AUDIT COMMITTEE TERMS OF REFERENCE
SPORTECH PLC (the "Company")
AUDIT COMMITTEE TERMS OF REFERENCE
1. INTRODUCTION
1.1 On 30 November 2007, the Board resolved, in accordance with the articles of
association of the Company, to confirm the terms of reference of the audit committee
of the Board.
1.2 The purpose of this document is to set out:
(a) the duties and responsibilities of the Committee; and
(b) the constitution of the Committee and the regulations governing proceedings of
the Committee.
1.3 In this document, references to:
(a) the "Board" are to the board of directors of the Company from time to time;
and
(b) the "Committee" are to the audit committee of the Board.
2. MEMBERSHIP
2.1 The members of the Committee shall be appointed by the Board. All members of the
Committee shall at all times be independent non-executive directors of the Company.
2.2 Appointments to the Committee shall be for a period of up to three years which may be
extended for up to two further periods of three years.
2.3 The Committee shall consist of at least two members, at least one of whom shall have
recent and relevant financial experience.
2.4 The chairman of the Board shall not be a member of the Committee.
3. CHAIRMAN
3.1 The Board shall appoint the chairman of the Committee who shall be an independent
non-executive director.
3.2 In the absence of the chairman of the Committee at any meeting of the Committee, the
members of the Committee present shall elect one of their number to chair the meeting.
4. SECRETARY
The company secretary shall act as the secretary of the Committee.
5. MEETINGS
5.1 Meetings of the Committee shall be held at least three times a year at appropriate times
in the reporting and audit cycle and otherwise as required.
5.2 Only members of the Committee are entitled as of right to attend meetings of the
Committee but others (such as the chairman of the Board, the chief executive, the
finance director and representatives from the risk, compliance, finance and internal
audit functions) may be invited by the Committee to attend all or part of any meeting as
and when the Committee considers appropriate. The external auditors shall be invited
to attend meetings of the Committee on a regular basis.
6. NOTICE
6.1 Meetings of the Committee shall be summoned by the secretary of the Committee at
the request of any member of the Committee or at the request of the external or internal
auditors if they consider it necessary.
6.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date,
together with an agenda of items to be discussed, shall be forwarded to each member of
the Committee and any other proposed attendee not later than five working days before
the date of the meeting. Supporting papers shall be sent to members of the Committee
and (as appropriate) any other proposed attendee at the same time.
7. QUORUM
The quorum necessaiy for the transaction of business at meetings of the Committee
shall be two members. A duly convened meeting of the Committee at which, a quorum
is present shall be competent to exercise all or any of the authorities, powers and
discretions vested in or exercisable by the Committee.
8. VOTING
8.1 Matters arising at any meeting of the Committee shall be decided by a majority of
votes.
8.2 Each member of the Committee present at a meeting of the Committee shall have one
vote on matters arising at the meeting. The chairman of the Committee shall not have a
casting vote on any matter in respect of which there is an equality of votes.
8.3 A member of the Committee shall not vote in respect of any matter being considered by
the Committee in which he has, directly or indirectly, a personal interest and shall not
be counted in the quorum at a meeting in relation to any matter on which he is debarred
from voting.
9. SCOPE OF DUTIES
The Committee shall carry out the duties below for the Company and its major
subsidiary undertakings as appropriate.
10. DUTIES - FINANCIAL REPORTING
10.1 The Committee shall monitor the integrity of the financial statements of the Company,
including its annual and interim reports, preliminary results' announcements and any
other formal announcement relating to its financial performance, reviewing significant
financial reporting issues and judgements which they contain. The Committee shall
also review summary financial statements, significant financial returns to regulators
and any financial information contained in certain other documents, such as
announcements of a price sensitive nature.
10.2 The Committee shall review and challenge where necessary:
(a) the consistency of, and any changes to, accounting policies both on a year on
year basis and across the Company and its group;
(b) the methods used to account for significant or unusual transactions where
different approaches are possible;
(c) whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account the views of the
external auditor;
(d) the clarity of disclosure in the Company's financial reports and the context in
which statements are made; and
(e) all material information presented with the financial statements, such as the
operating and financial review and the corporate governance statement (insofar
as it relates to the audit and risk management).
10.3 The Committee shall review the annual financial statements of the Company's pension
funds where not reviewed by the Board as a whole.
11. DUTIES - INTERNAL CONTROLS AND RISK MANAGEMENT SYSTEMS
The Committee shall:
(a) keep under review the effectiveness of the Company's internal controls and
risk management systems; and
(b) review and approve the statements to be included in the annual report
concerning internal controls and risk management.
12. DUTIES - WHISTLEBLOWING
The Committee shall review the Company's arrangements for its employees to raise
concerns, in confidence, about possible wrongdoing in financial reporting or other
matters. The Committee shall ensure that these arrangements allow proportionate and
independent investigation of such matters and appropriate follow up action.
13. DUTIES - INTERNAL AUDIT
The Committee shall consider if an internal audit function is required for the Company
and if such audit function is required shall:
(a) monitor and review the effectiveness of the Company's internal audit function
in the context of the Company's overall risk management system;
(b) approve the appointment and removal of the head of the internal audit function;
(c) consider and approve the remit of the internal audit function and ensure it has
adequate resources and appropriate access to information to enable it to
perform its function effectively and in accordance with the relevant
professional standards. The Committee shall also ensure the function has
adequate standing and is free from management or other restrictions;
(d) review and assess the annual internal audit plan;
(e) review promptly all reports on the Company from the internal auditors:
(f) review and monitor management's responsiveness to the findings and
recommendations of the internal auditor; and
(g) meet the head of internal audit at least once a year, without management being
present, to discuss their remit and any issues arising from the internal audits
carried out. In addition, the head of internal audit shall be given the right of
direct access to the chairman of the Board and to the Committee.
14. DUTIES - EXTERNAL AUDIT
14.1 The Committee shall:
(a) consider and make recommendations to the Board, to be put to shareholders for
approval at the AGM, in relation to the appointment, re-appointment and
removal of the Company's external auditor. The Committee shail oversee the
selection process for new auditors and if an auditor resigns the Committee shall
investigate the issues leading to this and decide whether any action is required;
(b) oversee the relationship with the external auditor including (but not limited to):
(i) approval of their remuneration, whether fees for audit or non audit
services and that the level of fees is appropriate to enable an adequate
audit to be conducted;
(ii) approval of their terms of engagement, including any engagement
letter issued at the start of each audit and the scope of the audit;
(iii) assessing annually their independence and objectivity taking into
account relevant UK professional and regulatory requirements and the
relationship with the auditor as a whole, including the provision of any
non audit services;
(iv) satisfying itself that there are no relationships (such as family,
employment, investment, financial or business) between the auditor
and the Company (other than in the ordinary course of business);
(v) agreeing with the Board a policy on the employment of former
employees of the Company's auditor, then monitoring the
implementation of this policy;
(vi) monitoring the auditor's compliance with relevant ethical and
professional guidance on the rotation of audit partners, the level of fees
paid by the Company compared to the overall fee income of the firm,
office and partner and other related requirements; and
(vii) assessing annually their qualifications, expertise and resources and the
effectiveness of the audit process which shall include a report from the
external auditor on their own internal quality procedures;
(c) meet regularly with the external auditor, including once at the planning stage
before the audit and once after the audit at the reporting stage. The Committee
shall meet the external auditor at least once a year, without management being
present, to discuss their remit and any issues arising from the audit;
(d) review and approve the annual audit plan and ensure that it is consistent with
the scope of the audit engagement;
(e) review the findings of the audit with the external auditor. This shall include,
but not be limited to, the following:
(i) a discussion of any major issues which arose during the audit;
(ii) any accounting and audit judgements; and
(iii) levels of errors identified during the audit.
14.2 The Committee shall also review the effectiveness of the audit and shall:
(a) review any representation letter(s) requested by the external auditor before they
are signed by management;
(b) review the management letter and management's response to the auditor's
findings and recommendations; and
(c) develop and implement a policy on the supply of non audit services by the
external auditor, taking into account any relevant ethical guidance on the
matter.
15. MINUTES OF MEETINGS
15.1 The secretary of the Committee shall minute the proceedings and resolutions of ail
meetings of the Committee, including the names of those present and in attendance.
15.2 Minutes of meetings of the Committee shall be circulated promptly to all members of
the Committee and, when finalised and agreed, to all other members of the Board.
16. REPORTING RESPONSIBILITIES
16.1 The chairman of the Committee shall report formally to the Board on the proceedings
of the Committee following each meeting on all matters within its duties and
responsibilities.
16.2 The Committee shall make whatever recommendations to the Board it deems
appropriate on any area within its remit where action or improvement is needed.
16.3 The Committee shall make a statement in the annual report about its activities.
16.4 The Committee shall make available these terms of reference, explaining its role and
the authority delegated to it by the Board.
17. AUTHORITY
The Committee is authorised by the Board:
(a) to obtain, at the Company's expense, external legal or other professional advice
on any matter within its terms of reference; and
(b) to seek any information it requires from any director or employee of the
Company in order to perform its duties.
18. GENERAL
18.1 The Committee shall:
(a) have access to sufficient resources in order to carry out its duties, including
access to the company secretariat for assistance as required;
(b) be provided with appropriate and timely training, both in the form of an
induction programme for new members and on an ongoing basis for all
members;
(c) give due consideration to applicable laws and regulations, the provisions of the
Combined Code and the requirements of the UK Listing Authority's Listing
Rules as appropriate;
(d) be responsible for co-ordination of the internal and external auditors; and
(e) oversee any investigation of activities which are within its terms of reference
and act as a court of the last resort.
18.2 The chairman of the Committee shall attend each Annual General Meeting of the
Company prepared to respond to any shareholder questions concerning the
Committee's activities,
18.3 The Committee shall, at least once a year, review its own performance, constitution and
terms of reference to ensure it is operating at maximum effectiveness and recommend
any changes it considers necessary to the Board for approval.