PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

Audit Committee

The Audit Committee meets as required and on several occasions throughout the year. For membership and attendance details of the Audit Committee, refer to the Annual Report.

The composition of the Audit Committee is based on the following principles:

• The Audit Committee should consist of non-executive directors only
• The Chairperson of the Audit Committee must not be Chairperson of the Board
• The Audit Committee should consist of at least three members
• The Audit Committee should include members who are financially literate with at least one member who has financial and accounting related expertise

The Audit Committee is governed by a charter which outlines the Committee’s role and responsibilities, composition, structure and membership requirements. The charter is regularly reviewed to ensure it remains consistent with the Board’s objectives and responsibilities. A detailed Terms of Reference has been developed to ensure the Audit Committee meeting agenda is consistent with the Committee’s role and responsibilities as outlined in the charter.

The External Auditor, Managing Director, Chief Financial Officer, Company Secretary, Group Commercial Manager, and other Company executives (as required) attend Audit Committee meetings, by invitation, to present the relevant statutory information, Financial Statements, reports, and to answer the questions of the Audit Committee members. At the Audit Committee meetings, the Audit Committee members will meet with the External Auditor without management present.

The main responsibilities of the Audit Committee include:

• Review of financial statements and external financial reporting
• Assess the management processes supporting external reporting
• Assess whether the external reporting is adequate to meet the information needs for shareholders
• Recommendations on the appointment and removal of the External Auditor
• Review and monitor the performance and independence of the external audit
• Review of tax planning and tax compliance systems and processes
• Review and monitor risk management and internal compliance and control systems
• Assess the performance and objectivity of the internal audit function
• Reporting to the Board on the Committee’s role and responsibilities covering all the functions in its charter

The Company Secretary prepares the draft minutes for each Audit Committee meeting, which are tabled at the next Audit Committee meeting for review and approval. The draft minutes are also included in the Board papers of the next Board meeting following the Audit Committee meeting.

Certification of Financial Reports

The Managing Director and Chief Financial Officer state in writing to the Board each reporting period that in their opinion the Company’s financial reports present a true and fair view of the Company’s financial position and performance, and are in accordance with relevant Accounting Standards. The statements from the Managing Director and Chief Financial Officer are based on a formal sign-off framework established throughout the Company and reviewed by the Audit Committee as part of the financial reporting process.

Auditor Independence

The Board recognises the importance of a truly independent audit firm to ensure that the audit function delivers, for the benefit of the Board and all other stakeholders, an unbiased confirmation of both the Financial Statements and the state of affairs of the Company. Consistent with the Board’s commitment to an independent audit firm, a policy has been approved by the Board on the role of the External Auditor, which is designed to ensure the independence of the external audit function.

During each year, the Audit Committee examines the non-audit roles performed by the audit firm and other potential audit service providers to satisfy itself that the auditor’s independence will not be compromised and that alternate providers are available, if considered desirable. Whilst the value of the non-audit services could, in extreme cases, compromise audit independence, more important is to ensure that the External Auditor is not passing an audit opinion on the non-audit work of its own firm.

During the year, the Company’s External Auditor, KPMG, provided an Auditor Independence Declaration to the Board (refer to the Directors’ Report) that, to the best of their knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
• any applicable code of professional conduct in relation to the audit.

In considering this declaration, the Board were satisfied with the continuing independence of the audit function.

For details of the non-audit roles performed by KPMG during the year, please refer to the notes to the Financial Statements.

Selection and Appointment of External Auditor

Following shareholder approval at the 2004 Annual General Meeting, KPMG were appointed External Auditor for the financial year commencing 1 July 2004 after a comprehensive tender process conducted by the Audit Committee. KPMG replaced Ernst & Young who had been the External Auditor since 1995.

Rotation of External Auditor

KPMG has advised the Company that their policy of audit partner rotation requires a change in the lead engagement partner and review partner after a period of five years. An audit partner rotation plan has been reviewed and approved by the Audit Committee to ensure the transition process is managed effectively.