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Audit Committee

As approved by the Board of Directors in May 2017)


The Board of Directors of Semirara Mining and Power Corporation has established an Audit Committee to assist the Board in fulfilling its oversight of the following :

  1. internal control environment,

  2. financial process reporting and integrity of the financial statements including disclosures,

  3. external audit function,

  4. internal audit function, and

  5. compliance with reporting, legal and regulatory requirements.

1. Limitation of Audit Committee’s Role


1.1. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. The financial statements are the responsibilities of Management. The Committee is not providing any expert or professional assurances as to the Company’s financial statements.



2. Membership

2.1. The Audit Committee shall consist of a minimum of three (3) appropriately qualified non-executive Directors, a majority of whom are Independent Directors of the Board. All Committee Members must be Directors of the Board.


2.2. The Chairperson of the Committee must be an Independent Director.


2.3. The Committee and the Committee Chairperson shall be appointed by the Board.


2.4. Each Committee Member shall meet the necessary qualifications of the SEC and have relevant background, knowledge, skills, and/or experience in the areas of accounting, auditing and finance. Each Member shall have knowledge, understanding and appreciation of the Company’s business and industry in which it operates, as well as related industries and those of its subsidiaries. Each Member shall be diligent in disclosing relationships significant to the Company and related companies/parties or himself that might potentially compromise his independence in his oversight duties.


2.5. The Committee Member’s term shall be for one year. Committee Members may be replaced at any time by a majority of the Board in office. A Member’s cessation as a Board Director means his automatic termination as a Committee Member.


2.6 Committee Members shall be entitled to committee membership per diems or fees.


3. Committee Authority  

3.1. The Board has granted the Committee the authority herein provided, as well as the authority to investigate any activity of the Company.


3.2. The Committee shall be, granted unrestricted access to all information and all employees have been, and shall be, directed to cooperate as requested by the Committee Members.


3.3. The Committee has the authority to retain, at the Company’s expense, persons having special competencies (including, without limitation, legal, accounting or other consultants and experts) to assist or advise the Committee in fulfilling its responsibilities.


3.4. The Committee may form and delegate authority to subcommittees when appropriate.


3.5. The Committee shall provide an open avenue of communication among the internal auditors, external auditors, and the Board. This includes direct communication and interaction of the Committee with the Chief Audit Executive, internal auditors and external auditors, as well as separate or private sessions as appropriate and necessary.



4. Committee Meetings


4.1. The Committee shall meet at least once every quarter in a calendar year.  Additional meetings may be held as determined by the Committee.


4.2. It is the responsibility of the Chairperson to schedule all meetings of the Committee. A written agenda and relevant meeting materials shall be provided at least three (3) days before each meeting to the Committee Members and any other person/s invited by the Committee as necessary, to have adequate time for preparation and reading.


4.3. A majority of the Committee Members shall constitute a quorum, and the act of a majority of those present at any Committee meeting at which there is a quorum shall be the act of the Committee.


4.4. A resolution in writing signed or approved by letter, or email by a majority of Committee Members shall be as effective for all purposes as a resolution passed at a meeting of the Committee duly convened, held and constituted.


4.5. The Committee shall meet with Management, internal auditors and the external auditor in separate executive sessions at least once a year.


4.6. The Committee may request any officer or employee, outside counsel or the external auditor of the Company to attend a Committee meeting or to meet with any Committee Member or consultant to the Committee.


4.7. The Company’s Chief Governance Officer/Compliance Officer, Corporate Secretary or any other person nominated by the Committee shall be the Secretary of the Committee in its meetings.


4.8. The Committee shall provide copies of the minutes of each meeting to the Board as soon as practical after each Committee meeting.



5. Duties and Responsibilities


The Committee’s duties and responsibilities shall be as follows:


5.1. Internal Control Oversight


5.1.1 Through the Internal Audit (IA) Department, monitor and evaluate the adequacy and effectiveness of the internal control system, integrity of financial reporting, and security of physical and information assets.


5.1.2 Discuss with Management, internal auditors and external auditor the adequacy and effectiveness of accounting and financial reporting controls, information technology systems and data security, and any appropriate Management action adopted in light of material control deficiencies and identified or reported material errors and fraud.


5.1.3 Recommend and direct Management to develop and/or to formalize all policies and procedures to promote a transparent financial management system and integrity of internal control activities.


5.1.4 Set a framework for fraud prevention and detection, including the establishment of procedures or mechanism for processing complaints regarding accounting, internal controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable or unethical practices.



5.2. Financial Reporting Process and Disclosure Oversight


5.2.1. Consider the adequacy of resources devoted to the accounting function (including training and succession planning) to ensure that reporting is in accordance with the required accounting practices and methodologies and compliant with Philippine financial reporting standards and regulations.


5.2.2. Review and discuss key issues and appropriateness of accounting policies and principles inherent in preparing the financial statements, including impact of new accounting standards and interpretations.


5.2.3. Consider the adequacy of financial reporting disclosures to ensure a “transparent, balance and fair” view that meet Shareholder needs.


5.2.4. Consider the adequacy of any Management representations made in support of the financial statements and in particular accounting for unusual or complex transactions.


5.2.5. Consider and advise on the propriety of related party transactions and review the necessary appropriate disclosures required by accounting and reporting standards.


5.2.6 Review and approve the quarterly interim and annual financial statements prior to their submission to the Board and regulatory filing, with particular focus on the following matters:

  • Any change/s in accounting policies and practices
  • Areas where a significant amount of judgment has been exercised
  • Significant adjustments resulting from the audit
  • Going concern assumptions
  • Compliance with accounting standards
  • Compliance with tax, legal and regulatory requirements
  • Disclosures of material information
  • Subsequent events and disclosure thereof as necessary


5.2.7 Discuss with Management, and external auditors when applicable, any correspondence between the Company and regulators regarding the Company’s financial statement filings and disclosures. 


5.2.8 Review and approve Management’s representation letter before submission to external auditors.


5.2.9 Communicate with legal counsel litigation, claims, contingencies or other significant legal issues that impact financial statements.



5.3 Internal Audit Oversight


5.3.1 Recommend the approval of the Internal Audit Charter. 


5.3.2 Review the qualifications, appointment, performance and/or replacement of the Chief Audit Executive (CAE) or equivalent position.


5.3.1 Approve the remuneration of the CAE


5.3.2 Review annually the Internal Audit Charter, internal audit plan and adequacy of resources. Recommend changes in the planned scope of the internal audit function.


5.3.3 Discuss and review the internal auditors’ evaluation of internal controls, and monitor Management’s responses to audit findings and recommendations.


5.3.4 Review the performance and independence of the internal audit function to be in conformance to International Standards for the Professional Practice of Internal Auditing during the year and report the Committee’s conclusions to the Board.


5.3.5 Approve the terms and conditions for outsourcing internal audit services.


5.3.6 Ensure that internal auditors are given unrestricted access to all records, properties and personnel to enable them to perform their audit function.



5.4 External Audit Oversight


5.4.1 Recommend to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the SEC, who undertakes an independent audit of the company, and provides an objective assurance on the manner by which the financial statements should be prepared and presented to the shareholders;


5.4.1 Assess and exercise oversight of the professional qualifications, independence, integrity, appointment, reappointment or replacement of the external auditor to the Board.


5.4.2 Pre-approve all audit and non-audit work engagements, scope, remuneration, fees and terms of the external auditor.


5.4.3 Confirm with the external auditor that audit scope has not been unreasonably restricted by Management, and ensure that  external auditors are given unrestricted access to all records, properties and personnel to enable them to perform their audit function;


5.4.4 Review, evaluate and ensure disclosure on nature of non-audit or taxation services, if any, performed by the external auditor, and assess any potential conflict of interest situations, given the guidelines or policies on non-audit services, which could be viewed as impairing the external auditor's objectivity.


5.4.5 At the conclusion of the annual audit, discuss with Management and the external auditor, significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, and including the following :  

  • any significant changes in the Company’s selection or application of accounting principles,
  • any major issues as to the adequacy of the Company’s internal controls, the development, selection and disclosure of critical    accounting estimates,
  • analyses of the effect of alternative assumptions, estimates or GAAP methods on the Company’s financial statements, and
  • audit adjusting entries noted or proposed but passed as immaterial or otherwise.


5.4.6 Review and monitor the external auditor’s independence and objectivity and the effectiveness of the external audit process, taking into consideration relevant Philippine professional and regulatory requirements or issuances, and nationally and internationally recognized best practices.


5.4.7 Review and monitor the external auditor’s suitability and effectiveness on an annual basis.


5.4.8 Establish effective communication with the external auditor and require them to report all relevant matters that help the Audit Committee to efficiently carry out its oversight responsibilities.


5.4.9 Review external audit findings in respect of any significant deficiencies or weaknesses in controls and the disposition of the recommendations in the external auditor’s management letter, and ensure that Management responds appropriately with timely corrective action.


5.4.10 Resolve disagreement, if any, between Management and the external auditor.



5.5   Compliance and Governance Oversight


5.5.1 Discuss with the Board the Company’s compliance with important and applicable laws, regulations, standards, best practices guidelines and established standards of corporate conduct.


5.5.2 Consider the Company’s tax planning and compliance processes in its taxation obligations.


5.5.3 Initiate and supervise special investigations or seek external legal advice as required.


5.5.4 Review legal and compliance developments, including results of inquiries and communication received from government or regulatory agencies.


5.5.5 In coordination with the Risk Committee, oversee and monitor enterprise-wide risks related to the specific oversight duties and responsibilities of the Audit Committee;


5.5.6 Support the Company’s good governance framework through endorsement of best practices, and administration of the Code of Conduct and Business Ethics to the Board Directors and Senior Management.



5.6   Related Party Transactions (RPTs) Review


Review by Independent Directors of material/significant RPTs that meet the threshold levels stipulated by regulatory rules and requirements on RPTs, as well as guidelines per SMPC Group’s Related Party Transaction Policy to determine whether RPTs are in the best interests of the Company and Shareholders.



6. Committee Training and Education


The training needs for each Audit Committee Member will vary, depending on an individual’s area of expertise and knowledge. Audit Committee Members shall be given the opportunity to attend technical and professional courses, seminars and conferences to keep abreast of updates on corporate governance, changes in the regulatory environment, accounting, business, economics, specialized areas such as derivatives, and other relevant areas that will enhance their contribution to the Audit Committee. Costs of courses and seminars attended by Committee Members are borne by the Company.


Moreover, the Company’s Board and Director Development program includes orientation, peer Director performance evaluation and scheduled visits to the Company’s Mine Sites for Directors to gain a closer understanding of the Company’s business and operations. 



7. Committee Succession Planning

The Corporate Governance Committee undertakes the responsibility for succession planning for the Board to ensure that positions are filled in terms of board membership, committee membership, board and committee chairs and senior executive officer positions. The Audit Committee, in conjunction with the Board and the Corporate Governance Committee, may consider and plan for succession of its Committee Members.



8. Committee Reporting


8.1 The Committee Chairperson shall report matters requiring the Board’s proper disposition and attention regularly.


8.2 The Committee shall prepare an annual report to the Board and shareholders that all responsibilities outlined in its Charter have been carried out, i.e. performance of oversight duties during the year, describing the Committee’s composition, responsibilities and how they were discharged, any other regulatory information, approval of non-audit services, among others.


8.3 The Committee shall also review or issue any other reports and certifications on critical compliance issues such as those relating to Committee responsibilities.



9. Committee Performance


9.1. The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for review and approval.


9.2. The Committee shall annually conduct a self-assessment of its own performance using a formal questionnaire with defined quantitative rating and corresponding qualitative description for such rating. The results of the self-assessment shall be validated by the Company’s Compliance Officer or Corporate Governance Committee, as may be applicable.