewing the outputs of that process (including review of the Group’s financial statements for accuracy to ensure they reflect a true and fair view, as a basis for recommendation to, and adoption by the Board);
• assisting the Board in determining the reliability and integrity of accounting policies and financial reporting and disclosure practices;
• monitoring compliance with applicable accounting standards and other requirements relating to the preparation and presentation of financial results;
• reviewing the appropriateness of the accounting principles adopted by management in the composition and presentation of financial reports;
• evaluation of the performance of the external auditors, including their independence and objectivity and reviewing procedures for the rotation of external audit engagement partners;
• where applicable, evaluation of the performance of internal auditors, including whether the internal auditors are adequately resourced, used effectively and coordinated with the external auditors;
• reviewing, agreeing and approving the annual audit plan (including a review of the Group’s risk management and internal compliance and control systems);
• setting the Group policy on the provision of non-audit services and ensuring compliance with that policy;
• recommending the appointment (including termination of engagement), remuneration and other contractual terms of internal and external auditors;
• determining that no management restrictions or limitations have been placed on external auditors;
• ensuring that the Managing Director and the Chief Financial Officer state in writing to the Board that the Group’s interim and annual financial reports present a true an fair view, and that in all material aspects the Groups’ financial condition and operational results are accordance with the relevant accounting standards; and
• ensuring that the Managing Director and the Chief Financial Officer state in writing to the board that the above statement regarding interim and annual financial reports:

• is founded on a sound system of risk management and internal compliance and control which implements the polices adopted by the Board; and
• the Group’s risk management and internal compliance and control system is operating efficiently and effectively in all material aspects.

5.2 Risk

The Committee’s specific function with respect to risk management is to review and report to the Board that:

• adequate consideration is undertaken to identify all significant risks facing the business
• adequate policies and procedures have been designed and implemented to manage identified risks;
• a regular program of audits is undertaken to test the adequacy of and compliance with prescribed policies; and
• proper remedial action is undertaken to redress areas of weakness.

The following are intended to form part of the normal procedures for the Committee’s risk responsibility and will be undertaken to the extent necessary and consistent with the Group’s size and scope of activities:

• developing an understanding of the overall business environment, relevant laws, regulatory codes etc of particular significance to the Group and the programmes in place to provide reasonable assurance of compliance;
• the Group’s ongoing risk management program effectively identifies all areas of potential risk;
• evaluating the adequacy and effectiveness of the management reporting and control systems used to monitor adherence to policies and guidelines and limits approved by the Board for management of balance sheet risks;
• evaluating the adequacy and effectiveness of the Group’s financial and operational risk management control systems by reviewing risk registers and reports from management and external auditors;evaluating the structure and adequacy of the Group’s business continuity and disaster recovery plans;
• evaluating the structure and adequacy of the Group’s own insurances on an annual basis;
• reviewing and making recommendations on the strategic direction, objectives and effectiveness of the Group’s financial and operational risk management policies;
• overseeing the establishment and maintenance of processes to ensure that there is:

• an adequate system of internal control, management of business risks and safeguard of assets; and
• a review of internal control systems and the operational effectiveness of the policies and procedures related to risk and control;

• evaluating the Group’s exposure to fraud and overseeing investigations of allegations of fraud or malfeasance; and
• providing recommendations as to the propriety of related party transactions and potential conflicts of interest.

5.3 Compliance

The Committee’s specific function with respect to compliance is to review and report to the Board regarding the appropriateness of the Group’s compliance procedures and adherence to those procedures.

The following are intended to form part of the normal procedures for the Committee’s compliance responsibility and will be undertaken to the extent necessary and consistent with the Group’s size and scope of activities:

• reviewing the procedures the Group has in place to ensure compliance with laws and regulations (particularly those which have a major potential impact on the Group in areas such as trade practices, occupational health and safety and the environment);
• reviewing the procedures the Group has in place to ensure compliance with insider trading laws, continuous disclosure requirements and other best practice corporate governance processes (including requirements under the ASX Listing Rules, Corporations Act, AASB, ATO and ASIC requirements) and monitor adherence to those procedures; and
• monitor relationships with the Group’s bankers including compliance with any lending terms or debt covenants in regard to loans, debt or interest paying securities issued by the Group.

 

6 Implementation of responsibilities and functions

It is intended that the methods by which the responsibilities and functions of the Committee will be implemented include:

• evaluating the independence of both the non-executive directors and the external auditors;
• reviewing the appropriateness of the accounting principles adopted by management in the composition and presentation of financial reports and assessing the management processes supporting external reporting;
• overseeing the financial reports and the results of external audit of these reports (including assessing whether external reporting is consistent with Committee members’ information and knowledge and is adequate for shareholder needs);
• assessing the performance of the external auditors and determining whether the Committee is satisfied that independence in the external audit function has been maintained having regard to the provision of non-audit services;
• assessing the performance and objectivity of the internal audit function (where appropriate);
• determining whether new policies or training should be implemented to safeguard against possible risks or non-compliance with applicable laws, regulations or Group policies;
• monitoring compliance with the Group’s policies and procedures that recognise the Group’s business, environmental and statutory responsibilities and overseeing incident investigations;
• reporting to the Board the results of the Committee’s review of risk management and internal compliance and control systems.

 

7 Relationship with the external auditor

The Committee provides a link between the external auditor and the Board and has the responsibility and authority to recommend to the Board the appointment and removal of the external auditor and to review the terms of their engagement.

The Committee requires that a person may not play a significant role in managing the audit for the external auditor (normally the lead and review auditor) for more than 5 out of any 7 successive years and that the external auditor:

• submit on a periodic basis to the Committee, a formal written statement delineating all responsibilities and work completed by the auditor;
• consider whether the external auditor’s provision of non-audit services to the Group (if any) is compatible with maintaining the independence of the external auditor; and
• if applicable, recommend that the Board take appropriate action in response to the external auditor’s report to satisfy itself of the external auditor’s independence.

 

8 Review

The Board will, at least once in each year:

• review the membership and charter of the Committee to determine its adequacy for current circumstances and the Committee may make recommendations to the Board in relation to the Committee’s membership, responsibilities, functions or otherwise;
• meet separately with the internal and external auditors where appropriate to (independently of management) discuss their results of their audits;
• prepare and consider any report or other disclosures to be included in the Group’s annual report or other communications to shareholders on the relationships between the external auditors and the Group; and
• review with management and the external auditor, the financial report to be included in the annual report including:

• the external auditor’s responsibilities under generally accepted accounting standards;
• significant accounting policies;
• management judgements and accounting estimates;
• adjustments arising from the audit; and
• the external auditors’ judgements about the quality, not just the acceptability, of accounting principles as applied in the financial report.