TERMS OF REFERENCE
1.1 This guideline is to assist the Boards of Directors of Meghna Cement Mills Limited’ (the Company) in making the audit committee established, effective & efficient and to assist the directors who will be appointed in the audit committee in carrying out their respective roles duly and result oriented.
1.2 It is required that the board would consider the constitution of the audit committee in particular circumstances, proportionate to the tasks, and in accordance with the size, complexity and risk profile of the Company.
1.3 The audit committee has the particular role, acting independently from the executive, to ensure that the interests of shareholders are properly protected in relation to financial reporting and internal control.
1 4 Nothing in this guideline would be interpreted as a departure from the principle of the board of directors’ functions as all directors would still remain equally responsible for the Company’s affairs as a matter of law.
1.5 The audit committee, like other committee to which particular responsibilities are delegated, will remain a committee of the board. Any disagreement with the board, including disagreement between the audit committee’s members and the rest of the board, would be resolved at board level.
1.6 This Code contains recommendations about the conduct of the audit committee’s relationship with the board, with the executive management and with the internal and the external auditors.
1.7 The audit committee will be required to intervene if there are signs of something been seriously missed or omitted. If they are uneasy about the explanations of management and/or auditors about any particular financial reporting or policy or any decision, they may seek independent advice from the professionals in that respect.
1.8 Under these guidelines, the audit committee would have wide-ranging, time- consuming and sometimes intensive work to do.
1.9 The Company management will need to make the necessary resources available to the audit committee in accordance with its requirements.
FORMATION & RESPONSIBILITIES
2.0 Establishment and effectiveness
2.1 The board would establish the audit committee by appointing qualified members in the committee;
3.0 Appointment of Members
3.1 The board would establish the audit committee with at least three members including two independent directors. The independent directors to be considered as independent as per the BSEC Guidelines and by the Board having relevant financial experience.
3.2 The Company Secretary will act as the Secretary of the Committee.
3.3 Appointments would be made for a period of up to three years in a row;
3.4 The term of the Audit Committee may be extendable by no more than one additional three-year’s period/term, or so long as the committee members continue to be independent, whichever is earlier.
4.0 Chairman of the Audit Committee
4.1 The Board of Directors will select 0l (one) member out of the Audit Committee to be the Chairman of the Audit Committee, who will be an independent director.
4.2 Chairman of the audit committee will be required to remain present in the Annual General Meeting (AGM).
5.0 Role and responsibilities of the Audit Committee
5.1 The role and responsibilities of the audit committee will be as follows:
a. To oversee of the financial reporting process and to monitor the fairness of the financial statements of the Company and announcements relating to the Company’s financial performance and reviewing of the financial reporting;
b. To monitor the Company’s internal control and management process and to review the effectiveness of its functions;
c. to make recommendations to the board, for it to put to the shareholders for their approval in general meeting;
d. to report to the Board of Directors on how it has discharged its responsibilities.
a. To monitor the accounting policies, principles and guidelines as adopted by the company for the time being and from time to time.
b. To oversee appointment and performance of the statutory auditors.
c. To review the annual financial statements, the quarterly and half yearly financial statements before submission to the board for approval.
d. To review the adequacy of internal audit function.
e. To review statement of significant related party transactions submitted by the management.
f. To review the management reports/ management letters/ letter of internal control weakness, if any has been issued by the statutory auditors to the company.
g. To oversee that in case of any money being raised through any public offering or rights issue the Company will disclose it to the Audit Committee about the uses / applications of funds by major category (capital expenditure, sales and marketing expenses, working capital, etc.), on a quarterly basis, as a part of their quarterly declaration of financial results.
If used for the purposes other than those stated in the offer document / prospectus, to review on an annual basis, the statement of utilization of funds as raised by issuing of offer document / prospectus. Such statement of utilization of funds has to be prepared by the management of the Company.
6.0 Review of Terms of Auditors
6.1 The audit committee would review the terms of engagement and the remuneration as to be paid to the external auditors in respect of their audit services.
6.2 The audit committee would review that the engagement letter issued to the external auditor at the start of each audit, ensuring that it has been updated to reflect changes in circumstances arising since the previous year.
6.3 The audit committee would satisfy itself that the auditors provide appropriate, effective and high-quality audit service towards the Company.
6.4 The audit committee to review and monitor the external auditor’s independence, objectivity and the effectiveness of the audit process.
MEETINGS OF AUDIT COMMITTEE
7.1 It is for the Chairman of the Audit Committee, in consultation with the other members of the Committee, to decide the frequency and timing of its meetings.
It is recommended that there would be no fewer than three Audit Committee meetings during the financial year. It is also recommended that Audit Committee meetings to be held to coincide with the key dates within the financial reporting and auditing cycle of the Company.
7.2 No one other than the audit committee’s chairman and members is entitled to be present at a meeting of the audit committee. It is for the audit committee to decide if non-members would attend in a particular meeting or a particular agenda item on invitation of the audit committee.
7.3 Sufficient time has to be allowed to the audit committee to enable to review and discuss on the matters placed before the audit committee. A sufficient interval would be allowed between audit committee meetings and main board meetings to allow any work arising from the audit committee meeting to be carried out and reported to the board as appropriate.
7.4 The audit committee would, at least annually, meet the external and internal auditors, to discuss matters relating to the issues arising in course of the audit.
7.5 Meetings of the audit committee be considered as formal. However, the Chairman of the Audit Committee may call informal ones, if deems required. The Audit Committee to keep in touch on a continuing basis with the key management personnel involved in the Company’s governance, including the board chairman, the chief executive, the finance director, the external auditors, the head of internal audit and the Company Secretary.
7.6 The quorum of the Audit Committee will be with at least 3 (three) members and with at least l(one) independent director.
8.0 Relationship with the Board
8.1 The role of the audit committee is for the board to decide and to the extent that the audit committee undertakes tasks on behalf of the board, the results would be reported to, and considered by, the board. In doing so it would identify any matters in respect of which it considers that action or improvement is needed, and make recommendations as to the steps necessary to be taken.
8.3 The audit committee would review annually its terms of reference and its own effectiveness and recommend any necessary changes to the board. The board would also review the audit committee’s effectiveness annually.
8.4 The audit committee would report to the board on how it has discharged its responsibilities, including:
a. The significant issues that it considered in relation to the financial statements and how these issues were addressed;
b. Its assessment of the effectiveness of the external audit process and its recommendation on the appointment or reappointment of the external auditor(s);
c. Any other issues on which the board has requested the committee’s opinion.
8.5 Where there is any disagreement between the audit committee and the board, adequate time would be made available for discussion of the issue or issues with a view to resolving the disagreement(s).
8.6 Where any such disagreements between the audit committee and the board, cannot be resolved, the audit committee would have the right to report the issue to the shareholders as part of the report on its activities in the annual report.
RESOURCES & REMUNERATION
9.0 Resources for the Audit Committee
9.1 The audit committee would be provided with sufficient resources to discharge its duties effectively and smoothly.
9.2 The audit committee would have access to the services of the company’s secretariat division on all audit committee matters including: planning the audit committee’s work, drawing up meeting agendas, maintenance of minutes, drafting of material about its activities for the annual report, collection and distribution of information and provision of any necessary practical support.
9.3 The Company Secretary would ensure that the audit committee receives required support, information and papers in a timely manner to enable full and proper consideration to be given to the issues.
9.4 The board would make funds available to the audit committee to enable it to take independent legal, accounting or other advice when the audit committee reasonably believes it necessary to do so.
10.1 The board of directors may allow any remuneration, if necessary, to the members of the audit committee for-the additional services and responsibilities as the member of the Audit Committee.
10.2 In allowing the remunerations to the members of the audit committee due consideration has to be given to the time as given by the audit committee members, the skills they bring to bear and the onerous duties they take on, as well as the value of their work to the Company.
10.3 As the Chairman’s responsibilities are more responsive and the time involvement will generally be more than the other members of the audit committee so if any remuneration being allowed to the Chairman, then this has to be considered duly and be reflected in the quantum of his or her remuneration.
11.0 Reporting to the Board of Directors
11.1 The audit committee would review and report to the board on the significant financial reporting issues, interim reports, any announcement and related formal statements.
11.2 It is solely the management’s responsibility to prepare complete and accurate financial statements and disclosures in accordance with financial reporting standards and applicable rules and regulations. However, the audit committee would consider the significant accounting policies, any changes thereto and any significant estimates, considerations and judgments.
11.3 In course of the review, the audit committee, if is not satisfied with any aspect of the draft financial reporting by the Company, will report its views to the board immediately.
11.4 The audit committee would review related information presented with the financial statements, including the business review, and statements relating to the audit and management.
11.5 If requested by the board, the audit committee may also review the content of the annual report and accounts and advise the board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
11.6 The audit committee would review arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.
11.7 The audit committee’s objective would be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.
11.8 The Audit Committee will submit written statement /report on its activities to the Board of Directors from time to time.
11.9 The Audit Committee will immediately report to the Board of Directors on the any of the following findings:
a) reports on conflicts of interests;
b) suspected or presumed fraud or irregularity or material defect in the internal control system;
c) suspected infringement of laws, including securities related laws, rules and regulations;
d) any other matter which the audit committee deemed necessary to be disclosed to the Board of Directors immediately.
12.0 Report to the Authorities
12.1 If the Audit Committee has reported to the Board of Directors about anything which has material impact on the financial condition and results of operation and has discussed with the Board of Directors and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, then the Audit Committee will report on such finding to the Bangladesh Securities & Exchange Commission (BSEC), upon reporting of such matters to the Board of Directors for three times or completion of a period of 6 (six) months from the date of first reporting to the Board of Directors, whichever is earlier.
13.0 Report to the Shareholders and General Investors
13.1 Report on activities carried out by the Audit Committee, including any report made to the Board of Directors under Clause no. 11.9 above during the year, will be signed by the Chairman of the Audit Committee and disclosed in the annual report of the issuer Company.