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Terms of Reference
Constitution
A committee, as resolved by the Board, shall be known as the Audit Committee (the “Committee”) with the following terms of reference.
Membership
The Committee shall be appointed by the Board from amongst the non-executive directors of the Company. The Committee shall have not less than three members. A quorum for any meeting shall be two members.
The chairman of the Committee shall be appointed by the Board. The Company Secretary shall act as the secretary to the Committee.
Attendance at meetings
Finance executives and legal counsel may be asked to attend meetings. Other Board members may also attend, if invited.
Frequency of meetings
Meetings shall take place not less than twice a year and timely before the finalization of the annual and interim accounts.
Authority
The Committee is authorized by the Board to investigate any activity within its terms of reference. It is authorized to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
The Committee is authorized by the Board to obtain outside legal and other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.
Duties
The duties of the Committee shall be:
Relationship with the external auditors
| (a) | to be primarily responsible for making recommendation to the Board on matters relating to appointment, re-appointment and removal of the external auditors, and to approve the remuneration and terms of engagement of the external auditors and any questions relating to their resignation or dismissal; |
| (b) | to review and monitor the external auditors' independence and objectivity and the effectiveness of the audit process in accordance with applicable standard; |
| (c) | to develop and implement policy on the engagement of external auditors to supply non-audit services; |
| (d) | to discuss with the external auditors before the audit commences, the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved; |
Review of financial information
| (e) | to monitor integrity of financial statements of the Company and the Company's annual report and accounts, half-year report and to review significant financial reporting judgements contained in them. In reviewing the Company's annual report and accounts, half-year report before submission to the Board, the Committee should focus particularly on:
- any changes in accounting policies and practices;
- major judgmental areas;
- significant adjustments resulting from the audit;
- the going concern assumptions and any qualifications;
- compliance with accounting and financial reporting standards; and
- compliance with the Listing Rules of the Stock Exchange of Hong Kong (the “Listing Rules”) and other legal requirements in relation to financial reporting;
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| (f) | in regard to (e) above, the Committee must liaise with the Company's Board, senior management and must meet at least once a year with the Company's auditors and should consider any significant or unusual items that need to be reflected in such reports and accounts, and must give due consideration to any matters that have been raised by the Company's qualified accountant, compliance officer or auditors; |
| (g) | to discuss problems and reservations arising from the interim and final audits, and any matters the external auditors may wish to discuss (in the absence of management where necessary); |
| (h) | to review the external auditors' management letter and management's response; |
| (i) | to review the continuing connected transactions entered into by the Company and to report to the Board following the conclusion of such review, as required under the Listing Rules. |
Oversight of the financial reporting system and internal control procedures
| (j) | to review the Company's financial controls, internal control and risk management systems; |
| (k) | to discuss with the management the system of internal control and ensure that management has discharged its duty to have an effective internal control system; |
| (l) | to consider any findings of major investigations of internal control matters and management's response; |
| (m) | where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that such function is adequately resourced and has appropriate standing in the Company and to review and monitor the effectiveness of such function; |
| (n) | to review the group's financial and accounting policies and practices; |
| (o) | to review the external auditors' management letter and any material queries raised by auditor; |
| (p) | to ensure the Board will provide a timely response to the issues raised to the external auditors' management letter; |
| (q) | to report to the Board on matters set out in these terms of reference; and |
| (r) | to consider other topics as defined by the Board. |
Reporting procedure
The secretary shall circulate the minutes of the meetings of the Committee and reports, if any, to all members of the Board.
Adopted and effective on 16th August , 2005
Membership
| Mr. Gordon Siu Kwing Chue * | Chairman |
| Mr. Chien Lee * | Member |
| Mr. Kevin Lo Chung Ping # | Member |
* Independent non-executive directors
# Non-executive director
Secretary
Mr. Adrian Mak Yau Kee
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