Audit committee REPORT

Mike Bosman
Chairperson,
Audit Committee

"The committee has continued its focus on ensuring a fit-for-purpose balance sheet, which is representative of value going forward. After overseeing the clean-up of the balance sheet in 2019, the Audit Committee has continued to play its oversight role to ensure that the balance sheet is reflective of the financial position of the company. While the COVID-19 pandemic has brought unexpected disruptions, the committee believes that management is still pursuing a robust and realistic deleveraging plan. The management team has also made significant strides in improving and embedding a sustainable control environment in the organisation. The establishment of an in-house internal audit function will go a long way in ensuring stringent control over all the activities of the organisation."

Focus for 2021

Overseeing the implementation of the combined assurance model and the embedding of the internal audit charter.
Ensuring compliance with the JSE guidance letter on financial controls to assist the CEO and CFO in meeting the new requirements.
Monitoring progress on the deleveraging plan to ensure that the appropriate capital structure is attained without erosion of value.
Review relevant submissions and reports issued by internal and external assurance providers
Monitoring the organisation's control environment and engaging with relevant persons – both internal and external – as required, to effectively discharge its responsibilities.
Reviewing relevant reports and position papers prepared by management relating to accounting standard changes to ensure that all material risks are addressed.
Reviewing management submissions on technical accounting matters.

Committee composition:

As only two directors were appointed to the committee by the shareholders at the AGM held on 5 December 2019, the board subsequently restructured the committee and appointed the following independent non-executive directors as members of the committee to hold office:
Mike Bosman	(Chairperson of the committee)
Andrew Mthembu	(Resigned as a committee member with effect from 6 January 2020 to take up his role as the interim board chairperson)
Ismail Mamoojee
Jesmane Boggenpoel

The EOH Audit Committee (the committee) is pleased to submit its report for the year ended 31 July 2020, which has been approved by the board. This report has been prepared in compliance with section 94(7)(f) of the Companies Act 71 of 2008 (the Companies Act) and in accordance with the mandate given by the board.

The number of meetings and attendance per committee member is shown in the attendance table.

The Board is satisfied that the members of the committee have the necessary skills and experience to enable the committee to fulfil its duties.

The appointment of committee members will be subject to approval by shareholders at the next AGM to be held on Wednesday, 20 January 2021. The biographies of the directors who have made themselves available for election to the committee can be viewed in the AGM notice.

Committee purpose

The main role of the committee is to provide independent oversight of:

the integrity of the Annual Financial Statements and other external reports issued by the Company; and
the effectiveness of the organisation’s assurance services and functions, particularly focusing on combined assurance arrangements, the finance function, external assurance service providers and the internal audit function.

Terms of reference

The Board approved the new terms of reference for the committee during 2019, which are in line with the King IV Report on Corporate Governance for South Africa, 2016 (King IV).

Meetings

Nine meetings of the committee were held during the year under review. Attendance at meetings is shown in the attendance table.

The Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Officer, the Company Secretary and other members of senior management as required, attend committee meetings by invitation, but have no voting rights. Similarly, external and internal auditors attend committee meetings by invitation, but have no voting rights.

The Chairperson of the committee reports to the Board at all Board meetings on the activities and recommendations of the committee.

The Chairperson of the committee periodically meets separately with the external auditor and the internal audit executive without members of executive management being present.

Internal audit

EOH established an in-house internal audit function during the second half of the 2019 financial year. The internal audit charter and internal audit plan were approved by the committee and a Head of Internal Audit was appointed, who reports directly to the committee with an indirect line to the CRO. All internal audit reports were reviewed and discussed at committee meetings and, where appropriate, recommendations were made to the board.

The committee's key focus areas for the 2020 financial year included:

Focus areas	Response
Assurance	The committee received and reviewed reports from all assurance providers, including internal and external auditors, and continued its oversight over the governance of the organisation and the continuing maturation of the control environment.
Liquidity and solvency	Monitoring the liquidity and solvency of the organisation, continuously reviewing the efficacy of the deleveraging plan and overseeing its implementation. The deleveraging plan continues to progress well despite the challenges brought by the COVID-19 crisis.
Financial reporting	Reviewing relevant reports and position papers prepared by management relating to accounting standard changes to ensure that all material risks are addressed. Reviewing management submissions on technical accounting and tax matters such as IFRS 15, IFRS 9, IFRS 16, IAS 36, IFRS 5 and transfer pricing policy.

Discharge of responsibilities

The committee is satisfied that it has conducted its affairs, discharged its legal and other responsibilities as outlined in its charter, the Companies Act and King IV. The Board concurred with this assessment.

Conclusion

The committee has had due regard to the principles and recommended practices of King IV in carrying out its duties and is satisfied that it has discharged its responsibilities in accordance with its terms of reference.

The full Audit Committee report can be found in the Audit committee's report of the annual financial statements.

Mike Bosman

Chairperson, Audit Committee

1 December 2020