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AUDIT COMMITTEE TERMS OF REFERENCE
The primary purpose of the Audit Committee is to assist the Board in discharging its responsibilities relating to the oversight of: (a) the integrity of the Corporation’s financial statements; (b) the Corporation’s compliance with legal and regulatory requirements regarding financial reporting and securities matters; (c) the external auditor’s qualifications and independence; (d) the adequacy of the Corporation’s internal controls over financial reporting; and (e) the performance of the external auditors and the Corporation’s internal audit function.
The Committee shall have the ability to access the Corporation’s legal counsel without the approval of management, as it deems necessary to carry out its duties. The Committee shall also have the authority without the consent of management or the Board, at the Corporation’s expense, to the extent it deems necessary or appropriate, to retain and compensate special independent legal, accounting or other consultants to advise the Committee in connection with fulfilling its obligations.
Management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation’s financial statements and formaintaining appropriate accounting and financial reporting principles and policies andinternal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The external auditors are responsible for planning and carrying out a proper audit of the Corporation’s annual financial statements and reviews of the Corporation’s quarterly financial statements in accordance with professional standards. The function of the Committee is to provide oversight and to review the effectiveness of these activities. It is not the responsibility of the Committee to plan or conduct audits or to determine that the Corporation’s financial statements are complete, accurate and in accordance with IFRS.
Composition of the Committee
The Committee will consist of at least three directors, each of whom shall be independent (as that term is defined from time to time under securities law requirements for audit committee service and as determined by the Board). The members of the Committee shall be appointed and replaced by the Board from time to time. Each member of the Committee must be financially literate (as determined by the Board) or must become financially literate within a reasonable period of time after appointment to the Committee. A majority of the members of the Committee shall constitute a quorum.
For the purposes of determining the composition of the Committee, “financially literate” shall mean the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation’s financial statements.
Chair of the Committee
The Chair of the Committee shall be appointed by the Board from time to time. The Chair shall be responsible for general leadership of the Committee, including preparing the agenda, presiding over Committee meetings, and reporting to the Board following Committee meetings on matters considered by the Committee. The Chair shall encourage Committee members to ask questions and express views during meetings. If the Chair of the Committee is not able to attend any meeting of the Committee, the Chair shall arrange for another member to preside at the meeting in his or her absence, failing which another member will be chosen by the Committee. The Chair shall take reasonable steps to ensure that the responsibilities of the Committee as outlined in these Terms of Reference are understood by all Committee members and executed as effectively as possible.
Specific Responsibilities
Financial Reporting & Public Disclosure
1.Review and discuss with management and the external auditors the annual audited consolidated financial statements and recommend their approval to the Board.
2.Review and discuss with management and the external auditors all interim financial statements, and annual and interim MD&A and earnings press releases, and recommend their approval to the Board.
3.Review the Annual Information Form and all financial reports which require Board approval and recommend their approval to the Board.
4.Review and approve all changes in accounting principles followed by the Corporation.
5.Discuss with the external auditors the quality and acceptability of the Corporation’s accounting principles.
6.Be satisfied that adequate procedures are in place for the review of the Corporation’s public disclosure of financial information extracted or derived from the Corporation’s financial statements, and periodically assess the adequacy of those procedures. This assessment should include discussions with management to review the processes and systems in place.
7.Discuss financial information and earnings guidance, if any, provided to analysts and rating agencies (to the extent permitted by law), which discussions may occur after issuance.
External & Internal Auditors
8.Evaluate the external auditors andrecommend to the Board the reappointment or replacement (as appropriate) of the external auditors to be proposed in the Corporation’s next proxy circular for shareholder approval and appointment. In the event of a change of auditors, the Audit Committee will review all issues relating to the change.
9.The external auditors shall report directly to the Committee and shall be accountable to the Board and the Audit Committee as representatives of the shareholders. The Committee shall so instruct the external auditors.
10.Review and evaluate the experience, qualifications and independence of the senior members of the external audit team.
11.Conduct a periodic comprehensive review of the external auditors (every four to five years).
12.Ensure that there is a rotation of the lead audit partner on a regular basis.
13.Review and approve the external audit plan and the terms of the external auditors' engagement.
14.Review the appropriateness of the proposed audit feespayable for recommendation to the Board.
15.Pre-approve all non-audit services provided to the Corporation (including its subsidiaries) by the external auditors which are not prohibited by law. Such pre-approval may include a blanket pre-approval of non-prohibited services for limited dollar amounts or in limited categories of service which the Committee, in its business judgement, does not believe have the potential for conflict or abuse. The pre-approval may be provided by the Chair of the Committee for non-audit services up to $100,000 (although all such services will be reported to the full Committee at its next scheduled meeting). Non-audit services in excess of $100,000 will require the approval of the full Committee.
16.Obtain from the external auditors annually a formal written statement setting forth all the relationships between the auditors and the Corporation, and the fees billed for all services rendered by the external auditors to the Corporation for the most recent fiscal year in the aggregate and by each service.
17.Review and approve the disclosure of proportionate audit and non-audit expenditures and the general nature of the non-audit services to be included in the Corporation’s annual information form or proxy statement.
18.Review and approve the internal audit plan and review progress against the plan.
19.Meet with the external auditors and the internal auditors from time to time, in any event not less frequently than once a year, both with and in the absence of management, to review the work of such auditors, their findings (including their view on the quality of the Corporation's accounting and disclosure practices), any significant recommendations made by them as to internal controls or other matters, management's responses to such recommendations, any unresolved differences, and the cooperation received by such auditors from management.
20.Review and oversee the resolution of any disagreements between management and the external auditors regarding financial reporting.
21.Review the adequacy of the accounting staff and internal audit function.
22.Establish a process with the external auditors and the internal auditors to be informed on a timely basis of any serious concerns which they may have about internal controls and the financial operations of the Corporation and any serious differences of opinion between management and such auditors on such subjects.
23.Establish a process for reporting by internal and external auditors of any practices or conditions affecting the well-being of the Corporation that in their opinion are not satisfactory and require rectification.
24.Review and approve policies for the Corporation’s hiring of partners, employees or former partners or employees of the present and former external auditors.
Internal Controls & Compliance
25.Establish procedures for (a) the receipt and treatment of complaints received by the Corporation regarding accounting, internal controls or auditing matters; and (b) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.
26.Discuss guidelines and policies governing the process by which senior management and the relevant departments and divisions of the Corporation assess and manage the Corporation’s exposure to financial risk and discuss the Corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including reviewing the adequacy of the Corporation’s insurance program and approving for recommendation to the Board policies governing short-term investments, foreign exchange transactions, use of derivatives and other financial instruments by the Corporation, including a list of qualified institutions with which the Corporation’s funds may be deposited or invested.
27.Oversee the enterprise risk management process, including recommending to the Board as required the allocation of oversight of the various risks to Committees, including the Audit Committee, and to the Board as a whole
28.Review reports on the integrity and effectiveness of the Corporation's internal control and management information systems, including internal controls over financial reporting and disclosure controls and processes.
29.Be satisfied that the Corporation is in compliance with applicable legislation and regulations regarding financial reporting and securities matters.
30.Ensure that the Corporation and its subsidiaries have a reporting system requiring the prompt reporting of any significant non-compliance with applicable policies, practices and procedures to the Chief Executive Officer and to the Chair of the Audit Committee forthwith.
31.Be satisfied that the Corporation has established an appropriate code of ethics for the Corporation’s senior financial officers (including the chief financial officer, principal accounting officer and controller of each subsidiary) and that mechanisms to monitor compliance are in place.
Reporting to Board
32.Make regular reports to the Board.
Annual Review & Assessment
33.Conduct an annual performance evaluation of the Committee (with the assistance of the Nominating & Corporate Governance Committee).
34.Review and reassess the adequacy of these Terms of Reference no less than annually and recommend any proposed changes to the Board for approval.
TermsofReferenceAUDIT-March 2015