Travis Perkins plc

To monitor the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them;
To review the company’s internal financial controls and risk management systems;
To monitor and review the effectiveness of the company’s internal audit function;
To make recommendations to the board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment of the external auditor and to approve the remuneration and terms of engagement of the external auditor;
To review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
To develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm;

and to report to the Board, 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.

2. Authority

The committee is authorized by the board to investigate any activity within the terms of reference outlined below. It is authorized to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the committee. To this end, it can request the attendance of any employee at an audit committee meeting to explain and clarify matters under discussion.

The committee is authorized by the board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

3. Membership and appointment

The committee shall consist of not less than three members, who shall be appointed by the Board on the recommendation of the Nomination Committee. Once appointed, each member will generally remain a member as long as he/she is a non executive director.

All members of the committee shall be independent non-executive directors. The board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience. All other members of the committee should have a degree of financial literacy and experience of corporate financial matters.

The chairman of the company shall not be an audit committee member.

The chairman of the committee shall be appointed by the board. The company secretary shall be secretary to the committee, and shall circulate minutes of meetings of the committee to all board members.

4. Meetings of the audit committee

There shall be no fewer than three meetings during the year. A quorum shall be two members. Meetings should allow sufficient time to enable the audit committee to undertake as full a discussion as may be required. In addition, there should be sufficient time between audit committee meetings, the main board meetings, and relevant company announcements to allow any work arising from the audit committee to be carried out and reported to the board as appropriate.

The external audit lead partner may be invited regularly to attend meetings as well as the finance director. Others may be invited to attend, including the Head of Group Business Risk & Assurance.

The audit committee shall, at least annually, meet the external and internal auditors without management.

The committee may be convened from time to time at the request of any member of the committee or the external auditor or the finance director or the Head of Group Business Risk & Assurance.

5. Resources

The audit committee shall be provided with sufficient resources to undertake its duties.

6. Skills, experience and training

At least one committee member should have a professional qualification from one of the professional accountancy bodies.

The company shall provide an induction programme for new audit committee members.

7. Financial reporting

The audit committee shall review the significant financial reporting issues and judgements made in connection with the preparation of the company’s financial statements, interim reports, preliminary announcements and related formal statements.

The audit committee shall review related information presented with the financial statements, including the Chairman, Chief Executive and Finance Director’s statements, and corporate governance statements relating to the audit and to risk management.

8. Internal controls and risk management systems

The audit committee shall review the company’s internal financial controls and risk management systems.

The audit committee shall review and approve the statements included in the annual report in relation to internal control and the management of risk.

9. Whistle blowing

The audit committee shall review arrangements by which staff of the company may, in confidence, raise concerns about possible improprieties in matters financial reporting or other matters. The audit committee’s objective shall be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

10. The internal audit process

The audit committee shall monitor and review the effectiveness of the company’s internal audit function, and consider the major finding of internal audit investigations. The Head of Group Business Risk & Assurance may only be appointed or removed with the approval of the audit committee.

11. The external audit process

Appointment

The audit committee shall have primary responsibility for making a recommendation on the appointment, reappointment and removal of the external auditors.

The audit committee shall assess annually the qualification, expertise and resources, and independence of the external auditors and the effectiveness of the audit process.

Terms & Remuneration

The audit committee shall approve the terms of engagement and the remuneration to be paid to the external auditor in respect of audit services provided.

The audit committee shall agree the engagement letter.

The audit committee shall satisfy itself that the level of fee payable in respect of the audit services provided is appropriate and that an effective audit can be conducted for such a fee.

Independence, including the provision of non-audit services

The audit committee shall have procedures to ensure that independence and objectivity of the external auditor annually, taking into consideration relevant UK professional and regulatory requirements. This assessment shall involve a consideration of all relationships between the company and the audit firm (including the provision of non-audit services).

Annual audit cycle

At the start of each annual audit cycle, the audit committee shall ensure that appropriate plans are in place for the audit.

The audit committee plan, including planned levels of materiality, and proposed resources to execute the audit plan shall appear consistent with the scope of the audit engagement, having regard also to the seniority, expertise and experience of the audit team.

The audit committee shall:

Discuss with the external auditor major issues that arose during the course of the audit and have subsequently been resolved and those issues that have been left unresolved;
Review key accounting and audit judgements; and
Review levels of errors identified during the audit;
Review the audit representation letters.
Review the management letter;
Assess the effectiveness of the audit process.

12. Communication with shareholders

The terms of reference of the audit committee including its role and the authority delegated to it by the board shall be made available.

A separate section in the annual report shall describe the work of the committee in discharging those responsibilities.

The chairman of the audit committee shall be present at the AGM to answer questions, through the chairman of the board, on the report on the audit committee’s activities and matters within the scope of audit committee’s responsibilities.