1. Statement of Purpose
The Audit Committee
of Karachi Urban Transport Corporation Limited ("Corporation") shall
provide assistance to the Board of Directors ("Board") in the general
oversight of corporate accounting, financial reporting processes and practices
of the Corporation, the quality and integrity of the financial reports of the Corporation,
and the Corporation's internal controls and procedures designed to promote
compliance with accounting standards and applicable laws and regulations. In so
doing, it is the responsibility of the Audit Committee to maintain free and
open means of communication between the directors, the external auditors, the
internal auditors, and the financial management of the Corporation.
1.2. The Audit Committee is not
responsible for planning or conducting the audit or determining whether the Corporation's
financial statements are complete and accurate and are in accordance with the approved
accounting standards as applicable in Pakistan. Approved accounting standards
comprise of such International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board as are notified under the
Companies Ordinance, 1984, provisions of and directives issued under the
Companies Ordinance, 1984. Such activities are the responsibility of management
and the Corporation's external auditors. The Audit Committee does not itself
prepare financial statements or perform audits or auditing services, and its
members are not auditors, certifiers of the Corporation's financial statements
or guarantors of the reports of the Corporation's external auditors.
1.3.The Audit Committee has authority to obtain advice and assistance
from outside legal, accounting or other advisors as the Audit Committee deems
necessary to carry out its duties, and the Audit Committee shall receive
appropriate funding, as determined by the Audit Committee, from the Corporation
for payment of compensation to the outside legal, accounting or other advisors
employed by the Audit Committee.
2. Organization and Structure
2.1.Composition
The Audit
Committee shall be composed of at least three directors, including the chairman,
determined by the Board to meet the independence. Appointment to the Audit
Committee, including the designation of the Chair and the designation of any
committee members as "audit committee financial experts" shall be
made on an annual basis by the Board. Majority of the members of the Committee
shall be from among the non-executive directors of the Corporation and the
chairman of the Audit Committee shall preferably be a non-executive director. The
Audit Committee shall be supported by the Corporation's Chief Financial Officer
(“CFO”) and Internal Auditors. The names of members of the Audit Committee
shall be disclosed in each annual report of the Corporation.
2.2.Decision & voting powers:
All the
decision of the committee shall be taken by vote of majority.
Members of the
committee shall be entitled to vote and in case of equality, the Chairman shall
have one additional casting vote.
The Company Secretary
(“Secretary”), Internal Auditor and CFO of the Corporation shall attend and participate
at the meeting but shall not have the right to vote.
2.3.Tenure:
The Audit Committee
shall continue to be in function as a committee of the Board until otherwise
resolved by the Board, to carry on the functions of the Audit Committee in
relation of the accounts of the Corporation.
2.4.Frequency of Meetings:
Meetings of the
Audit Committee shall be held at such times and places, but not less than three times per year, as
the Audit Committee shall determine, including by written consent. When
necessary, the Audit Committee shall meet in executive session outside of the
presence of any executive officer of the Corporation. The Chair of the Audit
Committee shall report on activities of the Audit Committee to the Board.
These meetings
shall be held prior to the approval of interim results (if any) of the Corporation
by its Board of Directors and before and after completion of external audit. A
meeting of the Audit Committee shall also be held, if requested by the external
auditors or internal auditor.
2.5.Attendance at Meetings
The CFO, the head
of internal audit and a representative of the external auditors shall attend
meetings of the Audit Committee at which issues relating to accounts and audit
are discussed.
Provided that at
least once a year, the Audit Committee shall meet the external auditors without
the CFO and the Internal Auditor being present.
Provided further
that at least once a year, the Audit Committee shall meet the head of internal
audit and other members of the internal audit function without the CFO and the
external auditors being present.
2.6.Reporting Procedure
The secretary shall
circulate minutes of meetings of the Audit Committee to all members, directors
and the CFO within a fortnight.
3. Responsibilities and Duties
In carrying out its
responsibilities, the Audit Committee believes its policies and procedures should
remain flexible, in order to best react to changing conditions and to ensure to
the directors and shareholders that the corporate accounting and reporting
practices of the Corporation are in accordance with all requirements and are of
the highest quality. In discharging the function of the Audit Committee, the
committee shall have authority to investigate into any matter in relation to
any items specified in Companies Ordinance, 1984 or referred to it by the
Board.
The committee shall
be responsible for and in carrying out these responsibilities, the Audit
Committee will:
- Recommend human resource management policies to
the board;
- Recommend to the board the selection,
evaluation, compensation (including retirement benefits if any) and succession
planning of the Managing Director;
- Recommend to the board the selection,
evaluation, compensation (including retirement benefits if any) of Managing
Director, CFO, Company Secretary and Head of Internal Audit;
- Consideration and approval on recommendations of
Managing Director on such matters for key management positions who report
directly to Managing Director.
·
Recommend to the Board of Directors the
appointment of external auditors by the Corporation’s shareholders and shall
consider any questions of resignation or removal of external auditors, audit
fees and provision by external auditors of any service to the Corporation in addition to audit of its
financial statements. In the absence of strong grounds to proceed otherwise,
the Board of Directors shall act in accordance with the recommendations of the
Audit Committee in all these matters. The external auditors shall report
directly to the Audit Committee.
·
Preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Corporation by its external auditors if not disallowed in any applicable
law.
·
Meet with the external auditors and financial
management of the Corporation to review the scope of the proposed audit for the
current year and the audit procedures to be utilized, and at the conclusion
thereof, review such audit, including any comments or recommendations of the external
auditors.
·
Review and discuss with the external auditors
its annual written statement delineating all relationships or services between
the external auditors and the Corporation, or any other relationships or
services that may impact its objectivity and independence.
·
Review with management and the external auditors
firm the Corporation's annual audited or any other audit, including the Corporation's
disclosures and review with management and the external auditors:
i.
the results of the audit and the opinion on the
annual financial statements;
ii.
the judgments of the external auditors firm on the quality and consistent application
of the Corporation's accounting principles, the reasonableness of significant
judgments, clarity of disclosures and underlying estimates in the financial
statements;
iii.
changes in accounting principles or application
thereof, significant judgment areas, and significant and complex transactions;
iv.
the effectiveness and adequacy of the Corporation's
internal auditing; and
v.
any disagreements between management and the external
auditors, about matters that individually or in the aggregate could be
significant to the Corporation's financial statements or the report of the external
auditors, and any serious difficulties the external auditors encountered in
dealing with management related to the performance of the audit and
management's response;
vi.
all known and likely uncorrected misstatements
identified by the external auditors during
the audit, other than those that the external auditors believes are trivial,
and the propriety of correcting the misstatements and implications of not
correcting them and all material misstatements identified by the external
auditors firm that were not corrected;
vii.
managements consultation with other accountants;
and
viii.
significant issues, if any, arising from the
audit that were discussed, or were the subject of correspondence, with
management, such as business conditions affecting the Corporation, and business
plans and strategies that may affect the risks of material misstatement, the
retention of the external auditors and the application of accounting principles
and auditing standards.
·
Recommend to the Board whether the audited
financial statements should be included in the Corporation's Annual Report prior
to filing with the Securities and Exchange Commission of Pakistan (SECP) and
review with management and the external auditors the Corporation's other
Reports (if any).
·
Discuss each of the Corporation's earnings press
releases with management and the external auditors prior to its issuance, as
well as corporate policies with respect to the disclosure of financial
information. In particular, the Committee shall periodically review with
management and the external auditors the type of presentation and information
to be included in the Corporation's earnings press releases and, to the extent
applicable, earnings guidance provided to analysts and ratings agencies (if
required).
·
Periodically meet with the external auditors without
members of management present. Among the items to be discussed in these
meetings, among others, are the evaluation of the Corporation’s financial,
accounting, and internal auditing personnel, and the cooperation that the external
auditors received during the course of the audit.
·
Resolve any disagreements between management and
the external auditors regarding financial reporting.
·
Review and report to the Board the propriety and
ethical implications of any transactions, as reported or disclosed to the
Committee by the external auditors, employees, officers, members of the Board
or otherwise, between (a) the Corporation and (b) any employee, officer or
member of the Board of the Corporation or any affiliates of the foregoing.
·
Review accounting and financial human resources
succession planning within the Corporation.
·
At least annually, obtain from and review a report by the external
auditors describing (i) its internal quality control procedures, and (ii) any
material issues raised by the most recent internal quality control review, or
peer review, or by any professional inquiry or investigation within the
preceding five years regarding any audit performed by the external auditors,
and any steps taken to deal with any such issues.
·
Review the adequacy and effectiveness of the Corporation's
disclosure controls and procedures.
·
Review the adequacy and effectiveness of the Corporation's
internal controls, including any significant deficiencies in such controls and
significant changes or material weaknesses in such controls reported by the external
auditors, internal auditors or management, and any fraud, whether or not
material, that involves management or other Corporation employees. Review with
the appropriate member of the Internal Auditors the scope, qualifications,
resources, activities and effectiveness of the internal audit function, and
approve the appointment, replacement or dismissal of the Internal Auditors.
·
Periodically meet separately with the
appropriate member of the Internal Auditors outside the presence of management
and the external auditors.
·
Annually review and approve the Corporation’s
internal audit charter.
·
Annually review and approve the Corporation’s
internal audit plan.
·
Submit, or cause to be submitted, the minutes of
all meetings of the Audit Committee to, or discuss the matters discussed at
each committee meeting with, the board of directors.
·
Investigate any matter brought to its attention
within the scope of its duties, with the power to retain outside counsel for
this purpose if, in its judgment, doing so is appropriate.
·
Annually review the adequacy of the Committee
formal written term of reference of the Audit Committee and recommend any
proposed changes to the Board.
·
The Board may assign any matter of important
nature relating to the accounts, finance. Taxation, inspection and
investigation from time to time and may require a report to be submitted to the
Board on such matters within stipulated time.
·
The Committee on any matter relating to
financial management including audit report shall submit a report to the Board
from time to time, The Chairman of the Audit Committee shall attend the annual
general meeting of the Corporation to provide any clarification on matter
relating to Audit.
·
Determination of appropriate measures to safeguard
the Corporation’s assets.
·
Review of preliminary announcements of results
prior to publication.
·
Review of quarterly (if any), half-yearly (if
any) and annual financial statements of the Corporation.
·
Prior to their approval by the Board of
Directors, focusing on:
o
major judgmental areas;
o
significant adjustments resulting from the
audit;
o
the going -concern assumption;
o
any changes in accounting policies and
practices;
o
compliance with applicable accounting standards;
and
o
compliance with listing regulations and other
statutory and regulatory requirements.
·
Facilitating the external audit and discussion
with external auditors of major observations arising from interim and final audits
and any matter that the auditors may wish to highlight (in the absence of
management, where necessary).
·
Review of management letter issued by external
auditors and management’s response thereto.
·
Ensuring coordination between the internal and
external auditors of the Corporation.
·
Review of the scope and extent of internal audit
and ensuring that the internal audit function has adequate resources and is
appropriately placed within the Corporation.
·
Consideration of major findings of internal
investigations and management's response thereto.
·
Ascertaining that the internal control system
including financial and operational controls, accounting system and reporting
structure are adequate and effective.
·
Review of the Corporation’s statement on
internal control systems prior to endorsement by the Board of Directors.
·
Instituting special projects, value for money
studies or other investigations on any matter specified by the Board of
Directors, in consultation with the Chief Executive and to consider remittance of
any matter to the external auditors or to any other external body.
·
Determination of compliance with relevant
statutory requirements.
·
Monitoring compliance with the best practices of
corporate governance and identification of significant violations thereof; and
·
Consideration of any other issue or matter as
may be assigned by the Board of Directors.
4. Whistleblower Responsibilities
The Audit
Committee shall establish and annually review written procedures that provide
for, among other things, the receipt, retention and treatment of any and all
complaints received by the Corporation regarding accounting, internal
accounting controls, internal and external auditing matters, fraud or illegal
acts, and which provide for the confidential, anonymous submission by Corporation
employees of any concerns regarding questionable accounting or auditing matters
or fraud or illegal acts. The Audit Committee shall adopt such procedures
which, in its discretion, provide assurances that all credible serious
complaints received by the Corporation are conveyed to the Committee or the
Chairman of the Committee.
5. Disclosures From External auditors and
Management
The Audit
Committee shall ensure that in connection with the filing of any periodic
financial statement with the SECP that the Committee has obtained all the
certifications and written disclosures required of management and or the external
auditors, prerequisite to the filing of any such reports.
6.
Annual Performance Review
The Audit Committee shall
conduct an annual evaluation and review of its performance in carrying out its
responsibilities hereunder.
