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Terms of Reference – Audit Committee

TERMS OF REFERENCE

AUDIT COMMITTEE

  1. Policy Statement

The Kingston Free Zone (KFZ) is a limited liability company incorporated under the Companies Act (2004) of Jamaica.  The KFZ is a subsidiary of the Port Authority (PAJ).  The Shareholders are the PAJ and the Government of Jamaica (GoJ) in the ratio of 72:28, respectively. KFZ is governed primarily by thePublic Bodies Management and Accountability Act and the Corporate Governance Framework for Public Bodies (CGF). Pursuant to Section 8 of the Public Bodies Management & Accountability Act, 2001 (the “PBMA”), the Board of Directors shall establish an Audit Committee consisting of no less than three directors. The Audit Committee shall report to the Board, as set forth in Section 9 of the PBMA Act. The Committee exercises an independent review function to assist the Board in fulfilling its oversight responsibilities.

 

  1. Purpose

The Audit Committee Terms of Reference (“the TOR”) defines the purpose, authority and responsibility of the Audit Committee (“the Committee”). In addition, the TOR is intended to assist the Board of Directors in fulfilling its fiduciary responsibilities. The Audit Committee (the “Committee”) is appointed to assist the Board in fulfilling its oversight responsibilities with respect to matters concerning:

 

  1. Roles and Responsibilities

The roles and responsibilities of the Committee are as follows:

  1. Advise the Board on:
  • practices and procedures which will promote productivity and the quality and volume of service;
  • the extent to which the objectives of the Board are being achieved;
  • the adequacy, efficiency and effectiveness of the accounting and internal control structure and systems of the Board; and
  • the independence of the auditors auditing the Board.
  1. review and advise the Board on the audited financial statements that are to be included in the annual report of the KFZ;
  • oversee any internal audit of the KFZ;
  1. review and advise the Board on the annual auditor’s report;
  2. Conduct investigations on behalf of other board committees;
  3. in the case of an entity undergoing a special audit or examination, review and advise the Board with respect to the report of that audit or examination; and
  • perform such other functions as are assigned to it by the Board.

 

3.1 Risk Assessment, Internal Controls and Financial Reporting

The Committee shall:

  1. Consider the adequacy of risk management and internal controls as well as the accuracy of financial reporting through reviewing (inter alia) the:
  2. mechanisms for the assessment and management of risk;
  3. plans and results of internal audit activities;
  • plans and results of external audit activities;
  1. adequacy of managements’ response to issues identified by all audit activities; and
  2. submission of all regulatory and statutory reports.

3.2 External Audit

The Committee shall:

  1. review the audit engagement letter, audit plans, timing and scope of the external audit, identifying special areas of concern to the external auditors;
  2. review minutes of any oral presentation or written reports made by the external auditors;
  • review the contents of the management representation letter to the external auditors;
  1. review the annual audit report and audited financial statements with the external auditors, prior to their recommendation to the Board;
  2. review all recommendations of the external auditors and, where appropriate, recommend or ascertain that necessary corrective actions have been taken;
  3. review with management, the external auditors and Legal Officer any significant litigation, claim, or contingency which could have a material effect on the financial position of the KFZ;
  • review and discuss all reports from and to the Auditor General;
  • review and discuss all reports from and to the Contractor General;
  1. review external auditor’s performance within the framework of established policy and review annual audit fees in the context of the plan and scope of the audit and make recommendation to the Board;
  2. Recommend to the Board the appointment of external auditors; and
  3. Ensure there is mandatory rotation of the engagement partner of the external auditors in keeping with the stipulation of the Code of Audit Practice.

 

3.3 Internal Audit

The Committee shall:

  1. annually, review and approve changes, if any, to the Internal Audit plan;
  2. review and approve the annual audit plan and all major changes to the plan;
  • review the Internal Audits’ activity and performance relative to its plan;
  1. review with the Internal Auditor the internal audit budget.
  2. ensure there are no unjustified restrictions or limitations on the internal audit function;
  3. periodically, meet with the Vice President, Group Internal Auditor, without management, to discuss any matters that the Committee or the Internal Auditor believes should be discussed privately;
  • initiate special internal audits, if required;
  • review the reports prepared by internal auditor and the response or determination of management with respect to any findings or recommendations;

 

 

  1. Composition

The Members of the Audit Committee shall be appointed by the Board and should consist of no less than three (3) individuals with at least two (2) directors, one of whom is to be designated as the Chairman.

  1. The Board may co-opt, to perform the duties of the Committee, individuals who are not directors but who possess a broad range of qualifications relevant to the functions of the KFZ.
  2. Every co-opted individual shall have all the rights and responsibilities of the other members of the Committee with respect to the work of the Committee.[1]
  • The majority of the members of the Committee should be financially literate and at least one member of the Committee should be a qualified accountant registered under the Public Accountancy Act or should have significant, recent and relevant financial experience and knowledge.
  1. The Committee should not include the Chairman of the Board and, where possible, the Chairman of the Finance Committee.
  2. The membership of the Committee should be rotated every 3 years.
  3. The Vice President, Group Internal Audit shall be invited to all Committee meetings.

 

  1. Meetings
  2. The Audit Committee shall meet quarterly and have the authority to convene additional meetings, as may be required. A meeting may be called by the Chairman or by the majority of the members of the Committee.
  3. Failure to attend at least 3 consecutive meetings without acceptable reasons to the Committee Chairman, will give rise to a consideration of continued membership.
  • The Committee shall determine its own procedures.
  1. The Committee may request any member of management or staff to attend meetings of the Committee in order to carry out its responsibilities.
  2. Meeting agendas, action items, decisions and other documents will be prepared for each meeting and provided at least 3 working days in advance to the Committee members along with appropriate briefing materials.
  3. Meetings may be conducted via teleconference, face to face or electronically;

 

  1. Authority

The Committee has the authority to conduct investigations into any matters within its scope of responsibility. It is empowered to:

  1. seek any information it requires from employees, all of whom are directed to cooperate with the Committee’s requests;
  2. meet with officers, external auditors or outside counsel, as necessary; and
  • recommend to the Board that independent counsel, experts and other advisors be retained to advise the Committee or assist in the conduct of an investigation.

 

  1. Reporting Responsibilities

The Committee shall submit reports of its meetings to the Board outlining the Committee’s activities, findings and related recommendations.

 

The Committee shall also prepare a report on its work and this report should be a subset of the corporate governance report of the KFZ Annual Report.

 

  1. Quorum

The quorum for meetings consists of two (2) members of the Committee of which 1 must be a member of the Board. The Chairman shall have a casting vote.

 

  1. Committee Secretary/Minutes

The Secretary for the Committee shall be the Corporate Secretary who shall appoint a recording Secretary to take the Minutes of the meetings.

 

The Committee Secretary is required to:

  1. circulate the notices and minutes of the Committee meetings;

 

  1. distribute to Committee members, 3 working days prior to the meetings of the Committee, all agenda of meetings, reports and/or related documents which are prepared for consideration by the Committee;

 

  • maintain the records of the Committee’s meetings; and

 

  1. have such other duties as may be assigned by the Committee.

 

The Audit Committee shall keep detailed records of its meetings and such records shall be made available to the external auditor and any examiner of the KFZ during any external audit or examination.

 

  1. Remuneration

The legislation makes provision for remuneration of Committee Members and this is determined according to prescribed rates as formulated by the Minister responsible for Finance.

 

  1. Committee Development and Evaluation
  2. The Committee’s financial literacy will be periodically assessed, and an appropriate development plan identified to improve skills, when required;

 

  1. The Committee will ensure that members receive continuing education on current accounting, auditing, and financial reporting standards and practices;

 

  • An annual evaluation of the performance of the Committee and individual members will be done taking into consideration the Committee’s goals and objectives established at the beginning of the fiscal year.

 

  1. Conflict of Interest

Where there is a conflict of interest, the Committee Member so affected shall declare his/her interest to the Committee and the details of the conflict are to be recorded by the Committee Secretary.

 

The Committee Member who has a conflict of interest shall not participate in the deliberations on the particular matter and will excuse himself from the discussions in respect of those interests during the period of discussion of the matter.

 

Directors with conflicts of interest shall not particpate in any vote at meetings where the transactions are being discussed, or exert any influence on the voting on the resolution in respect of the transaction.

 

  1. Confidentiality of Committee Information

All information received by the Committee is confidential and is the property of the KFZ and cannot be disclosed to parties outside of the organisation without prior approval of the Board.

 

  1. Review and Assessment of Terms of Reference

The Committee will review and assess the adequacy of its Terms of Reference at least every 2 years and request the Board’s approval for proposed changes.

 

 

 

 

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[1](Section 8(8) – PBMA Act)