Integrated Annual Report 2021
Integrated Annual Report 2021
Board committee feedback

Audit Committee Report

Olufunke IghodaroCHAIRMAN OF THE
AUDIT COMMITTEE
The Audit Committee is satisfied that it has effectively discharged its duties in terms of its mandate from the Board and its statutory duties in compliance with the Companies Act of 71 of 2008 with specific reference to audit quality, auditor independence and financial policies and reporting concerns; and the JSE Listings Requirements.
COMMITTEE MEMBERS
BOARD STATUS
MEMBER SINCE
ATTENDANCE
O Ighodaro (Chairman)
Independent Non-Executive Director
25 May 2018
3/3
NN Gwagwa*
Independent Non-Executive Director
1 November 2006
2/2
L Mthimunye
Independent Non-Executive Director
27 February 2019
3/3
JP Suarez (Permanent invitee)
Non-Independent Non-Executive Director
27 February 2019
3/3
S Zilwa**
Independent Non-Executive Director
27 August 2021
1/1
*Resigned as a member of the Audit Committee effective 27 August 2021.
**Appointed as a member of the Audit Committee effective 27 August 2021.

 

Discharge of responsibilities for the 2021 financial year:

In the execution of our statutory duties and in accordance with our Charter, the audit committee effectively discharged the following responsibilities over the past financial year:

  • Reviewed key judgments and significant matters raised by management, internal and external audit to ensure the accuracy and integrity of financial information disclosed
  • Evaluated the adequacy and effectiveness of the internal control environment; and found these to be adequate
  • Evaluated the independence, effectiveness and performance of the Internal Audit function; and found the function to be independent and effective
  • Reviewed and approved the annual internal audit plan, ensuring the inclusion of material risk areas, acceptable coverage of business processes and that all reporting requirements were met
  • We are satisfied with the competence and effectiveness of the Chief Audit Executive (CAE) and arrangements for internal audit
  • Assessed the independence and performance of the Company’s external auditors and audit partner, Roger Hillen; and found the external auditors and audit partner to be independent
  • Reviewed and approved the external auditor’s 2021 annual plan, scope of work, audit fees and considered the key audit matters in the external audit report
  • Reviewed the adequacy and effectiveness of combined assurance, compliance and information and technology governance; and found these to be adequate
  • Approval of management’s proposal not to declare a dividend due to the headline loss reported during the period, and recommended this to the Board
  • Monitored and regularly reviewed the Group covenant position in relation to its borrowings and debt position; and found these to be adequate
  • Considered and recommended the audited consolidated Group Annual Financial Statements, integrated annual report, interim and final financial results to the Board for approval
  • Assessed compliance with all statutory requirements in terms of section 94(7) of the Companies Act of 2008, King IV, JSE Listings Requirements and any other applicable regulatory requirements and confirmed that no reportable irregularities were identified and reported by the external auditors in terms of the Auditing Profession Act 26 of 2005
  • Considered the effectiveness of the Chief Financial Officer, Mohammed Abdool-Samad; and concluded that he is effective
  • Concluded on and recommended a new external audit firm (KPMG) providing external assurance from the 2023 financial year to the Board, subject to shareholders approval at the relevant Annual General Meeting, addressing the mandatory audit firm rotation

The CEO, the CFO, senior financial Executives of the Group and representatives from the external and internal auditors attend all meetings by invitation. The internal and external auditors have unfettered access to our Committee and our members, and both present formal reports to us.

The CAE meets with us on a quarterly basis; and at every Committee meeting the external auditors have a separate meeting with the Committee from which Management is excused.

 

Summary of key focus areas in 2021:

  • Assessed the effectiveness of the Group and business unit internal financial control environment, financial reporting procedures, tax strategy and policy, combined assurance and compliance; and found these to be adequate
  • We are satisfied that the internal financial controls and procedures of the business units and Group operated effectively during the year ended December 2021 and can be relied upon. In addition, we are satisfied with the Group’s accounting policies and that these have been appropriately and consistently applied during the year ended December 2021
  • Monitored the implementation of the Group’s strategy
  • JSE Listings Requirements regarding CEO and CFO Controls Certification
  • Concluded on the mandatory audit firm rotation and recommended new external auditors from the Group’s 2023 financial year end to the Board, subject to shareholders approval
  • Monitored the divesture of Cambridge, Rhino and Massfresh
  • Monitored the transformation of the Group’s financial transaction processing activities to Genpact
  • Assessed reported damage incurred following the civil unrest
  • Monitored insurance and Business Interruption claims following the civil unrest
  • Reviewed the Group’s re-prioritised capex spend following the impacts of the civil unrest
  • Assessed liquidity and availability of funding facilities to the business during the year, following impacts of Covid-19 trading restrictions and the civil unrest had on the business
  • Determined that the business remains a going concern
  • Reviewed the Audit Committee Charter and found this to be compliant
  • Significant matters considered in relation to the Annual Financial Statements include:
    • Key assumptions made for the impairment testing of goodwill and other non-financial assets
    • The assessments of the recoverability of deferred tax assets
    • The presentation of the impact of Covid-19 and the civil unrest on the results of the Group as well as related disclosures
    • The presentation and disclosure of the Group’s discontinued operations as well as the assets and disposal group held for sale
    • The disclosures related to the OneCart Proprietary Limited business combination
    • The classification and disclosures related to the issue of the perpetual bond by Massmart Holdings Limited
    • The Committee has considered the JSE letters on proactive monitoring and has ensured that appropriate action was taken where disclosures were queried
  • Reviewed the scope, quality, effectiveness, independence and objectivity of the external auditors with reference to the audit quality indicators included in inspection reports issued by external audit regulators and are satisfied with all of these areas. In addition, we confirm that we have executed our responsibilities as set out in paragraph 3.84(g) of the JSE Listings Requirements. The audit firm Ernst & Young Inc. (with audit partner Amelia Young as lead assignment partner) will be proposed to the shareholders at the May 2022 Annual General Meeting for approval to be the Group’s auditor for the 2022 financial year. In our opinion, Ernst & Young Inc. are independent of the Group and the rotation (every five years) of Amelia Young is in accordance with the provisions of the Companies Act. We review and approve the fees proposed by the external auditors on an ongoing basis
  • The annual review of the nature and extent of non-audit services provided by the external auditors to ensure that fees for such services do not become so significant as to call into question their independence of Massmart
  • The nature and extent of any future non-audit services have been defined and pre-approved, and the total fee associated with those non-audit services may not exceed 50% of the total audit fee without approval from our Committee. If it appears that this guideline will be exceeded on a consistent basis, non-audit services will be outsourced to alternative auditors. During the year ended December 2021, the non-audit services made up less than 5% of the audit fee
  • No reportable irregularities were identified and reported to us by the external auditors
  • As at the date of this report, no complaints have been received relating to accounting practices and internal audit of the Company or to the content or auditing of the Company’s financial statements, or to any related matter

 

Focus areas for 2022 and beyond:

  • The ongoing impacts of Covid-19 trading restrictions and the civil unrest on the business
  • Trading performance and cash flow generation
  • Liquidity and solvency of the Group
  • Monitor performance against strategy, including the divesture of non-performing businesses
  • Information technology, security risks, cyber security and e-commerce
  • Monitor the divestment of Cambridge, Rhino and Massfresh

 

Olufunke Ighodaro
Chairman of the Audit Committee

08 April 2022