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Chairman’s letter – Audit and Corporate Governance Committee

In fulfilling its commitment to regulatory compliance, AngloGold Ashanti’s Audit and Corporate Governance Committee, together with the Risk and Information Integrity Committee, endeavours to develop responses to the evolving nature of risks in the mining environment, to align operations with corporate governance best practice and to comply with legislation, regulations and requirements in the jurisdictions in which AngloGold Ashanti operates.

Composition of the committee and deliberations

The collective knowledge and skills of the committee were further broadened through the appointment of Mrs NP January-Bardill, an independent non-executive director, effective 2 November 2011. The entire committee comprises of four independent non-executive directors and meets the requirements as set forth in King III.

The members attended the required meetings held during 2011 and actively participated in deliberations giving effect to the board approved terms of reference, which are reviewed and updated annually. Questions and concerns of the committee members were directed to AngloGold Ashanti’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, General Counsel, Vice President: Group Internal Audit, the external auditors, regional heads of finance, as well as risk, compliance and other assurance providers who attend committee meetings in an ex officio capacity.

In 2011, the committee met independently with the Vice President: Group Internal Audit and with external auditors on a quarterly basis, without any members of management present.

2011 highlights

It is the Audit and Corporate Governance Committee’s principal regulatory duty to oversee the integrity of the Group’s internal control environment and ensure that financial statements are appropriate and comply with International Financial Reporting Standards. Set out below are some highlights from 2011:

 
Focus area Actions
Financial statements
Accounting policies and reporting standards Received training – on new accounting standards impacting AngloGold Ashanti – thereby enabling committee members to probe deeper into the implications of certain complex financial reporting standards on AngloGold Ashanti’s financial statements.
Reviewed accounting policies for appropriateness.
Companies Act Received training on the Companies Act and changes to legislation.
Integrated reporting Reviewed the sustainability and resource and reserve reports which describe the group’s nonfinancial performance, to support scrutiny applied to the group’s financial integrity and the sustainability of the group’s business.
Quarterly and annual IFRS reports Reviewed and recommended the quarterly and annual IFRS financial statements to the board for approval and subsequent submission to the JSE Limited and other stock exchanges as applicable.
Form 20-F Reviewed and recommended the annual report on Form 20-F and quarterly reports on Form 6-K prepared on US GAAP principles to the board for approval for submission to the United States Securities and Exchange Commission (SEC). The annual report on Form 20-F for the year ended 31 December 2011 will be submitted to the SEC on or about 30 April 2012.
Internal controls  
Risk-based internal audit Considered the internal control heat-map for AngloGold Ashanti as presented by Group Internal Audit.
Reviewed and approved the risk-aligned internal audit plan and monitored the implementation of audit recommendations.
External auditor Appointed the external auditors, approved the external audit plan and fees, and assessed the
independence of the external auditors.
Combined assurance Monitored the development and implementation of a combined assurance programme that facilitates integration and leveraging of the various control, governance and assurance processes used by the different assurance providers.
Internal control assessment Considered the results presented by internal and external assurance providers through the evolving combined assurance framework in order to conclude on the internal control, risk management and internal financial control environments within AngloGold Ashanti.
Corporate governance  
King III Monitored the progress and ensured implementation of the requirements of King III.
Risk governance Fulfilled an oversight role regarding financial reporting risks, internal financial controls, fraud risk
and information technology risks as they relate to financial reporting.

Financial statements

Financial statements and going concern

The Audit and Corporate Governance Committee reviewed the quarterly as well as the annual financial statements of AngloGold Ashanti, and considered whether:

  • complex accounting areas comply with IFRS and US GAAP as applicable;
  • significant accounting judgements and estimates are thoroughly evaluated;
  • adjusted and unadjusted accounting differences reported by the external auditors were reviewed, assessed and approved; and
  • the documented assessment of the company’s going concern status prepared by management which included the key assumptions was reasonable.

The committee also reviewed the contents of the integrated report.

The committee concurred with and accepted the external auditor’s report on the annual financial statements and has recommended the approval thereof to the board.

Finance function expertise

The committee assessed and is satisfied with the expertise and experience of the Chief Financial Officer as well as the expertise and adequacy of resources of the finance function and the experience of responsible senior members of management.

Internal controls

Internal audit

Internal audit is a key independent assurance provider to the Audit and Corporate Governance Committee as it has a unique ability to engage with the depth and detail of AngloGold Ashanti’s global control environment on a daily basis. The Vice President: Group Internal Audit has direct access to the chairmen of both the Audit and Corporate Governance Committee and the board. The committee has assessed the performance of the Vice President: Group Internal Audit in terms of the approved internal audit charter and is satisfied that the internal audit function is independent and appropriately resourced, and that the Vice President: Group Internal Audit has fulfilled the obligations of the position.

The Vice President: Group Internal Audit provided the Audit and Corporate Governance Committee with a written assessment based on the results of the formal documented review of the company’s systems of internal controls and risk management, including the design, implementation and effectiveness of the internal financial controls conducted by Group Internal Audit and other identified assurance providers. In terms of the evolving combined assurance model implemented during 2011, and considering information and explanations given by management, nothing has come to the attention of the Vice President: Group Internal Audit that caused him to believe that the company’s system of internal controls and risk management are not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements.

The committee concurred with and accepted the written assessment by internal audit and recommended approval thereof to the board.

Combined assurance

The committee oversees the development and implementation of the combined assurance model of the company, aimed to provide a coordinated approach to all assurance activities over significant risks facing the company. To give effect to this, the Vice President: Group Internal Audit was appointed as the assurance coordinator for the group and tasked with implementing the framework.

A key success factor of the combined assurance framework was to ensure that it is pragmatic and cost-effective and meets the unique requirements of the company.

The combined assurance framework follows an integrated topdown (focusing on strategic risks) and bottom-up (focusing on site specific operational risks) approach within a framework that encompasses the following key activities:

Step 1: Risk identification;

Step 2: Identification of controls;

Step 3: Identification of assurance providers;

Step 4: Assessment of assurance activities against controls; and

Step 5: Conclude and develop action plans.

The top-down element of the combined assurance process was fully implemented during 2011 with the bottom-up approach rolled-out on a pilot basis to allow for further refinement and to gear the organisation for a full-on roll-out during 2012. It is anticipated that combined assurance will be fully embedded during the 2013 financial year.

Whistle blowing

The committee received quarterly updates on AngloGold Ashanti’s whistle-blowing process and did not receive any concern or complaint relating to the accounting practices, internal financial controls, internal audit function and the content or auditing of the company’s financial statements.

oneERP

In support of Project ONE, a project initiative aligned with AngloGold Ashanti’s vision – To be the leading mining company – the company has embarked on the global implementation of an enterprise resource planning (ERP) system, SAP. This project, oneERP is in full momentum and is supported by a clearly defined implementation timeline.

It is anticipated that the implementation of oneERP will have a definitive impact on the internal control and internal financial control environment of the group. The Audit and Corporate Governance Committee, together with the Risk and Information Integrity Committee, reviews implementation progress and receives assurance thereon from various assurance providers.

External auditors

At the annual general meeting held in May 2011 shareholders approved the committee’s nomination of Ernst & Young Inc. as the auditors of the company with Mr Lance Tomlinson appointed as the individual registered auditor for 2011. The committee assessed independence and is satisfied that the external auditors are independent as set out in section 90(2) of the Companies Act.

In consultation with executive management, the committee agreed to the engagement letter, terms of engagement, audit plan and budgeted audit fees for the 2011 financial year. All non-audit services rendered by the auditors were preapproved by me in terms of a formal policy prior to the execution of these services.

The Audit and Corporate Governance Committee has recommended to the board, the reappointment of Ernst & Young Inc., as the company’s statutory auditors for the 2012 financial year. A resolution will be placed before shareholders at the annual general meeting to be held on 10 May 2012 to consider, and if deemed appropriate, to appoint Ernst & Young Inc. as the external auditors until the close of the annual general meeting to be held in 2013.

Corporate governance

King III

AngloGold Ashanti has made good progress in terms of meeting the requirements of King III during 2011 under the guidance of the Audit and Corporate Governance Committee, specifically relating to:

  • training on the Code of Business Principles and Ethics (Our Code) across all levels of employees, to embed these ethical principles in the day-to-day behaviours and actions of employees and other stakeholders in the long-term. Training will remain a key focus area;
  • the formalisation of the board chairman’s duties and responsibilities;
  • review and approval of materiality for integrated reporting purposes;
  • approval of the IT governance framework, including an IT charter, policy and strategy; and
  • development and approval of an alternative dispute resolution policy and processes.

There are however specific areas that require further refinement in order to fully comply with the requirements of King III. These include:

  • Publication of an integrated report: The company will publish its first integrated annual report pertaining to the 2011 financial year. Given that this is the first such report, AngloGold Ashanti, like other public companies, will further refine its reporting process in order to meet evolving best practice and the expectations of its stakeholders regarding the integration of its reporting.
  • Implementation of a fully integrated combined assurance framework: Implementation of a fully integrated audit process as part of an approved combined assurance framework began in 2011. The process will be refined over time to achieve the desired standard.
  • Identification of key laws, rules, codes and standards applicable to the company’s operations and compilation of related compliance framework: This process began during the third quarter of 2011 and is expected to be completed in 2012.
  • Risk and Information Integrity Committee: This committee is responsible for the oversight of IT governance. Further refinement and alignment of the relevant IT committees is expected to be achieved during 2012.

The Institute of Directors has been contracted by AngloGold Ashanti to conduct an independent evaluation of the board chairman, and the board. The evaluation of the board committees will be carried out by way of self assessments. The evaluation process for 2011 has commenced and the findings will be reported to the board during 2012.

Governance of risk

Three out of four members of the Audit and Corporate Governance Committee also serve as members of the Risk and Information Integrity Committee which allows for the identification of common control themes and synergies between assurance processes, thereby ensuring that, where appropriate, these functions can leverage off one another.

The Audit and Corporate Governance Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk and information technology risks as they relate to financial reporting.

Looking forward

The Audit Corporate Governance Committee will continue to apply rigour and scrutiny in overseeing AngloGold Ashanti’s integrated reporting processes, the effectiveness of the internal control environment underpinning these and the full implementation of the combined assurance model.

The Committee confirms that for the period under review, it discharged its duties and responsibilities in accordance with its terms of reference.

Prof Wiseman Nkuhlu
Chairman: Audit and Corporate Governance Committee