Audit and risk committee report
The audit and risk committee (the committee) has pleasure in submitting its report to the shareholders as required in terms of section 94(7) of the Companies Act No 71 of 2008.
Membership of the committee
The committee comprised the following members at the date of this report:
- JRD Modise (chairman)
- LC Cele
- NP Mnxasana
Each member is an independent director and has the adequate relevant knowledge, the financial expertise and experience to equip the committee to properly execute its duties and responsibilities.
The experience and qualifications of the members are set out in the integrated annual report.
DCG Murray retired effective 25 May 2016 and JRD Modise was elected chairperson at the annual general meeting (AGM) by the company’s shareholders.
Functions of the committee
During the year under review, six meetings were held. Details of attendance are set out in the corporate governance section of the integrated annual report.
The committee reports that it has adopted appropriate formal terms of reference as its mandate, and has regulated its affairs in compliance with this mandate, and has discharged all of the responsibilities set out therein. During the financial year under review, the committee reviewed the following matters:
- The quarterly and half-yearly financial reports, the integrated annual report, the annual financial statements and accounting policies for the company and all subsidiaries
- The effectiveness of the combined assurance model
- The reports of the internal audit function on the state of internal control including its forensic reports regarding fraud prevention and detection
- The effectiveness of the internal audit function
- The auditor’s findings and recommendations
- Statements on ethical standards for the company and considered how they are promoted and enforced
- Significant cases of unethical activity by employees or by the company itself
- Reports on the risk management process in the company and
assessed the company’s exposure to the following risks:
- Top strategic risks (including credit and market risks, human resources risks and compliance risks)
- Operational risks
- Information technology risks
Independence of auditor
The committee reviewed a presentation by the external auditor and, after conducting its own review, is satisfied with the independence and objectivity of Deloitte & Touche as external auditors and M Mantyi, as the designated auditor. The committee further approved the fees to be paid to Deloitte & Touche and its terms of engagement and pre-approved each proposed contract with Deloitte & Touche for the provision of non-audit services to the company.
The committee has evaluated the annual financial statements of ArcelorMittal South Africa Ltd and the group for the year ended 31 December 2016 and, based on the information provided to the committee, considers that the company and group comply, in all material respects, with the requirements of the Companies Act of South Africa, the International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, and applicable legislation and financial pronouncements as issued by the Financial Reporting Standards Council.
Internal financial controls
The committee agendas provide for confidential meetings between committee members and both the internal and independent external auditors.
The committee has oversight of the group’s financial statements and reporting process, including the system of internal financial control. It is responsible for ensuring the group’s internal audit function is independent and has the necessary resources, standing and authority in the organisation to discharge its duties. The committee oversees co-operation between internal and external auditors, and serves as a link between the board of directors and these functions. The head of internal audit reports administratively to the chief executive officer and functionally to the chairman of the committee and head of group internal audit of the holding company ArcelorMittal Holdings AG.
The committee is of the opinion, after having considered the assurance provided by the internal audit function, that the group’s system of internal financial controls in all key material aspects is effective and provides reasonable assurance that the financial records may be relied upon for the preparation of the annual financial statements. This is based on the information and explanations given by management and the group internal audit function.
Expertise and experience of the chief financial
officer and the finance function
The committee has satisfied itself that the chief financial officer, D Subramanian, has the appropriate expertise and experience to carry out his duties.
The committee has assessed the competency, skills and resourcing of the group’s finance function, and is satisfied as to the overall adequacy and appropriateness of the finance function.
Expertise and experience of the company secretary
The committee has satisfied itself that the company secretary has the appropriate competence and experience and has maintained an arm’s-length relationship with directors.
Recommendation of the annual financial statements
and integrated annual report
The committee, having fulfilled the oversight role regarding the reporting process for both the annual financial statements and the integrated annual report and having regard to material factors that may impact the integrity of these reports, recommends the integrated annual report and the annual financial statements for approval by the board of directors.
27 February 2017