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Corporate Governance – Audit Committee

J.D. McCourt Dr. P.F. deV. Cluver

Membership and responsibilities

The audit committee was comprised of independent non-executive directors Dr P F deV Clüver and J D McCourt (Chairman) throughout 2009. The Board believes that J D McCourt satisfied the recommendation in the 2006 FRC Combined Code that at least one member of the audit committee should have recent relevant financial experience. It is also satisfied that Dr P F deV Clüver, inter alia through his membership of the committee, was sufficiently knowledgeable in relevant financial matters to enable him to fulfil his responsibilities on the committee.

These responsibilities, which were reviewed in line with best practice during the year, are set out in the terms of reference of the audit committee. They are summarised below:

  1. to approve the terms of engagement and remuneration of the external auditor and to recommend to the Board, when appropriate, any change in the external auditor;
  2. to agree, in advance, with the external auditor the nature and scope of the audit as set out in their audit plan;
  3. to review the Group’s preliminary and interim financial information and full year financial statements and to report to the Board on the outcome of this review. As part of this process, the committee considers:
    • the appropriateness of the Group’s accounting policies, including any changes in these policies;
    • any significant judgemental matters;
    • any significant audit adjustments;
    • the continuing appropriateness of the going concern assumption;
    • the contents of the directors’ report, the operating and financial review and chairman’s statement as set out in the annual report;
    • compliance with relevant financial reporting standards;
    • compliance with legal and Stock Exchange requirements.
  4. to review any issues raised by the external auditor during the conduct of the audit. As part of this review, the committee considers any report from the external auditor on their findings in relation to the Group's financial systems and controls, together with any management responses. In addition, the committee reviews any representation letter required by the external auditor as part of the audit, prior to its endorsement by the Board. As appropriate, the committee also meets the external auditor independently of management at least annually;
  5. to annually assess and monitor the independence, objectivity and effectiveness of the external auditor. As part of this process, the committee reviews the implementation of its policy in relation to the provision of non-audit services by the external auditor taking into account relevant ethical guidance. In addition, the committee has agreed with the Board a policy on the employment by the Group of former employees of the external auditor, which it monitors on an ongoing basis;
  6. to meet regularly with the Group’s head of internal audit in order to review the internal audit programme and to consider his findings on completed audits. The committee also reviews the adequacy of the resources of the internal audit team and the co-ordination between the internal and external auditor. The committee is responsible, in consultation with the Chairman of the Board, for the appointment or removal of the head of internal audit;
  7. to address any other topics as requested by the Board, including to consider the findings of any internal investigations and the response of management;
  8. to review the Group’s arrangements for employees to raise concerns, in confidence, about possible impropriety in financial reporting or other matters and to ensure there is provision for a proportionate investigation and follow-up of such matters; and
  9. to review, at least annually, the committee's own performance and terms of reference and to recommend any changes it considers necessary to the Board for approval.

Committee meetings in 2009

The audit committee schedules three routine meetings annually. There is a formal agenda for all meetings, which follows the financial reporting cycle of the Company. Meetings are attended as appropriate by the Group finance director, the Group financial controller, the head of internal audit and representatives of the external auditor. The main items on the agendas of each of the audit committee meetings held during 2009 were as follows:

February meeting

September meeting

December meeting

Independence of external auditor

As part of its annual review of the independence of the external auditor, the audit committee seeks confirmation from the external auditor that he is, in his professional judgement, independent of Fyffes. The committee also monitors the nature, extent and scope of the non-audit services provided by the external auditor. In this regard, the engagement of the external auditor to provide any non-audit services, where the expected costs exceed a pre-approved limit, requires the approval of the audit committee.

Four key principles underpin the provision of non-audit services by the external auditor, namely that the auditor shall not:

The amounts paid to the external auditor during the year for audit and non-audit services is disclosed on page 61 of our Annual Report.

The committee also reviewed the Group's practices in respect of the hiring of former employees of the external auditor in order to assess whether such appointments might affect, or appear to affect, the external auditor’s independence. The committee is advised in advance of any such proposed appointments.

Performance evaluation

Towards the end of 2009, the committee, as part of the overall evaluation of the Board and its directors, undertook a self-evaluation of its effectiveness. The outcome of this review, which was satisfactory, was reported to, and considered by, the Board in December 2009.