OFT Audit and Risk Assurance Committee - terms of reference

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Purpose

The purpose of the Audit and Risk Assurance Committee is to advise the Accounting Officer (the Chief Executive) and the Board on the adequacy of audit arrangements (internal and external) and on the implications of assurances provided in respect of risk and control, with a view to enabling the Board to assure itself of the effectiveness of the OFT's risk management system and procedures and its internal controls including business continuity and information technology.

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Terms of reference

The Audit and Risk Assurance Committee's remit encompasses all aspects of corporate governance, risk management and internal control within the OFT. In particular, the Committee shall review, advise, and prepare a report, as appropriate, in relation to the following:

• the effectiveness of mechanisms employed for the identification, assessment and management of risk
• the robustness of internal control systems, including the statements to be included in the annual report concerning internal controls and risk management 
• compliance with the Government's policies on Corporate Governance, together with such generally accepted principles of good corporate governance as it is reasonable to regard as applicable to the OFT
• the suitability of the whistle-blowing arrangements, whereby employees can raise concerns in confidence about possible wrong doing in financial reporting or other matters, including the proportionate and independent investigation of such matters and the appropriateness of any follow-up action
• the effectiveness of the procedures for detecting fraud
• the Annual Account and Trust Statement, focussing particularly on:
  
  o the quality of financial reporting and ensure that such reporting presents a balanced and understandable assessment of the position and performance of the OFT
  o critical accounting policies and practices, including the consistency of accounting policies on a year to year basis
  o major financial reporting issues and judgmental areas
  o the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed
  o the propriety of major adjustments processed at year end
  o significant adjustments resulting from the audit
• external audit reports, including:
  
  o meeting with external auditors at least twice a year, once at the planning stage, where the scope of the audit will be considered, and once at the reporting stage
  o discussing problems and reservations arising from the audit, and any matters the auditor may wish to discuss (where requested by the Committee, in the absence of Executive Members and any other person who is not a member of the Committee)
  o reviewing the external auditors' proposed audit opinion
  o reviewing the external auditors management letter and management's response
  o facilitating the resolution of any difference between management and the auditor regarding financial reporting
• the effectiveness of the internal audit function in the context of the overall risk management system, including
  
  o the internal audit strategy and plan
  o its remit and resourcing
  o its standing and freedom from management and other restrictions
  o reviewing all internal audit reports promptly
  o the adequacy of management responses to audit reports
  o the performance of the internal auditor, and
  o  the Accounting Officer's OFT governance statement.

The Audit and Risk Assurance Committee shall recommend to the Board, Executive Committee and Accounting Officer, as appropriate, such changes to existing practices and systems as is necessary.

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Authority

The Audit and Risk Assurance Committee acts only in an advisory capacity and has no executive powers.

The Audit and Risk Assurance Committee is authorised to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any Member or employee of the OFT and all Members and employees of the OFT are directed to co-operate with any reasonable request made by the Committee.

The Audit and Risk Assurance Committee is authorised to obtain independent professional advice (including legal advice) and to arrange for the attendance of persons who are not OFT employees with relevant experience and expertise if it considers this necessary.

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Membership

The Audit and Risk Assurance Committee shall be comprised, so far as possible, of Non-executive Members. In circumstances where this is not possible, the Committee shall be comprised of at least two Non-executive Members and at least one co-opted member who is not an employee of the OFT. The Committee shall have the power to co-opt a person or persons with appropriate specialist qualifications and/or experience subject to the approval of the appointment by the Board. 

A Non-executive Member or other independent co-opted member shall chair the Audit and Risk Assurance Committee. 

A quorum shall be three members. 

The Chair of the Audit and Risk Assurance Committee shall be rotated on an appropriate cycle to provide for objectivity in the long term and to avoid over or under representation of particular aspects of the OFT's business and administrative interests.

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Meetings

The Audit and Risk Assurance Committee shall meet at least four times a year.

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Reporting

The Chair of the Audit and Risk Assurance Committee, on behalf of the committee, shall report once a year to the Accounting Officer, and inform the Board, on the findings and conclusions of the Committee for the past year.

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Access rights

The Head of Internal Audit and the senior member of the External Audit team have the right of access to the Audit and Risk Assurance Committee and shall normally be present at meetings (as attendees rather than members).

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