Our Company established its audit committee of the board of directors of the Company (the "Directors") (the "Board") on 12 June 2007 with written terms of reference in compliance with the Code on Corporate Governance Practices set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control systems of our Company.
The audit committee comprises four members, namely Mr. CHAN Yiu-tong, Ivan, Mr. CHEONG Ying-chew, Henry, Mr. TONG Hang-chan, Peter and Mr. YU Chun-fai, Henry and is chaired by Mr. CHAN Yiu-tong, Ivan, all of whom are independent non-executive Directors.
Terms of Reference of the Audit Committee |
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| Constitution |
| 1. |
The Board hereby resolves to establish a committee of the Board to be known as the audit committee (the "Audit Committee"). |
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| Objective |
| 2. |
The Audit Committee shall be responsible for ensuring the objectivity and credibility of financial reporting of the Company. |
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| Membership |
| 3. |
The Audit Committee shall consist of four members. At least 3 members must be independent non-executive Directors. The remaining member needs not be an independent non-executive Director but must be a non-executive Director. All of them shall be appointed by the Board. A quorum shall be two members. |
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| 4. |
A former partner of the Company's existing auditing firm from time to time may not act as a member of the Audit Committee for a period of one year commencing on the date of his ceasing: (a) to be a partner of the firm; or (b) to have any financial interest in the firm, whichever is the later. |
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| 5. |
The chairman of the Audit Committee shall be appointed by the Board from among its independent non-executive Directors. |
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| Frequency of meetings |
| 6. |
The Audit Committee shall meet at least twice a year. The external auditor may request a meeting if it considers it necessary. |
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| Notice of meetings |
| 7. |
Meetings of the Audit Committee shall be called by its chairman or at the request of the Board. |
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| 8. |
Unless otherwise agreed, notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be issued to each member of the Audit Committee and any other person required to attend no less than three working days prior to the date of the meeting. |
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| Attendance at meetings |
| 9. |
The chief finance officer of the Company and a representative of the external auditor shall normally attend meetings. Other members of the Board shall have the right to attend meetings of the Audit Committee. However, the Audit Committee shall meet with the external auditor of the Company without the presence of the executive Directors at least once a year. |
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| 10. |
The Company Secretary or his nominee shall be the secretary of the Audit Committee. |
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| Authority |
| 11. |
The Audit Committee is authorized by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Audit Committee. |
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| 12. |
The Audit Committee is authorised by the Board, at the Company's expense, to appoint legal or other independent professional advisers with relevant experience and expertise to assist the Audit Committee and to secure the attendance of such professional advisers at its meetings if it considers it necessary. |
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| 13. |
The Audit Committee is authorised to require management to provide it with such resources as may be necessary for it to discharge its duties. |
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| Duties |
| 14. |
The duties of the Audit Committee shall be: |
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| A. |
to be primarily responsible for making recommendations to the Board on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor, and any questions regarding the resignation or dismissal of the external auditor; |
| B. |
to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standards; |
| C. |
to discuss with the external auditor before the audit process commences, the nature and scope of the audit, and ensure coordination where more than one auditor is involved; |
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to develop and implement policy on the engagement of an external auditor to supply non-audit services (for which purpose, "external auditor" includes any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as part of the audit firm nationally or internationally) and report to the Board on such policy, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken; |
| E. |
to monitor the integrity of the Company's financial statements, annual report and account, half-year report and, if prepared for publication, quarterly reports and to review significant financial reporting judgements contained in them; |
| F. |
in reviewing the half-year and annual financial statements before submission to the Board, to focus particularly on:
- any changes in accounting policies and practices;
- major judgemental areas;
- significant adjustments resulting from the audit;
- the going concern assumption;
- compliance with accounting standards; and
- compliance with stock exchange and other legal requirements in relation to financial reporting,
and to:
- liaise with the Board and senior management to carry such review; and
- consider any significant or unusual items that are, or may need to be, reflected in such reports and accounts and give due consideration to any matters that have been raised by the Company's staff responsible for the accounting and financial reporting function, compliance officer or auditors;
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| G. |
to act as the key representative body for overseeing the Company's relationship with the external auditor; and discuss problems and reservations arising from the interim and final financial statements, and any other matters the external auditor may wish to discuss (in the absence of management where necessary); |
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to review the external auditor's management letter, any material queries raised by the auditor to management in respect of the accounting records, financial accounts or systems of control and management's response; |
| I. |
to ensure that the Board provides a timely response to the issues raised in the external auditor's management letter; |
| J. |
to review the Company's financial controls, internal control and risk management systems; |
| K. |
to discuss with the management the system of internal control and ensure that management has discharged its duty to have an effective internal control system including the adequacy of resources, qualifications and experience of staff of the Company's accounting and financial reporting function, and their training programmes and budget; |
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to review the Company's statement on internal control systems to be included in the annual report prior to endorsement by the Board; |
| M. |
to consider the findings of any major investigations of internal control matters as delegated by the Board or on its own initiative and management's response; |
| N. |
to review and monitor the effectiveness of the internal audit programme, ensure co-ordination between the internal and external auditors and ensure that the internal audit function is adequately resourced and has appropriate standing within the Company; |
| O. |
to review the Company's financial and accounting policies and practices; |
| P. |
to review arrangements by which employees of the Company may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters and ensure that proper arrangements are in place for the fair and independent investigation of such matters and for appropriate follow-up action; |
| Q. |
to report to the Board on the matters set out in this paragraph 14; and |
| R. |
to consider other topics, as defined or instructed by the Board. |
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| Reporting procedures |
| 15. |
The secretary of the Audit Committee shall circulate the draft and final minutes of meetings of the Audit Committee to all members of the Audit Committee for their comment and records respectively, in both cases within a reasonable time after the meeting. |
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| 16. |
The secretary of the Audit Committee shall circulate the minutes of meetings of the Audit Committee to all members of the Board. |
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