Introduction - Tiger Brands Brands Audit Committee Terms of Reference Version2_16.02.2016 Introduction 1. The Audit Committee ("Committee") is constituted as a statutory committee

Tiger Brands Audit Committee Terms of Reference

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Introduction

1.

The Audit Committee ("Committee") is constituted as a statutory committee of the board ("Board") of Tiger

Brands Limited ("the Company") in respect of its statutory duties in terms of section 94(7) of the Companies Act,

2008 and a Committee of the Board in respect of all other duties assigned to it by the Board.

2.

The duties and responsibilities of the Committee members are in addition to their duties and responsibilities as

members of the Board. The deliberations of the Committee do not reduce the individual and collective

responsibilities of Board members in regard to their fiduciary duties, and they must continue to exercise due care

and judgment in accordance with their legal obligations (statutory and otherwise).

3. These terms of reference are subject to the provisions of the Companies Act, the Company’s Memorandum of

Incorporation, and any other applicable law or regulatory provision.

Purpose

The purpose of this document is to set out the role, duties and responsibilities of the Audit Committee (“the

Committee”) and its relationship to the Internal and External Audit functions and the Tiger Brands Board (“the Board”).


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Construct

Composition

1. In every financial year, the Company’s Shareholders, on recommendation of the Board, shall appoint an Audit

Committee for the following year. The members of the Committee shall be appointed from among the Directors

from time to time and shall consist of at least three members, with the requisite experience, knowledge and skills

set to serve on the Committee. All of whom shall be independent non-executive directors in terms of the

definition set out in “the Companies Act”, (as amended) and any other regulatory requirement; and

2. The Chairman of the Committee shall be appointed by the Board and shall have the requisite business, financial

and leadership skills. The Chairman of the Company shall not be eligible for appointment as a member of the

Committee. The members of the Committee shall be financially literate and keep up-to date with the required

skill-set. The Board shall have the power at any time to remove any member from the Committee. The Board

must fill any vacancy on the Committee within 40 business days. The composition of the Committee and its

Chairmanship will be subject to annual review by the board. Quorum for decisions by the Committee shall be any

two members of the Committee present throughout the meeting of the Committee. The company secretary shall

be the secretary of the Committee.

Relationship to Management

Responsibility for reliable financial reporting lies first with company management who set the tone and establish the

financial reporting environment. The Audit Committee needs to understand and assess this environment and the system

of internal controls so that it can exercise broad but effective oversight. This will mean asking the right questions and

expecting forthright responses. Strong management understand their public responsibility and the complexity of their

operations, and are willing to answer such questions.


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Relationship to External Auditors

The external auditors are expected to bring to the reporting process technical competence, business judgement,

integrity and objectivity. The Audit Committee is responsible for communicating with the auditors regarding their annual

audit of the financial statements, as well as their participation in interim reporting. Communication with the auditors

must be free and open to ensure the Audit Committee is informed of potential inaccuracies in the financial statements,

significant deficiencies in internal controls, alternative accounting treatments and other significant findings during the

course of their audit work.

Communication with Management

The Audit Committee members should have open communication with management and they should clearly understand

management assessment of and response to any special audit risks or high risk areas and the internal and external audit

activities, if any, related to these risks.

Meetings

1. The Committee should meet after the financial year end, but prior to Board approval of the annual financial

statements, to discuss the annual financial statements, integrated report and outcome of the year end audit;

2. The Chief Executive Officer and Chief Financial Officer of Tiger Brands, representatives of the Company’s financial

management and representatives of the external and internal auditors should attend meetings as invitees and will

have unrestricted access to the Chairman of the Committee or any other member of the Committee as required.

Other Board members shall also have a right of attendance;

3. The Committee will meet with the internal and the external auditors at least annually without management or the

other auditor present in order to discuss any issues relevant to the audit;


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4. At least one other meeting should take place to discuss and consider interim reports, prior to approval by the

Board, and the audit review of interim financial statements;

5. An agenda and discussion papers should be circulated prior to the meetings, which will be the responsibility of the

company secretary. Minutes must be kept of all meetings. The minutes of all meetings, or summaries thereof,

shall be submitted to the Board at the Board meeting immediately following the Committee meeting and the

agenda for each such Board meeting shall provide the opportunity for the Chairman of the Committee to report

orally on the matters of importance as well as the Committee’s findings and recommended actions; and

6. All outstanding issues from previous meetings to be followed up and resolved.

Duties & Responsibilities

Understanding Financial Reporting Process

1. The external auditors must satisfy the Audit Committee that the financial reporting process will generate the

information necessary to manage the company and properly report on its operations. Controls and procedures

should be designed to:

a. ensure that transactions are properly authorised and recorded; and

b. ensure the accuracy and timeliness of the information reported.

2. The Audit Committee’s comfort with the financial reporting process will be based on the quality of financial

information, the level of management’s involvement, and the work of the auditors.

Reviewing the Financial Statements and other Functions

1. The Audit Committee is responsible for reviewing the financial statements and integrated report, acting under the


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guidance of the externa auditors, prior to submission to the Board of Directors. The objective of the review is to

ensure that disclosure is adequate and that fair presentation is achieved, including contingent liabilities such as

outstanding litigation. Such a review would entail:

a. Obtaining explanations for all significant variances in the financial statements, between years;

b. Reviewing the company’s accounting policies or major changes in policies which management should

consider making or have already implemented;

c. Examining the effect of changes in International Financial Reporting Standards (IFRS);

d. Enquiring about any significant financial reporting issues discussed during the accounting period between

management and the auditors and how they were resolved;

e. Assessing significant judgmental decisions that had a major impact on the financial statements;

f. Reviewing any significant adjustments resulting from the audit;

g. Examining compliance with accounting standards and with Stock Exchange and other statutory

requirements;

h. Obtaining reasons for significant loss-making operations and considering whether the value of their related

assets is fairly stated in the balance sheet;

i. Reviewing significant transactions which are not a normal part of the company’s business;

j. Reviewing the adequacy of the doubtful debt and stock provisions;

k. Being kept informed of all outstanding litigation, contingencies and claims and how these matters are

reflected in the company’s financial statements;

l. Reviewing the extent, nature and disclosure of abnormal, exceptional or non-trading items;


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m. Discussing all significant proposed changes to the company’s financial statements and any concerns over

the adequacy of disclosure of any items;

n. Enquiring about the status of tax affairs; e.g. submission of tax returns, outstanding assessments,

movement in assessed losses, items disputed by the Receiver, etc.

o. Reviewing the overall effective tax rate and the extent of tax planning. Reviewing the movement in the

contingent liability for deferred tax;

p. Understanding the extent to which the financial information accompanying the audited financial

statements has been audited;

q. The reviewing of the information of new IT systems;

r. Reviewing the basis on which the Group has been determined to be a going concern;

s. Reviewing capital adequacy;

t. Reviewing compliance with the financial conditions of loan agreements; and

u. Reviewing controls over significant risks.

Assessing the Risk of Fraudulent Financial Reporting

Because the likelihood and magnitude of the potential risk will change as rapidly as the business climate changes,

assessing the risk of fraudulent financial reporting is challenging. The Audit Committee must ensure that the

external auditors have considered this risk with reference to:

a. The business environment;

b. The financial liquidity of the company;


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c. Management’s reputation, integrity and experience; and

d. The relationship of management with the external auditors.

External Audit

1. The Committee shall during each financial year for which it has been appointed, nominate for appointment as

auditor of the Company a registered independent auditor for approval by shareholders. In considering whether a

registered auditor is independent of the Company, the Committee shall consider the provisions of statutes and

the standards of the auditing profession and seek additional assurance from the auditor that internal governance

processes support and demonstrate their claim to independence.

2. The Committee shall consider whether the audit firm and. where appropriate, the individual auditor that will be

responsible for performing the functions of auditor, are accredited as such on the JSE list of Auditors and their

advisors as required by the JSE Limited Listings Requirements.

3. The Committee shall evaluate the independence, cost effectiveness and objectivity of the external auditors in

relation to the Company itself and any of its subsidiaries and any other member of the Company’s group and

determine the nature and extent of allowed non-audit services rendered by such auditors as to whether this

substantively impairs their independence. In assessing the independence of the external auditor, the Committee

should determine that the external auditor does not receive any remuneration or other benefit from the

Company, except in rendering approved audit and non-audit services. The Committee shall also consider

whether the external auditor’s independence may have been prejudiced as a result of any previous appointment

as auditor. Further, the Committee should consider how the external auditor’s accounting firm is structured to

ensure independence, the ownership of that firm, and whether the firm has formed alliances with entities which

provide clients with the kind of services an accounting firm would not be allowed to provide.


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4. The Committee shall ensure that the same individual or the lead audit partner of the accounting firm appointed

as the designated auditor may not serve as the auditor or designated auditor or lead audit partner for more than

five consecutive financial years and ensure that where an individual has served as the auditor or designated

auditor for two or more consecutive financial years and then ceases to be the auditor or designated auditor, that

the individual may not be appointed as auditor or designated auditor again until the expiry of two further years.

5. The Audit Committee is responsible for communicating with the external auditors. In its overseeing role, the

Committee should focus on:

a. the changing business environment;

b. changing financial reporting requirements;

c. the findings from the annual audit and interim work, including comments on controls; and

d. the proposed audit scopes, and approaches with respect to complex, high risks, and judgmental areas.

6. The Committee should meet at least twice per year with the external auditors to discuss these matters. At least

one of these meetings may include an “executive session” to ensure free and open communication.


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7. In its review process and discussions with the auditors, the Committee should ensure that the following matters

are addressed:

a. Auditors to report whether the scope of the audit was restricted by management;

b. Problems and reservations arising from the interim and final audits, and any material points raised in audit

reports issued since previous meetings and management’s response thereto;

c. The status of internal control and the results of the internal control matrix;

d. Review of the company’s statement on internal control prior to endorsement by the Board;

e. Report back from auditors on major weaknesses in internal control, as well as steps taken to rectify

problem areas;

f. The effectiveness of the internal audit function conducted as an extension of the external audit work. This

would involve ensuring that there is proper co-ordination between the internal and external auditors, and

that the internal audit function is adequately resourced and has appropriate standing within the company;

g. Areas of significant disagreement between management and auditors;

h. Major findings of internal investigations and management’s responses;

i. Auditors report on incidents of fraud and/or irregularities and/or stock losses since the previous meeting;

j. Steps taken to review the company’s IT procedures and controls at major installations;

k. Areas where management believe the costs of implementing additional or changed controls outweigh the

risk of making no changes; and

l. All qualifications noted on audit packs, irrespective of their nature, materiality or subsequent clearance,

and the circumstances giving rise to the qualifications fully explained.


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Internal Audit

1. An important role of the Committee is to monitor and supervise the effective function of internal audit to provide

an objective overview of the operational effectiveness of the company’s system of internal control and reporting.

This will include:

a. Reviewing the objectives and operations of the internal audit function;

b. Evaluating the performance of internal audit, its effectiveness and independence;

c. Reviewing the internal audit function’s compliance with its mandate as approved by the Committee and

considering whether the mandate, organisation, resources, internal audit skills and standing of the

Internal Audit function are appropriate to enable the Committee to meet is objectives;

d. Reviewing and approving the Internal Audit charter, Internal Audit coverage plan and budgets and

satisfying itself that the coverage plan makes provision for effectively addressing the critical risk areas of

the business;

e. Considering internal audit reports on the effectiveness of the process for identifying, assessing, and

reporting on all significant business and operational risks and the management and mitigation of those

risks by the Group and making appropriate recommendations to the Board;

f. Reviewing and considering the conclusions and significant matters reported by the Internal Audit function

in relation to financial reporting, corporate governance and internal control;

g. Reviewing the adequacy of corrective action taken in response to significant Internal Audit findings;

h. Ensuring that the internal auditor reports at all Committee meetings;


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i. Considering Internal Audit reports dealing with:

ensuring maintenance of proper and adequate accounting records;

controlling the overall operational and financial reporting environment; and

safeguarding the company’s assets against unauthorised use or disposal.

j. Directing and supervising investigations into matters within its scope, for example, evaluations of the

effectiveness of the company’s internal control, cases of employee fraud, misconduct or conflict of

interest;

k. Considering and reviewing any difficulties encountered in the course of internal audits including any

restrictions in scope; and

l. Considering whether the financial budgets of the internal audit function provide adequate support to

enable the Committee to meet its objectives.

Ethical Code of Conduct

1.

A well written and appropriate code or codex, endorsed by the Board, is a good communication device which

alerts all employees to ethical standards and guidelines for acceptable behaviour. Such standards promote

ethical decision making and may help resolve ethical dilemmas that arise. The code should also promote an

environment where open communication is expected and protected; and

2. The Audit Committee should exercise oversight by reviewing annually the programme that management

establishes to monitor compliance with the code. However, the Audit Committee’s most important contribution to

assuring ethical conduct is its sincere interest in the company’s operations and its advocacy of a high standard of

behaviour.


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Communicating with Board of Directors

1. The Committee should report its activities to the full Board as soon as possible after each meeting. The report

back should cover:

a. Any significant issues which might affect the directors’ liability; and

b. Any significant issues arising out of the review of the financial statements, and discussions on the audits

undertaken.

Combined Assurance

1. The Committee will ensure that a combined assurances model is applied to provide a coordinated approach to all

assurance activities, and in particular the Committee should:

a. Ensure that the combined assurance received is appropriate to address all the significant risks facing the

company; and

b. Monitor the relationship between the external assurance providers and the company.

Responsibility of Management

1. Management must ensure that adequate and effective control systems exist. A strong internal control

environment includes controls and procedures which:

a. Prevent irregularities from occurring;

b. Detect on a timely basis errors and irregularities that do occur;

c. Safeguard the company’s assets.


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2. These controls need to address, among other things, the following types of risk:

a. Physical security over assets that are readily transferable including operating assets, certain types of

inventory, and cash; and

b. Unauthorised access to software and computer files that are critical to the operation of the business

and/or to the financial management of the company.

External Auditor responsibility for fraud detection

The responsibility of the external auditors in detecting fraud is limited. An audit should be planned to provide

reasonable assurance of detecting errors and irregularities (theft, intentional errors, sabotage) that result in materially

misleading financial statements. Auditing standards limit the auditors’ responsibility for detection of illegal acts to those

which have both a direct and material effect on financial statement amounts. The external auditors are prepared at the

specific request of management or the Audit Committee to expand their scope to assess the adequacy of control beyond

their financial statement impact and to perform audit services related to fraud.

Audit Fees

It is the function of the Audit Committee to finally approve the fees of the auditors. These should be approved by the

Financial Director and management and recommended to the Audit Committee. However, an analysis of actual time

spent, compared to the previous year and budget, could prove useful and assist the Committee in identifying any

potential problem areas.

Rights

The Committee acts in terms of the delegated authority of the board as recorded in these terms of reference and can do

the following:


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1. Investigate any activity within the scope of its terms of reference.

2. Call upon the chairman of the other board committees, any of the executive directors, officers or company

secretary to provide it with information, subject to following a board approved process

3. Be afforded reasonable access to the company’s records, facilities and any other resources necessary to discharge

its duties and responsibilities

4. Obtain independent outside professional advice to assist with the execution of its duties, at company’s cost,

subject to following a board approved process; and

5. Make recommendations to the board that it deems appropriate on any area within the ambit of its terms of

reference where action or improvement is required.

Evaluation

The board must perform an evaluation of the effectiveness of the Committee every year.

Reporting

The Chairperson of the Committee shall report to the board at its next meeting on matters dealt with by the Committee.

Approval

These terms of reference shall be reviewed on an annual basis and shall be amended, as required, with the approval of

the Board.

Documents

Introduction - Tiger Brands Brands Audit Committee Terms of Reference Version2_16.02.2016 Introduction 1. The Audit Committee ("Committee") is constituted as a statutory committee