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Audit Committee

Terms of Reference of the Audit Committee (adopted on 20th April, 2005)
 
Committee members : Independent Non-Executive Directors
  Mr. Vincent Kwok Chi Sun
   
  Mr. Chan Kim Fai
   
  Mr. Hui Kin Hing
   
Chairman of the Committee : Mr. Vincent Kwok Chi Sun
   
Secretary of the Committee : Ms. Jennie Wong Kwai Fong
   
Constitution
1. The board hereby resolves to establish a Committee of the board to be known as the Audit Committee.
   
Membership
2. The Committee shall be appointed by the board from amongst the Non-Executive Directors of the Company and shall consist of not less than three members, a majority of whom should be independent. A quorum shall be two members.
   
3. The Chairman of the Committee shall be appointed by the board and should be an independent director.
   
Attendance at meetings
4. Attendees shall normally include Committee's members, the Finance Director, the Head of Internal Audit (where an internal audit function exists), a representative of the external auditors and those with meaningful input to the Committee's activities. However, at least once a year the Committee shall meet with the external and internal auditors (if any) without executive Board members present.
   
5. The assistant company secretary shall be the secretary of the Committee. The secretary of the Committee or in his absence, his representative or any one member, shall be the secretary of the meetings of the Committee.
   
Frequency of meetings
6. Meetings shall be held not less than twice a year. The external auditors may request a meeting if they consider that one is necessary.
   
Authority
7. The Committee is authorised by the board to investigate activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
   

8.

The Committee is authorised 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 consider this necessary.
   
Duties
9. The duties of the Committee shall be :
   
 
  1. to be primarily responsible for making recommendation to the board on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor, and any questions of resignation or dismissal of that auditor;

  2. to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standard. The audit committee should discuss with the auditor the nature and scope of the audit and reporting obligations before the audit commences and ensure co-ordination where more than one audit firm is involved;

  3. to develop and implement policy on the engagement of an external auditor to supply non-audit services. For this purpose, external auditor shall include any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as part of the audit firm nationally or internationally. The audit committee should 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;

  4. to monitor integrity of financial statements of the Company and the Company's annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgments contained in them. In this regard, in reviewing the Company's annual report and accounts, half-year report and, if prepared for publication, quarterly reports before submission to the board, the committee should focus particularly on:

    1. any changes in accounting policies and practices;

    2. major judgmental areas;

    3. significant adjustments resulting from audit;

    4. the going concern assumptions and qualifications;

    5. compliance with accounting standards; and

    6. compliance with the Exchange Listing Rules and other legal requirements in relation to financial reporting;

  5. In regard to (d) above:-

    1. members of the committee must liaise with the Company's board of directors, senior management and the person appointed as the Company's qualified accountant and the committee must meet, at least once a year, with the Company's auditors; and

    2. the committee should consider any significant or unusual items that are, or may need to be, reflected in such reports and accounts and must give due consideration to any matters that have been raised by the Company's qualified accountant, compliance officer or auditors;

  6. to review the Company's financial controls, internal controls and risk management systems;

  7. to discuss with the management the system of internal control and ensure that management has discharged its duty to have an effective internal control system;

  8. to consider any findings of major investigations of internal control matters as delegated by the board or on its own initiative and management's response;

  9. to discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss (in the absence of management where necessary);

  10. to review the external auditor's management letter, any material queries raised by the auditor to management in respect of the accounting records, financial accounts or systems of controls and management's response;

  11. to review the Company's statement on internal control systems (where one is included in the annual report) prior to endorsement by the board;

  12. where an internal audit function exists to review the internal audit programme, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, and to review and monitor the effectiveness of the internal audit function;

  13. to ensure that the board will provide a timely response to the issues raised in the external auditor's management letter;

  14. to report to the board on the matters set out in provision of terms of reference of the Committee;

  15. to review the group's financial and accounting policies and practices; and

  16. to consider other topics, as defined by the board.
   
Reporting procedures
10. The secretary or his representative shall circulate the minutes of meetings and reports of the Committee to all members of the Board.