Chairman’s letter - Audit and Corporate Governance Committee
Internal controls and procedures have been put in place to manage the risk of business failure and provide reasonable assurance against such failure.
In terms of the King Code of Governance for South Africa 2009 (King III) and in line with the South African Companies Act No 71 of 2008, the Audit and Corporate Governance Committee (the Audit Committee) is pleased to present its report for the financial year ended 31 December 2012.
Management has established and maintains internal controls and procedures, which are reviewed by the board on a regular basis. These are designed to manage, rather than eliminate, the risk of business failures and to provide reasonable assurance against such failures.
It is the Audit 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 (IFRS) and fairly present the financial position of the group and the results of its operations. The Audit Committee provides regular reports to the board, which assumes ultimate responsibility for the functions performed by the Audit Committee.
COMPOSITION AND DELIBERATIONS
The Audit Committee, appointed by the shareholders at the May 2012 annual general meeting, comprised of four independent non-executive directors. Collectively, the members possess the skills and knowledge to oversee and assess the processes developed by management to formulate responses to the evolving risks within AngloGold Ashanti’s 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.
The statutory duties and general activities of the Audit Committee are set out in its board-approved terms of reference that are reviewed and updated annually. The Audit Committee’s mandate includes:
- monitoring the integrity of the group’s integrated reporting and all factors and risks that may impact on reporting;
- annually nominating the external auditors for appointment by the shareholders;
- assessing the external auditor’s independence and determining their remuneration;
- monitoring and reviewing the effectiveness of the group’s internal audit function;
- annually reviewing the expertise, appropriateness and experience of the finance function;
- ensuring a combined assurance model is applied to provide a co-ordinated approach to all assurance activities;
- reviewing developments in governance and best practice;
- ensuring that there is an ethics policy in place that is aligned to the strategy of the company; and
- evaluating the effectiveness of the committee.
The Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Group General Counsel and Company Secretary, Senior Vice President: Group Internal Audit, the external auditors, regional heads of finance, as well as other assurance providers attend each committee meeting in an ex officio capacity and answer questions raised by committee members during meetings. The Audit Committee meets separately with management, internal audit and external audit at every meeting.
During 2012, the Audit and Corporate Governance Committee formally met seven times and attendance at these meetings is set out in the table below:
|9 February||13 March||16 April||3 May||10 July||1 August||1 November|
|Prof LW Nkuhlu*||✔||✔||✔||✔||✔||✔||✔|
- ✔ In attendance
- * Members of the Risk and Information Integrity Committee
The Audit Committee assessed its effectiveness through the completion of a self-assessment process and results were discussed and actions taken and processes put in place to address areas identified for improvement.
OVERSIGHT OF RISK MANAGEMENT
Notwithstanding the fact that the board has a fully constituted Risk and Information Integrity Committee to assist with the discharge of its duties regarding the integrated risk management process, the Audit Committee has a vested interest in risk management as a result of its responsibility for internal controls. The majority of the Audit Committee members are also members of the Risk and Information Integrity Committee.
Group Internal Audit is a key independent assurance and consulting business partner within AngloGold Ashanti. The Senior Vice President: Group Internal Audit has direct access to the chairmen of both the Audit Committee and the board. The Audit Committee has assessed the performance of the Senior Vice President: Group Internal Audit in terms of the annually reviewed and approved internal audit charter and is satisfied that the internal audit function is independent and appropriately resourced, and that the Senior Vice President: Group Internal Audit has fulfilled the obligations of the position by performing the following functions:
- evaluating ethical leadership and corporate citizenship within AngloGold Ashanti;
- assessing the governance of risk within AngloGold Ashanti;
- reviewing the governance of Information Technology;
- assessing compliance with laws, rules, codes and standards;
- evaluating the effectiveness of internal controls over financial reporting and internal controls in general;
- reporting findings to management and the Audit Committee and monitoring the implementation of all significant deficiencies reported; and
- implementing a Combined Assurance Framework for the Group.
Group Internal Audit participated in an independent quality assessment review conducted by PwC in 2012. The independent review was aimed at assessing whether Group Internal Audit was aligned with the professional standards of the Institute of Internal Auditors and broader good practice using a global peer group. PwC concluded that Group Internal Audit complied with the requirements of the Institute of Internal Auditors’ Standards for the Professional Practice of Internal Audit and benchmarked favourably against international peers.
The Audit Committee is of the opinion, having considered the written assurance statement provided by Group Internal Audit, that the group’s system of internal financial controls is effective and provides reasonable assurance that the financial records may be relied upon for the preparation of the annual financial statements.
2012 IN OVERVIEW
During the financial year ended 31 December 2012, the Audit Committee carried out its duties as required by section 94(2) of the Companies Act, King III, and the committee’s terms of reference in accordance with its annual plan adopted to manage the discharge of its responsibilities.
Set out below are some highlights from 2012:
|Accounting policies and reporting standards||Received updates 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.
|Integrated reporting||Reviewed the integrated report including the group’s annual financial statements, sustainability and resource and reserve reports. The Audit Committee reviewed the disclosure of sustainability issues in the integrated report and is satisfied that these do not conflict with the financial results.|
|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, SEC and other stock exchanges
as applicable, after:
|Risk-based internal audit||Considered the internal control heat-map for AngloGold Ashanti as presented by Group
Reviewed and approved the risk-aligned internal audit plan tabled on a quarterly basis and the detailed combined assurance plan.
Monitored the implementation and tracking of audit recommendations.
|External auditor||Recommended the appointment of the external auditors, approved the external audit plan
and fees, and assessed the independence of the external auditors as required in terms of
section 94(8) of the Companies Act, which included consideration of compliance with criteria
relating to independence or conflicts of interest as prescribed by the Independent Regulatory
Board of Auditors.
Approved the appointment of the external auditors to provide independent assurance on certain sustainability indicators as included in the Sustainability Report.
Pre-approved all non-audit services provided by the external auditors of the group in terms of the policy on non-audit services.
|Combined assurance||Monitored the development and implementation of a fully-fledged combined assurance model
that facilitates integration and leveraging of the various control, governance and assurance
processes used by the different assurance providers.
During 2012, all significant operations within AngloGold Ashanti were subjected to risk-based, integrated technical or commercial combined assurance reviews. These reviews brought a new dimension to assurance within the group and the Audit Committee is pleased with the progress achieved and value derived from the combined assurance process.
|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.|
|King III||Monitored the progress and ensured implementation of the requirements of King III. A register
detailing compliance with the principles of King III in 2012 can be found on our website www.anglogoldashanti.com.
|Risk governance||Fulfilled an oversight role regarding financial reporting risks, internal financial controls, fraud
risk and information technology risks as these relate to financial reporting.
|Compliance||Monitored the development and refinement of a global compliance management framework.
The framework allows for a systematic approach for regions to identify and monitor compliance
to major laws, regulations, standards and codes.
FINANCE FUNCTION AND CHIEF FINANCIAL OFFICER
The Audit Committee conducted an assessment of the appropriateness, skills, expertise and resourcing of the finance function and was satisfied with the overall adequacy and appropriateness of the function. The Audit Committee further reviewed the expertise and experience of the Chief Financial Officer and was satisfied with the appropriateness thereof.
The Audit Committee received quarterly updates on AngloGold Ashanti’s whistle-blowing process. No concerns or complaints relating to the accounting practices, internal financial controls, internal audit function and the content or auditing of the company’s financial statements were reported.
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 system, SAP (oneERP).
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 Committee, together with the Risk and Information Integrity Committee, will continue to review implementation progress and receive assurance thereon from the oneERP combined assurance team.
AUDIT COMMITTEE STATEMENT
Based on information from and discussions with management, internal and external audit, the Audit Committee has no reason to believe that there were any material breakdowns in the design and operating effectiveness of internal controls during the period and that the financial records can be relied on as the basis for preparation of the annual financial statements.
ANNUAL FINANCIAL STATEMENTS
The Audit Committee has evaluated the consolidated annual financial statements for the year ended 31 December 2012 and concluded that they comply, in all material aspects, with the requirements of the Companies Act and International Financial Reporting Standards. The Audit Committee therefore recommended the approval of the annual financial statements to the board.
The Audit Committee is satisfied that it has considered and discharged its responsibilities in accordance with its mandate and terms of reference during the year under review.
Prof Wiseman Nkuhlu
Chairman: Audit and Corporate Governance Committee
19 March 2013