Working Rules of the Audit

RNS Number : 3121C

Air China Ld

30 April 2012

 



Air China Limited

Working Rules of the Audit and Risk Management Committee

of the Board of Directors

Chapter 1

General Principles

Article 1

In order to improve the decision-making function of the board of directors (the "Board") of Air China Limited (the "Company"), enhance the effective supervision over the management by the Board and maintain a sound corporate governance structure, the Audit and Risk Management Committee of the Board (the "Committee") is established and these Working Rules (the "Working Rules") are made in accordance with the Company Law of the People's Republic of China and with reference to the Rules for the Governance of Listed Companies issued by China Securities Regulatory Commission, the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), the articles of association of the Company (the "AOA") and other relevant rules and regulations.

Article 2

As a special operating committee established by the Board in accordance with the shareholders' resolution in a general meeting, the Committee is responsible for the communication between, supervision over and inspection of the internal auditors and the external auditors of the Company.

Chapter 2

Composition

Article 3

The Committee shall consist of three to five non-executive directors, the majority of whom shall be independent non-executive directors. The Committee shall include at least one independent non-executive director who is a duly qualified professional or has suitable skills in accounting or financial management.

Article 4

The members of the Committee shall be appointed by the Board upon nomination by the chairman of the Board, more than half of the independent non-executive directors, or more than one-third of all the directors.

Article 5

The Committee shall have one chairman (the "Chairman"), who shall be an independent non-executive director elected by and among the Committee members. The Chairman shall preside over the work of the Committee.

Article 6

The member of the Committee shall have a term equal to the term of a director of the Company and may be re-elected upon expiration of such term. Any member of the Committee shall automatically lose his or her membership at the Committee if he or she ceases to be a director of the Company. The vacancy shall be filled by the Board in accordance with Articles 3 to 5 herein.

Chapter 3

Powers and Responsibilities

Article 7

The Committee shall have the powers and authorities to:

(1)     make recommendations to the Board on the appointment, reappointment and removal of the external auditor, approve the remuneration and terms of engagement of the external auditor and deal with any questions of its resignation or dismissal;

(2)     review and monitor the external auditor's independence and objectivity and the effectiveness of the auditing process in accordance with the applicable standards. The Committee should discuss with the auditor the nature and scope of the audit and reporting obligations before the audit commences;

(3)     review and monitor the external auditor's independence and objectivity in the provision of non-audit services, and report to the Board, identifying and making recommendations on any matters where action or improvement is needed. 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 the relevant information would reasonably conclude to be part of the audit firm nationally or internationally;

(4)     review and supervise the internal audit system of the Company and its implementation, review the responsibilities of the internal auditor and listen to the reports made by the person in charge of the internal audit department of the Company;

(5)     oversee the communications between the internal auditor and the external auditor, ensure co-ordination between them and that the internal audit function is adequately resourced and has appropriate standing within the Company, and review its effectiveness;

(6)     monitor integrity of the Company's financial information and disclosures, as well as its financial statements, annual reports and accounts, interim reports, quarterly reports, and review significant financial reporting judgments 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 adjustments resulting from audit;

iv.      going concern assumptions and any qualifications;

v.       compliance with accounting standards; and

vi.      compliance with the Listing Rules and legal requirements in relation to financial reporting.

(7)     regarding (6) above, liaise with the senior management and meet with the Company's accountant for the annual audit at least twice a year; consider any significant or unusual items that are, or may need to be, reflected in the 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;

(8)     review the financial controls, internal control and risk management system of the Company, monitor the effective implementation of the Company's internal control and self-assessment of the internal control system, assess the effectiveness of the rules and specifications for risk investment (including but not limited to investment in any financial derivative instruments), and review the strategy and scheme of the Company for such investment;

(9)     discuss the internal control system with the management to ensure that the management has performed its duty to have an effective internal control system. The discussion should cover, among others, the adequacy of resources, staff qualification and experience, training programs and budget of the Company's accounting and financial reporting function;

(10)    consider major investigation findings on internal control matters as delegated by the Board or on its own initiative and management's response to these findings;

(11)    review the audit notes submitted to the management by the accountant for the annual audit, any material queries raised by the auditor to the management about accounting records, financial accounts and systems of control and the management's responses, and ensure that the Board will provide a timely response to the issues raised in the audit notes submitted to the management by the accountant for the annual audit;

(12)    review the financial and accounting policies and practices adopted by the Company and its subsidiaries;

(13)    review any major connected transactions of the Company and submit written opinions to the Board for its consideration;

(14)    listen to the Company's report on any fraudulent behaviours and their reporting;

(15)    report to the Board on any matters relating to the Working Rules; and

(16)    address other matters entrusted to the Committee by the Board.

Article 8

The Committee shall report to the Board and resolutions adopted by the Committee shall be submitted to the Board for its consideration. The Committee shall identify and make recommendations on any matters where any improvement is required. The Committee shall cooperate with the audit activities of the supervisory committee of the Company.

Article 9

The secretarial department of the Board shall actively assist in and create necessary conditions for the discharge of its duties by the Committee, such as providing information and relevant materials and coordinating the communication with the accounting firm.

Chapter 4

Rules for Annual Financial Reporting

Article 10

The Committee shall, at the end of each fiscal year, but before the start of the annual audit, agree with the chartered accounting firm engaged for the annual audit on a timetable for auditing the financial statements of the Company.

The Committee shall urge the accounting firm to submit its audit report within the agreed timetable, and record how and for how many times the Committee has done so, and the results, in a written note, which shall be signed by the relevant person in charge.

Article 11

The Committee shall, before the accountant for the annual audit is engaged to audit the annual financial report of the Company commences its auditing assignment, review and form its opinion in writing on the financial report prepared by the Company.

The Committee shall, after the accountant for the annual audit commences its auditing assignment, communicate with the accountant for the annual audit. After the preliminary audit opinion is issued by the accountant for the annual audit, review the audit opinion and form its opinion in writing on the financial report of the Company.

Article 12

The Committee shall vote and reach a decision on the annual financial report, and submit the decision to the Board for review and approval. The Committee shall also submit to the Board a summary report on the audit work done by the accounting firm, and its decision on the renewal of the engagement of the existing auditor or the engagement of a new auditor for the new financial year.

The documents relating to the audit of the annual financial report of the Company (as considered and reviewed by the committee) shall be disclosed in the annual report of the Company.

Chapter 5

Procedural Rules

Article 13

The Committee may hold regular or ad hoc meetings. Regular meetings shall be held at least twice a year and once every half year. Ad hoc meetings may be held when so requested by two or more members of the Committee. The secretarial department of the Board shall inform all Committee members seven days before the meeting, which notification period may be waived upon agreement of all Committee members. The meeting shall be chaired by the Chairman, or if the Chairman is unable to attend the meeting, by an independent non-executive director delegated by the Chairman.

Article 14

The quorum of the meeting is two-thirds of the Committee members. Each member present shall have one vote. The resolution of the meeting must be passed by a majority of the members present before such resolution becomes effective. In the event of a tie, the Chairman shall have the right to an extra vote.

Article 15

Votes at a meeting can be taken by a show of hands or casting of ballots. Ad hoc meetings of the Committee may also be held by correspondence.

Article 16

The Committee may, if necessary, invite directors, supervisors or senior management members of the Company to attend its meetings.

Article 17

The Committee may, if necessary, engage an agency to provide professional opinion in its decision-making process and any reasonable cost shall be borne by the Company.

Article 18

The procedure and methods of voting of, and resolutions passed by, the meeting of the Committee must comply with the relevant laws and regulations, the AOA and the Working Rules.

Article 19

The Committee shall prepare minutes of its meetings, which shall be signed by the Committee members who have attended the meeting and shall be kept by the board secretary.

Article 20

The resolutions passed by, and the results of voting conducted at, the Committee meetings shall be reported in writing to the Board.

Article 21

Members attending a Committee meeting shall keep any matter discussed at the meeting confidential, and shall not disclose any related information unless authorised.

Chapter 6

Supplementary Provisions

Article 22

The Working Rules are formulated by the Board and shall come into effect upon approval of the Board.

Article 23

Any matter not provided herein shall be dealt with in accordance with the relevant laws and regulations and the AOA. In the event of any inconsistency between the Working Rules and any laws or regulations or the AOA, as duly amended from time to time, such laws or regulations or the AOA shall prevail. In such situation, an amendment shall be made to the Working Rules immediately and submitted to the Board for review and approval.

Article 24

The Committee shall make available these terms of reference, explaining its role and the authority delegated to it by the Board by including them on the websites of The Stock Exchange of Hong Kong Limited and the Company.

Article 25

The Board reserves the rights to amend and interpret the Working Rules.

Amended in April, 2012

 

END

 

 

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