Audit Committee Report
Patrick Firth
Audit Committee Chairman
I am pleased to present the Audit Committee’s Report for the year ended 31 March 2024.
The Audit Committee aims to serve the interests of the Company’s shareholders and other stakeholders through its independent oversight of the Company’s financial reporting process, its systems of internal controls and effective management of risk, and the appointment and ongoing review of the independence and quality of the work of the Company’s external auditor. The Committee operates within clearly defined terms of reference and include all matters indicated by Disclosure Guidance and Transparency Rule 7.1, the AIC Code and the UK Code.
Composition Read More
The membership of the Audit Committee comprises all of the Directors, with the exception of the Chairwoman of the Board, who stepped down as a member as of 26 February 2024, in compliance with Listing Rule 9.6.11. Caroline Chan was appointed to the Audit Committee on 11 April 2024. As permissible under the AIC Code, the Chairwoman of the Board attends the Audit Committee meetings to enable their greater understanding of the issues facing the Company and to benefit from her valuable contributions. All of the Directors are, and have been since appointment, independent. The Board has considered the composition of the Audit Committee.
Three of the members of the Committee are qualified accountants. The Board is satisfied that the Committee, as a whole, has:
- recent and relevant financial experience;
- competence relevant to the sector in which the Company operates, and
- the skills, experience and objectivity to be an effective Audit Committee.
Details of the skills and experience of all of the Committee members are outlined in their biographies on pages 76-77. I am due to step down as Audit Committee Chairman upon my retirement from the Board at the upcoming AGM in August 2024. It is intended that Ms Peacegood will succeed me to become Chairwoman of the Audit Committee.
Meetings Read More
The Audit Committee meets no less than four times a year and at such other times as the Committee shall require, or any member may request. The Administrator and the Investment Adviser are invited to attend meetings, as the Committee deems appropriate.
The external auditor attends the Audit Committee meetings at which the annual and interim financial statements are considered, and at which the auditor has the opportunity to meet with the Committee without representatives of the Investment Manager, the Investment Adviser or the Administrator being present. The auditor also attends the planning meeting for the annual and interim audits and meets regularly with members of the Audit Committee as the audit progresses. The auditor may request that a meeting of the Committee be convened if it deems it necessary.
The Audit Committee met four times (three scheduled and one ad hoc) during the year ended 31 March 2024 (details of the Committee members’ attendance at the meetings can be found under ‘Meeting Attendance’).
Responsibilities and Activities Read More
The Audit Committee’s responsibilities include:
- monitoring the integrity of the Company’s financial statements and any formal announcements relating to its financial performance;
- reviewing significant financial reporting judgements;
- evaluating the effectiveness of the systems of internal control and risk management;
- assessing the effectiveness and independence of the Company’s external auditor; and
- making recommendations to the Board on the appointment and remuneration of the external auditor.
Full details of the Committee’s roles and responsibilities are set out in formal terms of reference and include all of the roles and responsibilities recommended by the AIC Code. The terms of reference are regularly reviewed by the Committee and are available on the Company’s website.
The Audit Committee is required to report formally to the Board on its findings after each meeting on all matters within its roles and responsibilities, identifying any matters on which it considers that action or improvement is needed and making recommendations on the steps and decisions to be taken. In discharging its duties over the course of the year under review, the Audit Committee’s principal activities included the following:
Risk management and internal control processes
The Committee assessed the principal and emerging risks facing the Company (details of which are included under ‘Risks and Risk Management’). The Committee also reviewed and, where necessary, amended and updated the Company’s risk matrix and its record of internal control processes. The Committee was satisfied with the adequacy and effectiveness of the risk management framework and internal control processes, details of which are included under Risk Management and Internal Control Systems. The Committee continues to review and monitor the ongoing workstreams in relation to the valuation process and works with the Investment Adviser to strengthen controls, processes and reporting going forward. The Committee also reviewed the most recent ISAE 3402 and SOC1 reports from the Administrator and sought additional assurances where required including confirmation that there had been no material changes from the date of the report to the date on which the Annual Report was signed.
Interim review and annual audit
The Committee reviewed and approved the interim review and annual audit plans of the external auditor, including their scope and the auditor’s engagement terms and fees. The Committee monitored the implementation of the plans and discussed the auditor’s reports and findings. The Committee also evaluated, and reviewed the objectivity, and independence of the auditor and the overall quality and effectiveness of the external audit process.
Annual and Interim Reports
The Committee reviewed the Company’s accounting policies and considered
the format and content of the Company’s Interim and Annual Reports before recommending their approval to the Board. As part of the review process, the Committee:
• considered the continuing appropriateness of the Company’s accounting policies, including the potential implications of forthcoming changes in accounting standards for the Company;
• considered the financial statements that are prepared on a going concern basis with an understanding of the discontinuation vote due to be held at the 2024 AGM. Shareholder discussions are being held in conjunction with the Company’s Brokers and other key service providers, as well as key reports being tabled and considered for Committee comment;
• reviewed the significant financial reporting judgements used in preparing the Financial Statements; and
• discussed and challenged the forecasts, assumptions and other information provided by the Investment Manager to support the going concern and viability statements.
Internal audit requirements
The Committee considered the Company’s internal audit requirements. Due to the Company having no employees and the outsourcing of its investment and administrative arrangements to third parties which have their own internal controls and procedures, the Committee concluded that there continued to be no need for an internal audit function.
Whistleblowing
The Committee reviewed the whistleblowing policy in place for each of the Investment Manager, the Investment Adviser and the Administrator and was satisfied the relevant staff could raise concerns, in confidence, about possible improprieties relating to financial reporting or other matters that may affect the Company.
Performance evaluation:
The Committee reviewed the outcome of the annual evaluation of its performance and concluded that it continued to provide effective challenge and oversight.The Audit Committee Chairman will be attending the AGM to answer any shareholder questions on the Committee’s activities.
