Manual on Corporate Governance
Code of Conduct and Business Ethics
Annual Corporate Governance Report
Board Committees and Charters
2015 SMPC Integrated Annual Report
Audit Committee Charter
(As amended by the Audit Committee on February 25, 2015 and approved by the Board of Directors on March 6, 2015)
The Board of Directors of Semirara Mining and Power Corporation has established an Audit Committee to assist the Board in fulfilling its oversight of the following :
internal control environment,
financial process reporting and integrity of the financial statements including disclosures,
external audit function,
internal audit function, and
the Company’s compliance with reporting, legal and regulatory requirements.
Limitation of Audit Committee’s Role
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. The financial statements are the responsibilities of Management. The Committee is not providing any expert or professional assurances as to the Company’s financial statements.
The Audit Committee shall consist of a minimum of three (3) members, a majority of whom are Independent Directors of the Board.
The Committee and the Committee Chairperson shall be appointed by the Board upon the recommendation of the Nomination and Election (NOMELEC) Committee. Each Committee Member shall have an adequate understanding of finance, accounting or related financial management practices. Each Member shall have knowledge, understanding and appreciation of the Company’s business and industry in which it operates, as well as related industries and those of its subsidiaries. Each Member shall be diligent in disclosing relationships significant to the Company and related companies/parties or himself that might potentially compromise his independence in his oversight duties.
The Chairperson of the Committee must be an Independent Director. It is appropriate that he has expertise or experience on accounting or related financial management, and sufficiently knowledgeable about financial reporting and auditing requirements.
The Committee Member’s term shall be for one year. Committee Members may be replaced at any time by a majority of the Board in office.
All Committee Members must be Directors of the Board. A Member’s cessation as a Board Director means his automatic termination as a Committee Member.
Committee Members shall be entitled to committee membership per diems or fees.
The Board has granted the Committee the authority herein provided, as well as the authority to investigate any activity of the Company.
The Committee shall be, granted unrestricted access to all information and all employees have been, and shall be, directed to cooperate as requested by the Committee Members.
The Committee has the authority to retain, at the Company’s expense, persons having special competencies (including, without limitation, legal, accounting or other consultants and experts) to assist or advise the Committee in fulfilling its responsibilities.
The Committee may form and delegate authority to subcommittees when appropriate.
The Committee shall meet at least once every quarter in a calendar year. Additional meetings may be held as determined by the Committee.
It is the responsibility of the Chairperson to schedule all meetings of the Committee. A written agenda and relevant meeting materials shall be provided at least three (3) days before each meeting to the Committee Members and any other person/s invited by the Committee as necessary, to have adequate time for preparation and reading.
A majority of the Committee Members shall constitute a quorum, and the act of a majority of those present at any Committee meeting at which there is a quorum shall be the act of the Committee.
A resolution in writing signed or approved by letter, or facsimile by a majority of Committee Members shall be as effective for all purposes as a resolution passed at a meeting of the Committee duly convened, held and constituted.
The Committee shall meet with Management, internal auditors and the external auditor in separate executive sessions at least once a year.
The Committee may request any officer or employee, outside counsel or the external auditor of the Company to attend a Committee meeting or to meet with any Committee Member or consultant to the Committee.
The Company’s Corporate Secretary or any other person nominated by the Committee shall be the Secretary of the Committee in its meetings.
The Committee shall provide copies of the minutes of each meeting to the Board as soon as practical after each Committee meeting.
Duties and Responsibilities
The Committee’s duties and responsibilities shall be as follows:
1. Internal Control Oversight
1.1 Discuss with Management, internal auditors and external auditor the adequacy and effectiveness of accounting and financial reporting controls, information technology systems and data security, and any appropriate Management action adopted in light of material control deficiencies and identified or reported material errors and fraud.
1.2 Recommend and direct Management to develop and/or to formalize all policies and procedures to promote a transparent financial management system and integrity of internal control activities.
1.3 Set a framework for fraud prevention and detection, including the establishment of procedures or mechanism for processing complaints regarding accounting, internal controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable or unethical practices.
2. Financial Reporting Process and Disclosure Oversight
2.1 Consider the adequacy of resources devoted to the accounting function (including training and succession planning) to ensure that reporting is in accordance with the required accounting practices and methodologies and compliant with Philippine financial reporting standards and regulations.
2.2 Review and discuss key issues and appropriateness of accounting policies and principles inherent in preparing the financial statements, including impact of new accounting standards and interpretations.
2.3 Consider the adequacy of financial reporting disclosures to ensure a “transparent, balance and fair” view that meet Shareholder needs.
2.4 Consider the adequacy of any Management representations made in support of the financial statements and in particular accounting for unusual or complex transactions.
2.5 Consider and advise on the propriety of related party transactions and review the necessary appropriate disclosures required by accounting and reporting standards.
- Discuss and review with Management the Company’s quarterly interim reports and annual financial statements as to completeness, clarity, consistency and accuracy of disclosures of material information and subsequent events prior to their presentation to the Board and the filing of such financial statements to SEC and other regulatory agencies.
- Discuss with Management, and external auditors when applicable, any correspondence between the Company and regulators regarding the Company’s financial statement filings and disclosures.
- Review and approve Management’s representation letter before submission to external auditors.
- Communicate with legal counsel litigation, claims, contingencies or other significant legal issues that impact financial statements.
3. Internal Audit Oversight
3.1 Establish the Internal Audit Charter.
3.2 Review the qualifications, appointment, performance and/or replacement of the Chief Audit Executive (or equivalent position).
3.3 Review annually the Internal Audit Charter, internal audit plan and adequacy of resources. Recommend changes in the planned scope of the internal audit function.
3.4 Discuss and review the internal auditors’ evaluation of internal controls, and monitor Management’s responses to audit findings and recommendations.
3.5 Review the performance and independence of the internal audit function to be in conformance to International Standards for the Professional Practice of Internal Auditing during the year and report the Committee’s conclusions to the Board.
4. External Audit Oversight
4.1 Assess and recommend the professional qualifications, independence, appointment, reappointment or replacement and remuneration of the external auditor to the Board.
4.2 Pre-approve all audit and non-audit work engagements, scope, fees and terms with the external auditor.
4.3 Confirm with the external auditor that audit scope has not been unreasonably restricted by Management.
4.4 Review non-audit services and taxation advice by the external auditor.
4.5 At the conclusion of the annual audit, discuss with Management and the external auditor, significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Company’s financial statements.
4.6 Annually, discuss the overall performance and conduct of audit of the external auditor to be in accordance with Philippine Standards on Auditing, taking into account the opinions of Management and internal auditors.
4.7 Review external audit findings in respect of any significant deficiencies or weaknesses in controls and ensure that Management responds appropriately with timely corrective action, including audit adjusting entries noted or proposed but passed as immaterial or otherwise.
4.8 Resolve disagreement, if any, between Management and the external auditor.
5. Compliance, Risk and Governance Oversight
5.1 Discuss with the Board the Company’s compliance with important and applicable laws, regulations, standards, best practices guidelines and established standards of corporate conduct.
5.2 Consider the Company’s tax planning and compliance processes in its taxation obligations.
5.3 Initiate and supervise special investigations or seek external legal advice as required.
5.4 Review legal and compliance developments, including results of inquiries and communication received from government or regulatory agencies.
5.5 In coordination with the Risk Committee, oversee and monitor enterprise-wide risks related to the specific oversight duties and responsibilities of the Audit Committee;
5.6 Support the Company’s good governance framework through endorsement of best practices and review of Code of Conduct for Management.
6. Related Party Transactions (RPTs) Review
6.1 Review by Independent Directors of material/significant RPTs that meet the threshold levels stipulated by regulatory rules and requirements on RPTs, as well as guidelines per SMPC Group’s Related Party Transaction Policy to determine whether RPTs are in the best interests of the Company and Shareholders.
Committee Training and Education
The training needs for each Audit Committee Member will vary, depending on an individual’s area of expertise and knowledge. Audit Committee Members shall be given the opportunity to attend technical and professional courses, seminars and conferences to keep abreast of updates on corporate governance, changes in the regulatory environment, accounting, business, economics, specialized areas such as derivatives, and other relevant areas that will enhance their contribution to the Audit Committee. Costs of courses and seminars attended by Committee Members are borne by the Company.
Moreover, the Company’s Board and Director Development program includes orientation, peer Director performance evaluation and scheduled visits to the Company’s Mine Sites for Directors to gain a closer understanding of the Company’s business and operations.
Committee Succession Planning
The Board’s Nomination and Election Committee undertakes the responsibility for succession planning for the Board to ensure that positions are filled not just in terms of board membership, but also committee membership, board and committee chairs and senior executive officer positions. The Audit Committee, in conjunction with the Board and the NOMELEC Committee, may consider and plan for succession of its Committee Members.
The Committee Chairperson shall report matters requiring the Board’s proper disposition and attention regularly. The Committee shall prepare an annual report to the Board and shareholders for its performance of oversight duties during the year, describing the Committee’s composition, responsibilities and how they were discharged, and any other regulatory information, including approval of non-audit services.
The Committee shall also review or issue any other reports and certifications on critical compliance issues such as those relating to Committee responsibilities.
The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
The Committee shall annually conduct a self-assessment of its own performance using a formal questionnaire with defined quantitative rating and corresponding qualitative description for such rating. It shall also seek to obtain feedback from Management, internal auditor, general counsel and/or external auditor regarding its performance and/or possible ways for improvement thereof.