Audit and risk committee report

This is the report of the audit and risk committee (committee) of Bidcorp appointed for the financial year ended June 30 2016 in compliance with the Companies Act and in terms of the JSE Listings Requirements.

This committee was constituted by shareholders’ special resolution passed on April 4 2016 in anticipation of the planned listing and unbundling of Bidcorp on May 30 2016. The Bidvest Group Limited divisional foodservice audit committee structure was incorporated to support the newly constituted committee, which brings a wealth of experience and knowledge to the committee. Under the single chairmanship of Mrs H Wiseman for group and divisional audit and risk committees, the board is satisfied that this committee can make a strong and effective contribution to the group.

The committee has approved a draft charter that was presented and adopted by the Bidcorp board at the meeting held on August 23 2016. The charter complies with the statutory requirements as set out in the Companies Act and recommendations set out by King III.

Membership

The committee members for the financial year ended June 30 2016 have been appointed by shareholders’ resolution passed on April 4 2016; and is made up of a minimum of three (3) independent non-executive directors, and chaired by an independent non-executive. The Bidcorp audit and risk committee members include Mrs H Wiseman (chairman), Messrs PC Baloyi and NG Payne in line with the charter requirements.

The shareholders appointed the committee for the 2016 financial year by special resolution in April 4 2016 and will be requested to approve the appointment of the chairman and members to the committee for the 2017 financial year at the annual general meeting scheduled for November 21 2016.

The committee consists solely of independent non-executive directors who are all financially literate. The board considers the membership of the committee adequate and the members are adequately experienced to perform the duties in line with the charter requirements.

Purpose

The purpose of the committee, is to:

assist the board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems, control and reporting processes, and the preparation of accurate reporting and financial statements in compliance with the applicable legal requirements and accounting standards;
oversee the activities of, and to ensure coordination between, the activities of internal and external audit;
provide a forum for discussing financial, enterprise-wide, market, regulatory, safety and other risks and control issues, and to monitor controls designed to minimise these risks;
review the Bidcorp annual integrated report in conjunction with the social and ethics committee, including the consolidated and separate financial statements, as well as its interim report and any other public reports or announcements containing financial information;
receive and deal with any complaints concerning the accounting practices, internal audit or the content and audit of its financial statements or related matters; and
annually review the committee’s work and charter to make recommendations to the board to ensure its effectiveness.

Duties carried out

The committee has successfully performed its duties during the financial year according to its charter. In the fulfilment of these duties, the major areas of focus were revenue recognition, recoverability of receivables, valuation of goodwill and other intangibles, existence and valuation of inventory, accuracy of taxation expenses and recoverability of taxation assets, acquisition accounting, accounting for customer and supplier bonuses/rebates, risks associated with management override of controls, enterprise risk management oversight, assessment of the ability of the group to continue as a going concern, related-party transactions, the overall presentation of the financial information to shareholders, as well as a key role in the financial and reporting requirements during the listing and unbundling process.

The committee confirms the following statutory and delegated duties were adequately addressed and sets out the results below.

Financial statements

The committee:

confirmed, based on management’s review, that the consolidated and separate financial statements were prepared on the going concern basis;
examined the consolidated and separate financial statements and other financial information made public, prior to their approval by the board;
considered accounting treatments, significant or unusual transactions and accounting judgements;
considered the appropriateness of accounting policies and any changes made thereto;
reviewed the representation letter relating to the consolidated and separate financial statements and the ISAE 3420 reasonable assurance opinion in respect of the provisional announcement, signed by management;
considered any problems identified as well as any legal and tax matters that could materially affect the financial statements; and
met separately with management, external audit and internal audit, and satisfied themselves that no material control weakness exists.

External audit

The committee:

nominated KPMG as auditors and Mr M Hassan as the independent auditor and designated audit partner respectively to the shareholders for appointment for the financial year ended June 30 2016, of the group and company, and ensured that the appointments complied with legal and regulatory requirements for the appointment of an auditor;
approved the external audit engagement letter, the audit plan and the budgeted audit fees payable to the external auditors;
determined the nature and extent of all non-audit services provided by the independent auditors and pre-approved all non-audit services undertaken;
obtained assurances from the independent auditors that adequate accounting records were being maintained; and
confirmed that no reportable irregularities had been identified or reported by the independent auditors under the Auditing Profession Act.

Independence of external auditors, KPMG

The committee:

reviewed representations made by KPMG to the committee;
confirmed that the auditors did not, except as external auditors or in rendering permitted non-audit services, receive any remuneration or other benefit from the group;
confirmed the auditors’ independence was not impaired by any consultancy, advisory or other work undertaken;
determined the auditors’ independence was not prejudiced as a result of any previous appointment as auditors; and
considered the criteria specified for independence by the Independent Regulatory Board for Auditors and international regulatory bodies and found no cause for concern or doubt of the independence of the external auditors, KPMG.

Internal control and internal audit

The committee:

reviewed the annual internal audit plans and evaluated the independence, effectiveness and performance of the internal audit function;
considered the reports of the internal auditors on the group’s systems of internal control including financial controls, business risk management and maintenance of effective internal control systems;
received assurances that proper accounting records were maintained and that the systems safeguarded the group’s assets against unauthorised use or disposal;
reviewed issues raised by internal audit and the adequacy of corrective action taken by management in response thereto;
assessed the adequacy of the performance of the internal audit function and found it satisfactory; and
concluded the opinion recommended to the board at year-end that there were no material breakdowns in internal control.

Risk management

The committee:

reviewed the group’s policies and approach to risk management and found them to be sound;
considered all material risks to which the group is exposed, ensuring that the requisite risk management culture, policies and systems are progressively implemented and functioning effectively;
management is accountable to the board for implementing and monitoring the processes of risk management and integrating this into day-to-day activities; they confirm these processes through the completion of the quarterly Bidcorp management representation letter submitted to the audit and risk committee;
performs ongoing monitoring of the enterprise-wide risk assessment process to ensure risks and opportunities are adequately identified, evaluated and managed at the appropriate level in each business, and that the individual and joint impact of risks identified on the group was considered;
reviewed legal matters that could have a material impact on the group, as well as considering the adequacy and effectiveness of the group’s procedures to ensure compliance with legal and regulatory responsibilities; and
considered reports provided by management, internal assurance providers and the independent auditors regarding compliance with legal and regulatory requirements, and found Bidcorp’s processes to be sound and effective.

Combined assurance

The committee:

reviewed the plans and reports of the external and internal auditors and other assurance providers including management, and concluded that these were adequate to address all significant financial risks facing the business.

Chief financial officer (CFO)

The committee:

considered the appropriateness of the experience and expertise of the CFO and concluded that this was appropriate; and
considered the expertise, resources and experience of the finance function and concluded that these were appropriate.

Consolidated and separate financial statements

The committee:

reviewed the consolidated and separate annual financial statements of Bidcorp for the year ended June 30 2016, and the committee is of the view that, in all material respects, it complies with the relevant provisions of the Compan ies Act and IFRS and fairly presents the financial position at that date and the results of its operations and cash flows for the year then ended; and
in conjunction with the Bidcorp social and ethics committee, the committee has satisfied itself as to the integrity of the remainder of the annual integrated report.

Attendance

The names of the members who were in office during the period April 4 2016 to October 7 2016 and the number of audit and risk committee meetings attended by each of the members are:

Director	August 19 2016	September 16 2016
H Wiseman (chairman)*	^	^
PC Baloyi*	^	^
NG Payne*	^	^

^ Attended in person, by video-conference or tele-conference
*Appointed April 4 2016.

Conclusion

Following the review by the committee for the year ended June 30 2016, the committee is of the view that, in all material respects, it has complied with the relevant requirements.

Having achieved its objectives for the financial year, the committee recommended the consolidated and separate financial statements and annual integrated report for the year ended June 30 2016 for approval to the board.

Signed on behalf of the audit and risk committee by:

Helen Wiseman
Chairman