AUDIT AND RISK COMMITTEE REPORT

FOR THE YEAR ENDED 30 JUNE 2017

This report is presented to shareholders in compliance with the requirements of the Companies Act No 71 of 2008, as amended, the JSE Listings Requirements and the King III Report on Governance.

The AfroCentric Investment Corporation Limited Audit and Risk Committee (herein referred to as “the Committee”) is constituted in terms of section 94(7)(f) of the Companies Act. The Committee has documented approved terms of reference under which it operates and executes its oversight responsibilities.

COMPOSITION

The Committee consists of three suitably qualified Independent Non-executive Directors.

MEETINGS AND DUTIES

The Audit and Risk Committee held five meetings during the year under review. At these meetings, the Committee received and considered reports from External Audit, Internal Audit, Group finance and the Group legal, governance, risk and compliance departments.

ROLES AND RESPONSIBILITIES OF THE COMMITTEE

The Committee has the following specific responsibilities:

Independence of the external auditors

PricewaterhouseCoopers Inc. were appointed as external auditors of the Company and the Group. The Committee has satisfied itself that the external auditors are independent of the Group, as set out in the Companies Act, which includes a consideration of conflicts of interests as prescribed by the Public Audit Act No 25 of 2004 (“PAA”).

Integrated reporting

The Committee oversees integrated reporting, and in particular the Committee:

  • has regard to all factors and risks that may impact on the integrity of the integrated report;
  • reviewed the Annual Financial Statements, interim reports, preliminary or provisional result announcements, summarised integrated information, any other intended release of price-sensitive information and trading statements;
  • commented in the Annual Financial Statements on the financial statements, the accounting practices and the effectiveness of the internal financial controls of the Company;
  • considered the frequency for issuing interim results and whether the external auditors should perform assurance procedures on the interim results;
  • reviewed the disclosure of sustainability issues in the integrated report to ensure that it is reliable and does not conflict with the financial information;
  • reviewed and approved the internal audit coverage plan and charter;
  • recommended to the Board the engagement of an external assurance provider on material sustainability issues; and
  • recommends the integrated report for approval by the Board.

Combined assurance

The Committee ensures that a combined assurance model is applied to provide a coordinated approach to all assurance activities, and in particular the Committee should have:

  • ensured that the combined assurance received is appropriate to address all the significant risks facing the Company via suitable mitigating controls;
  • provided an effective counterbalance to executive management, thereby upholding the independence of internal and external assurance providers, to enhance effectiveness; and
  • monitored the relationship between the external assurance providers and the Company.

Risk management

The Committee is an integral component of the risk management process and specifically the Committee must oversee financial reporting risks; internal financial controls; fraud risks as it relates to financial reporting; and IT risks as it relates to financial reporting. The Committee performed all the functions necessary to fulfil its risk management role including:

  • ensuring the establishment of an independent risk function at a Group level; and
  • reviewing reporting concerning risk management that is to be included in the integrated report for it being timely, comprehensive and relevant.

Financial reporting and financial control

The Committee has:

  • evaluated the adequacy and effectiveness of the accounting policies adopted by the Company in terms of International Financial Reporting Standards (“IFRS”), JSE Listings Requirements and other legal requirements;
  • considered the adequacy and clarity of disclosures in the financial statements; and
  • reviewed the effectiveness of financial management and the quality of internal accounting control systems and reports produced by financial management.

Effectiveness of internal controls

After consideration of all of the findings reported by Internal Audit covering those areas included in their annual work plan, explanations given by management and discussions with the external auditor on the results of the audit, the Committee concluded that there had been no material breakdown in the Company’s overall controls system and the internal financial controls form a reasonable basis for the preparation of reliable Annual Financial Statements. The Committee is satisfied that the Group Annual Financial Statements are based on appropriate accounting policies, supported by reasonable and prudent judgement and estimates.

Group Annual Financial Statements

The Committee is satisfied that the Group Annual Financial Statements are based on appropriate accounting policies supported by reasonable and prudent judgements and estimates. The Committee is of the view that, in all material respects, it complies with the relevant provisions of the Companies Act and IFRS and fairly presents the financial position and the results of its operations and cash flows for the year ended 30 June 2017. Having achieved its objective for the financial year, the Audit and Risk Committee recommended the audited Annual Financial Statements for the year ended 30 June 2017 to the Board for approval.

Chief Financial Officer and Finance function

The Committee is satisfied as to the expertise, resources and experience of the Company’s finance division and the appropriateness of the experience and expertise of the Chief Financial Officer. It is satisfied that the composition of the Finance function meets the Group’s requirements.

Independence of external auditors

The Committee appraised the independence, quality and effectiveness of the External Audit function. Part of this process was to obtain confirmation from the external auditors that the firm, partner and staff responsible for the audit comply with all legal and professional requirements in regard to independence. The Committee also approved the fees paid to the external auditors.

The Committee confirmed its satisfaction with the independence and level of service rendered by the external auditor, PwC, for the 2017 financial year.

Key audit matters and restatement of June 2016 audited results

The Committee has considered the key audit matter, impairment of intangible assets, noted in the independent auditor’s report and is satisfied that this has been adequately addressed by the external auditors.

The Committee is aware of the restatement of the June 2016 audited results relating to the Sanlam financial put option liability and put option reserve, the earnings per share and the statement of cash flows. This has been adequately disclosed in the financial statements and the committee has requested professional opinions on all major corporate transactions as a corrective measure.

RESPONSIBILITY STATEMENT

The Audit and Risk Committee acknowledges its responsibility on behalf of the Board of Directors to ensure the integrity of these Annual Financial Statements. The Committee has accordingly applied its mind to the report and believes that it appropriately and sufficiently addresses all material issues, and fairly presents the performance of AfroCentric and its subsidiaries and associates for the year. The Audit Committee recommends these Annual Financial Statements to the Board of Directors for approval.

Lindani L Dhlamini
Chairperson of the Audit and Risk Committee
14 September 2017