Build King Holdings : 2012-04-01 - Terms of Reference of Audit Committee

BUILD KING HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 00240) AUDIT COMMITTEE (the "Committee") Terms of Reference Constitution

1. The Board of Directors (the "Board") has resolved to establish a Committee of the Board to be known as the Audit Committee.

Membership

2. The Committee shall be appointed by the Board from amongst the non-executive directors of the Company and shall consist of not less than three members. At least one is an independent non-executive director of the Company with appropriate professional qualifications or accounting or related financial management expertise as required under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") (as amended from time to time), and with the majority being the independent non-executive directors of the Company. A quorum shall be two members.
3. The Chairman of the Committee shall be appointed by the Board and should be an independent non-executive director.

Attendance at meetings

4. The Chairman of the Committee may invite other board members, senior management, internal auditor and representatives of external auditor to attend meetings for any agenda items. However, the invitees do not have any voting right. The Committee shall meet at least twice a year with the external auditor without executive directors present.
5. The company secretary or a duly appointed secretary of the meeting shall act as the secretary of the Committee.

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Frequency of meetings

6. Meetings shall be held not less than twice a year. Attendance may be in person or by telephone or other means of telecommunication. The external auditor or any members of the Committee may request a meeting if they consider necessary.

Authority

The Committee is authorized:
7. to investigate any activity within its terms of reference and to seek any information it requires from any employee in order to perform its duties (all employees being directed to co-operate with any such request made by the Committee);
8. to obtain, at the Company's expenses, outside legal or other professional advice on any matter within its terms of reference and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary; and
9. to call any employee to be questioned at a meeting of the Committee as and when required.

Duties

10. The duties of the Committee shall be:

Relationship with the Company's auditors

(a) to be primarily responsible for making recommendation 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 of its resignation or dismissal;
(b) to review and monitor the external auditor's independence and objectivity and the effectiveness of the auditor process in accordance with applicable standards. The Committee should discuss with external auditor the nature and scope of the audit and reporting obligations before the audit commences;
(c) to develop and implement policy on engaging an external auditor to provide non-audit services. For this 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 knowing all relevant information would reasonably conclude to be part of the audit firm nationally or internationally. The Committee should report to the Board, identifying and making recommendations on any matters where action or improvement is needed;

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Review of the Company's financial information

(d) to monitor integrity of the Company's financial statements and the annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgements contained in them. In reviewing these reports before submission to the Board, the Committee should focus particularly on:
(i) any changes in accounting policies and practices; (ii) major judgmental areas;
(iii) significant adjustment resulting from the audit;
(iv) the going concern assumption and any qualifications; (v) compliance with accounting standards; and
(vi) compliance with the Listing Rules and legal requirements in relation to financial reporting.
(e) Regarding (d) above:
(i) members of the Committee should liaise with the Board and senior management and the Committee must meet, at least twice a year, with the Company's auditors; and
(ii) the Committee should consider any significant or unusual items that are, or may need to be, reflected in the reports and accounts, it should give due consideration to any matters that have been raised by the Company's qualified accountant, or any of the Company's staff responsible for the Company's accounting and financial reporting function, compliance officer or auditors;

Oversight of the Company's financial reporting system and internal control procedures

(f) to review the Company's financial controls, internal control and risk management systems;
(g) to discuss the internal control system with management to ensure that management has performed its duty to have an effective internal control system. This discussion should include the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company's accounting and financial reporting function;
(h) to consider major investigations findings on internal control matters as delegated by the Board or on its own initiative and management's response to these findings;

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(i) where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, and to review and monitor its effectiveness;
(j) to review the group's financial and accounting policies and practices;
(k) to discuss problems and reservations arising from the interim review and final audit, and any matters the external auditor may wish to discuss (in the absence of management where necessary);
(l) to review the external auditor's management letter, any material queries raised by the external auditor to management about accounting records, financial accounts or systems of control and management's response;
(m) to ensure that the Board will provide a timely response to the issued raised in the external auditor's management letter;
(n) to report to the Board on the matters raised in this section 10; and
(o) to consider other topics, as defined by the Board.

Relationship with the employees and those who deal with the Company

(p) to review arrangements employees of the Company can use, in confidence, to raise concerns about possible improprieties in financial reporting, internal control or other matters. The Committee should ensure that proper arrangements are in place for fair and independent investigation of these matters and for appropriate follow-up action; and
(q) to act as the key representative body for overseeing the Company's relations with the external auditor.
11. Where the Board disagrees with the Committee's view on the selection, appointment, resignation or dismissal of the external auditors, the Company should include in the Corporate Governance Report a statement from the Committee explaining its recommendation and also the reason(s) why the Board has taken a different view.
12. The Committee should be provided with sufficient resources to perform its duties.

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Reporting procedures

13. Full minutes of the meetings of the Committee shall be kept by the secretary of the Committee. Draft and final versions of minutes of the Committee meetings shall be sent to all members of the Committee for their comment and records respectively at any reasonable time after the meeting.
14. The Secretary shall circulate the final version of minutes of meetings of the
Committee to all members of the Board.

Annual General Meeting

15. The Committee Chairman or in his absence, another member of the Committee or failing that his duly appointed delegate shall attend the annual general meeting of the Company so as to be available to answer questions from shareholders on matters within the scope of duties on the Committee.

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