TERMS OF REFERENCE
AUDIT COMMITTEE of the Board of Directors
Purpose
The prime purpose of the Audit Committee is the scrutiny of the establishment and maintenance of
an effective system of governance, risk management and internal control. This should include
financial, clinical, operational and compliance controls and risk management systems. The
Committee will also oversee financial performance and the actions to address any issues arising.
The Committee is also responsible for maintaining an appropriate relationship with the trust’s
auditors.
Responsibilities
1. Governance, risk management and internal control
The Committee will review the establishment and maintenance of an effective system of integrated
governance, risk management and internal control, across all of the Trust’s activities (both clinical
and non-clinical) that support the achievement of its objectives.
a) The Committee will review the adequacy and effectiveness of:
i.
all risk and control related disclosure statements (in particular the Annual
Governance Statement) together with any accompanying head of internal audit
statement, external audit opinion or other appropriate independent assurances
ii.
the underlying assurance processes that indicate the degree of achievement of
corporate objectives, the effectiveness of the management of principal risks and the
appropriateness of the above disclosure statements
iii.
the process for ensuring compliance with relevant regulatory, legal and code of
conduct requirements and related reporting and self-certification
b) On behalf of the board the Committee will review the operation of, and proposed changes
to, standing orders, standing financial instructions, codes and standards of conduct.
c) The Committee will maintain vigilance regarding the key financial, operational and strategic
risks facing the business, including regular review of the board assurance framework and
corporate risk register.
In carrying out this work the Committee will primarily utilise the work of Internal Audit, External Audit
and other assurance functions, but will not be limited in this regard. It will also seek reports and
assurances from other officers as appropriate, concentrating on the overarching systems of
governance, risk management and internal control, together with indicators of their effectiveness.
This will be evidenced through the Committee’s scrutiny and use of an effective Board Assurance
Framework to guide its work and the audit and assurance functions that report to it.
2.
Financial reporting
The Committee will:
a) ensure that systems for financial reporting to the board, including those of budgetary
control, are subject to review as to completeness and accuracy of the information provided.
b) monitor the integrity of the financial statements, and any formal announcements relating to
the trust’s financial performance
c) review the annual report and financial statements before submission to the board, focusing
particularly on:
i.
ii.
the wording in the statement of internal control and other disclosures relevant to the
terms of reference of the Committee
changes in, and compliance with, accounting policies, practices and estimation
techniques Unadjusted mis-statements in the financial statements
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iii.
significant adjustments resulting from the audit
iv.
the letter(s) of representation
v.
qualitative aspects of financial reporting
d) receive regular reports regarding losses, overpayments, compensation payments and
tender waivers.
3.
Internal audit
The Committee will ensure that there is an effective internal audit function that meets mandatory
NHS Internal Audit Standards and provides appropriate independent assurance to the audit
Committee and chief executive. This will be achieved by:
a) consideration of the provision, cost and quality of the internal audit service and any
questions of resignation or dismissal
b) review and approval of the internal audit strategy, operational (risk based) plan and more
detailed programme of work, ensuring that this is consistent with the audit needs of the
organisation as identified in the board assurance framework
c) considering the major findings of internal audit work (and the management’s response), and
ensuring co-ordination between the internal and external auditors to optimise audit
resources
d) ensuring that the internal audit function is adequately resourced and has appropriate
standing within the organisation
e) an annual review of the effectiveness of internal audit
4.
External audit
The Committee will review the work and findings of the external auditors and consider the
implications and management’s responses to their work. This will be achieved by:
a) consideration of the performance of the external auditors
b) discussion and agreement with the external auditors, before the audit commences, of the
nature and scope of the audit as set out in the annual plan, and ensuring co-ordination, as
appropriate, with other external auditors in the local health economy
c) discussion with the external auditors of their evaluation of audit risks and assessment of the
trust and associated impact on the audit fee
d) review of all external audit reports, including the report to those charged with governance,
agreement of the annual audit letter before submission to the board and any work
undertaken outside the annual audit plan, together with the appropriateness of management
responses
5.
Whistle blowing and counter fraud
The Committee will
a) review the adequacy of the arrangements by which trust staff may, in confidence, raise
concerns about possible improprieties in matters of financial reporting and control and
related matters, or any other matters of concern including patient care and safety
b) review the adequacy of the policies and procedures for all work related to fraud and
corruption as required by the counter fraud and security management service
c) approve and monitor progress against the operational counter fraud plan
d) receive regular reports and ensure that appropriate action is taken in significant matters of
fraudulent conduct and financial irregularity
e) monitor progress on the implementation of recommendations in support of counter fraud
f) receive the annual report of the local counter fraud specialist
6.
Other assurance functions
The Committee will
a) review the work of the other committees within the organisation whose work can provide
relevant assurance to the Audit Committee’s own scope of work. In particular it will consider
the work of the clinical performance committee and the Quality and Risk Committee in
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assessing the outcome of care, patient safety, and user experience.
a. In reviewing the work of the clinical performance committee, and issues around
clinical risk management, the Audit Committee will wish to satisfy itself on the
assurance that can be gained from the clinical audit function and other sources of
evidence about the overall quality of care provided.
b. The Committee will wish to assure itself of the systems, processes and controls
which underlay the reporting of the trust’s quality data. It will rely mainly on the
internal audit program and the annual external audit review of quality accounts to
provide this assurance.
b) receive exception reports from the risk, governance and regulation Committee in relation to
implementation of recommendations made by external bodies and inspections.
c) request and review reports and positive assurances from directors and managers on the
overall arrangements for governance, risk management and internal control. The Committee
may request reports from individual functions within the organisation.
7.
Other duties
The Committee will
a) self-assess performance annually, and draw up and implement a plan for improvement as
required
b) prepare an annual report commenting on the fitness for purpose of the assurance
framework, risk management arrangements, integration of governance arrangements, the
process undertaken to meet Care Quality Commission compliance and registration and the
robustness of the processes behind the Quality Accounts
c) adopt processes that ensure that no Monitor authorisation condition for which it is the lead
is breached. The Committee is responsible for authorisation conditions 2 (general duty), 21
(audit committee), 22 (audit), and 23 (public interest reporting).
d) report annually to the Board and the Council of Governors. The report will include the
performance of the external auditors and recommend whether or not to re-appoint them.
Level of Authority
Sub-Committee of the Board
The Committee is authorised by the board to seek any information it requires from within the trust
and to commission independent reviews and studies if it considers these necessary.
Membership
Up to three non-executive directors.
Attendees
Director of Finance & Commerce
Representative from Internal Audit
Representative from External Audit
Representative from Local Counter Fraud Service
Director of Nursing & Quality (as lead for risk)
Deputy Director of Finance
Deputy Company Secretary (secretariat)
Other executive directors and senior managers may be asked to attend to provide assurance to the
Committee.
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Quorum
Two non-executive directors
Frequency of Meetings
Meetings will be held quarterly (from 2015 April, July, October and January), plus a meeting prior to
the May Board to approve accounts.
The Chair of the Audit Committee may convene additional meetings as deemed necessary.
Access
The head of internal audit and representative of external audit will have free and confidential
access to the Chair of the Audit Committee. A private session will be available for the nonexecutives to meet the head of internal audit and a representative of external audit before each
Audit Committee meeting.
Reporting Arrangements
The Committee will report to the Board of Directors.
The minutes of the Audit Committee to be reported to the Board after each meeting.
The Audit Committee will provide an Annual report to the Board.
ToR Review: Annual
These Terms of Reference revised December 2013 to be reviewed December 2014
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