CHARTER OF THE AUDIT COMMITTEE

OF THE BOARD OF DIRECTORS OF CENTRAL AZUCARERA DE TARLAC

(As amended on 03 May 2017)

 

This Charter sets forth the purpose, composition, structure, functions and responsibilities functions of the Audit Committee of the Board of Directors of Central Azucarera de Tarlac (the “Company”) in accordance with the Code of Corporate Governance for Publicly Listed Companies[1]

 

 

Purpose

 

The purpose of establishing an Audit Committee is to enhance the Board’s oversight capability over the Company’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations.

 

 

Functions

 

The Audit Committee is responsible for overseeing the senior management in establishing and maintaining an adequate, effective and efficient internal control framework. It ensures that systems and processes are designed to provide assurance in areas including reporting, monitoring compliance with laws, regulations and internal policies, efficiency and effectiveness of operations, and safeguarding of assets.

 

In the exercise of its oversight functions, the Audit Committee has the following duties and responsibilities:

 

1. Recommends the approval of the Internal Audit Charter (IA Charter), which formally defines the role of Internal Audit and the audit plan as well as oversees the implementation of the IA Charter;

 

1. Through the Internal Audit (IA) Department, monitors and evaluates the adequacy and effectiveness of the Company’s internal control system, integrity of financial reporting, and security of physical and information assets. Well-designed internal control procedures and processes that will provide a system of checks and balances should be in place in order to (1) safeguard the Company’s resources and ensure their effective utilization, (2) prevent occurrence of fraud and other irregularities, (3) protect the accuracy and reliability of the company’s financial data, and (4) ensure compliance with applicable laws and regulations;

 

1. Oversees the Internal Audit Department, and recommends the appointment and/or grounds for approval of an internal audit head or Chief Audit Executive (CAE). The Audit Committee shall also approve the terms and conditions for outsourcing internal audit services;

 

1. Establishes and identifies the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. For this purpose, the Internal Auditor shall directly report to the Audit Committee;

 

1. Reviews and monitors Management’s responsiveness to the Internal Auditor’s findings and recommendations;

 

1. Prior to the commencement of the audit, discusses with the External Auditor the nature, scope and expenses of the audit, and ensures the proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts;

 

1. Evaluates and determines the non-audit work, if any, of the External Auditor, and periodically reviews the non-audit fees paid to the External Auditor in relation to the total fees paid to him and to the corporation’s overall consultancy expenses. The committee shall disallow any non-audit work that will conflict with his duties as an External Auditor or may pose a threat to his independence[2]. The non-audit work, if allowed, shall be disclosed in the Company’s Annual Report and Annual Corporate Governance Report;

 

1. Reviews and approves the Interim and Annual Financial Statements before their submission to the Board, with particular focus on the following matters:

 

1. Any change/s in accounting policies and practices;
2. Areas where a significant amount of judgment has been exercised;
3. Significant adjustments resulting from the audit;
4. Going concern assumptions;
5. Compliance with accounting standards; and
6. Compliance with tax, legal and regulatory requirements.

 

1. Reviews the disposition of the recommendations in the External Auditor’s management letter;
2. Performs oversight functions over the corporation’s Internal and External Auditors. It ensures the independence of Internal and External Auditors, and that both auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions;

 

1. Coordinates, monitors and facilitates compliance with laws, rules and regulations; and

 

1. Recommends to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the Commission, who undertakes an independent audit of the corporation, and provides an objective assurance on the manner by which the financial statements shall be prepared and presented to the stockholders.

 

1. Assess the integrity and independence of the corporation’s External Auditor; reviews and monitors the External Auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant Philippine professional and regulatory requirements; and reviews and monitors the External Auditor’s suitability and effectiveness on an annual basis.

 

The Audit Committee may perform the functions of Risk Oversight Committee which oversees the Company’s Enterprise Management System to ensure its functionality and effectiveness, as well as the functions of Related Party Transactions Committee which reviews all material related party transactions of the Company.

 

 

Powers / Authority

 

The Audit Committee shall have the power or authority to do any of the following:

 

1. To engage independent legal, accounting or other advisors to the extent it deems necessary or appropriate, provided that it shall keep the Board of Directors advised as to the nature and extent of such independent advise.

 

1. To request that any officer or employee of the Company, the Company’s external counsel, the Company’s external auditor or any other professional retained by the Company to render advice to the Company attend a meeting of the Audit Committee or meet with any members of or advisors to the Audit Committee.

 

1. To incur such ordinary administrative expenses as are necessary or appropriate in carrying out its responsibilities.

 

1. To perform such other oversight functions consistent with this Charter, the Company By-Laws or as may be authorized by the Board of Directors.

 

 

Composition

 

The Audit Committee shall be composed of at least three (3) appropriately qualified non-executive directors.  The Chairman of the Audit Committee must be an independent director and shall not be the chairman of the Board of Directors  or any board committees.

 

All members of the Audit Committee must have relevant background, knowledge, skills and/or experience in the areas of accounting, auditing and finance, and the Chairman must have accounting or related financial management expertise, as such qualifications are interpreted by the Board in its business judgment.

 

The Chairman and the Members of the Audit Committee  shall be appointed by the Board at the annual organizational meeting of the board. They may only be removed by the Board.

 

 

Meetings and Other Activities

 

1. The Audit Committee shall meet at least every quarter without the presence of the CEO or other management team members, and periodically meets with the head of the internal audit

 

1. Meetings of the Audit Committee shall be convened by the Chairman when he considers it appropriate or upon the request of any member. The Chairman of the Committee will approve the agenda for the committee meetings and any member may suggest matters to be discussed in the meetings.

 

1. Notice must be given to the members at least three (3) days prior to the scheduled meeting which must specify the place, date, time, and matter to be discussed.

 

1. There is a quorum when at least majority of the members are present throughout the meeting.

 

1. The Audit Committee shall timely report its activities to the Board and make such recommendations to the Board as it deems appropriate.  In cases where its decisions or recommendations shall be approved/ratified by the Board, the Audit Committee must immediately refer it to the Board.

 

1. To efficiently carry out its oversight responsibilities provided in this Charger, the Audit Committee shall meet with the Board at least every quarter without the presence of the CEO and other management team members, and periodically meet with the head of the internal audit.

 

Minutes and Records of Meeting

 

1. The Audit Committee shall appoint a Secretary who shall prepare minutes of meetings and keep records thereof.

 

2. Any such records shall be open for inspection by any Member or Advisor upon reasonable prior notice during usual office hours of the Company.

 

 

Remuneration of Members

 

Members and Advisors of the Audit Committee shall not accept fees or other remuneration with respect to their attendance in meetings except those authorized and approved by the Board. Members and Advisors shall also not accept fees or compensation whether directly or indirectly for consultancy services rendered to the Company.

 

 

Members’ Interest

 

In cases wherein the Member is interested in a contract or any dealings with the Company, s/he shall declare the nature of her/his interest, and shall abstain from taking part in the deliberations for the same. General notice given by the Member of the Committee stating that s/he is a director or stockholder of another company and s/he is interested in any contract or arrangement that may be entered into with that Company is deemed sufficient disclosure of interest.

 

 

Performance and Evaluation

 

To ensure that the Audit Committee fulfills its responsibilities in accordance with global best practices and in compliance with the Revised Manual of Corporate Governance and other relevant regulatory requirements, the Audit Committee shall conduct an assessment of its performance at least annually. The Audit Committee shall obtain and subject itself to an independent assessment by the Board of Directors relative to its performance in accordance with expectations set out in this Charter.

 

Amendment

 

The Committee shall review this Charter at least annually; recommend any proposed changes to the Board for its approval; and ensure that the Charter is posted on the Company’s website, or promptly after any significant amendment to the Charter.

 

APPROVED by the Board of Directors during the Regular Meeting held on 03 May 2017 at Makati City.

 

_______________________________ MARTIN IGNACIO P. LORENZO Chairman of the Board
______________________________ FERNANDO C COJUANGCO Director	___________________________ MARCO P. LORENZO Director
_____________________________ FERNAN VICTOR P. LUKBAN Director and Member of Audit Committee	___________________________ VIGOR D. MENDOZA II Director and Member of Audit Committee
___________________________ RENATO B. PADILLA Independent Director	___________________________ BENJAMIN I. ESPIRITU Independent Director and Chairman of Audit Committee

 

[1] SEC Memorandum Circular No.  19, Series of 2016

 

[2]  As defined under the Code of Ethics for Professional Accountants