Pick n Pay Stores Limited
Audit and risk committee report

The audit and risk committee is a statutory committee, as required by the Companies Act, and functions within a charter approved by the Board annually. The committee members, Jeff van Rooyen, Hugh Herman and Ben van der Ross, were confirmed for appointment at the AGM on 25 June 2013.

Role of the committee

The audit and risk committee has an independent role with accountability to both the Board and to shareholders. The committee’s responsibilities include the statutory duties prescribed by the Companies Act, activities recommended by King III and the responsibilities assigned by the Board.

The committee’s ongoing main responsibilities are as follows:

Integrated and financial reporting

• Review the financial statements, interim report, preliminary results announcement and summarised financial statements and ensure compliance with International Financial Reporting Standards and the Companies Act;
• Review and approve the appropriateness of accounting policies, disclosure policies and the effectiveness of internal financial controls;
• Perform a review of the Group’s integrated reporting function and progress and consider factors and risks that could impact on the integrity of the integrated annual report;
• Review the sustainability disclosure in the integrated annual report and ensure that it is consistent with financial information reported; and
• Recommend the integrated annual report to the Board for approval.

Finance function

• Consider the expertise and experience of the Chief Finance Officer; and
• Consider the expertise, experience and resources of the Group’s finance function.

Internal audit

• Review and approve the internal audit charter and audit plans;
• Evaluate the independence, effectiveness and performance of the internal audit function and compliance with its mandate;
• Review the Group’s systems of internal control, including financial controls, ensuring that management is adhering to and continually improving these controls;
• Review significant issues raised by the internal audit process; and
• Review policies and procedures for preventing and detecting fraud.

External audit

• Act as a liaison between the external auditors and the Board;
• Nominate the external auditor for appointment by shareholders;
• Determine annually the scope of audit and non-audit services which the external auditors may provide to the Group;
• Approve the remuneration of the external auditors and assess their performance; and
• Assess annually the independence of the external auditors.

Risk management

• Ensure that management’s processes and procedures are adequate to identify, assess, manage and monitor enterprise-wide risks; and
• Review tax and technology risks, in particular how they are managed.

General

• Receive and deal appropriately with any complaint relating to the accounting practices and internal audit of the Group or to the content or auditing of its financial statements, or to any related matter; and
• Perform other functions as determined by the Board.

Composition of the committee

This committee is chaired by and comprises only independent non-executive directors. In accordance with the requirements of the Companies Act, members of the committee are appointed annually by the Board for the ensuing financial year and in compliance with King III, are elected by shareholders at the annual general meeting.

Meetings and activities

• meeting at least twice a year to review the Group’s financial results, to receive and review reports from both the internal and external auditors, and to meet with management to review their progress on identifying and addressing key risk areas within the business;
• reporting to the Board at the next meeting, which is held within a week of the respective committee meeting;
• meeting separately with the internal and external auditors to confirm they are receiving the full co-operation of management; and
• the committee Chairman meets regularly with key management to keep abreast of emerging issues.

The committee discharges all audit committee responsibilities of all the subsidiary companies within the Group. To help it discharge this responsibility, financial review committees, chaired by the Chief Finance Officer, review in detail the results of all material operating subsidiary companies with the external auditors and management of the respective subsidiary. These review committees report their findings to the Group audit and risk committee.

The external and internal auditors have unrestricted access to the committee and all of its members throughout the year.

Independence of external auditors

The committee met with management, independently of the auditors, to discuss issues relevant to the audit and for purposes of evaluating the quality and effectiveness of the external audit function. The committee is satisfied as to the independence of the Group’s external auditors, KPMG Inc. and its respective audit partners. The committee nominates KPMG as external auditor for appointment by shareholders at the annual general meeting.

Policy on non-audit services

All non-audit services provided by the Group’s external auditors are pre-approved by the audit committee. The total fee for non-audit services provided should not, under normal circumstances, exceed 50% of the total auditor’s remuneration.

Expertise and experience of Chief Finance Officer and finance function

The committee together with the lead external audit partner has considered, and confirmed, the composition, experience, resources and skills of the finance function. The committee is satisfied that Bakar Jakoet has the appropriate expertise and experience for his position of Chief Finance Officer of the Group. In addition, the committee is also satisfied that the composition, experience and skills of the finance function meet the Group’s requirements.

Approval of the audit and risk committee report

The committee confirms that it has functioned in accordance with its charter for the 2014 financial year and that its report to shareholders has been approved by the Board.

The committee confirmed its satisfaction with the performance and level of service rendered by the external auditor. The Board has, on the recommendation of the committee, nominated KPMG Inc. for reappointment as the Company’s registered auditor for the ensuing year at the forthcoming annual general meeting.

Jeff van Rooyen
Chairman: audit and risk committee

14 April 2014