The North American Income Trust plc 47
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
Membership and Responsibilities
The Audit Committee is chaired by Karyn Lamont, who is a
chartered accountant, and comprises all Directors, with
the exception of the Company Chair, who attends
meetings but is not a member. The Committee is satisfied
that it has the necessary recent and relevant financial
experience and competence relevant to the investment
trust sector in order to fulfil its responsibilities.
The Audit Committee meets at least twice a year and
considers reports from the auditor and the Manager’s
internal audit, risk and compliance functions. The terms of
reference of the Audit Committee, which are available on
request and on the Company’s website, are reviewed on
an annual basis. The main responsibilities of the Audit
Committee are:
· to review the half yearly and annual financial
statements of the Company, the accounting policies
applied therein and to ensure compliance with financial
and regulatory reporting requirements.
· to assess whether the Annual Report, including the
financial statements, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
· to review and monitor the internal control systems and
risk management systems on which the Company is
reliant.
· to consider annually whether there is a need for the
Company to have its own internal audit function.
· to develop and implement policy on the engagement of
the auditor to supply non-audit services.
· to review the arrangements in place within the Manager
whereby staff may, in confidence, escalate concerns
about possible improprieties in matters of financial
reporting or other matters (‘whistleblowing’).
· to make recommendations to the Board in relation to
the appointment of the auditor and to approve the
remuneration and terms of engagement of the auditor.
· to consider the auditor’s reports, including the audit
strategy and findings.
· to review annually the auditor’s independence,
objectivity, effectiveness, resources and qualification.
The respective responsibilities of the Directors and the
auditor in connection with the financial statements
appear on pages 61 and 62.
Internal Control
The Board is responsible for the Company’s system of
internal control and for reviewing its effectiveness. The
Board confirms that there is an ongoing process for
identifying, evaluating and managing the significant risks
faced by the Company. This process has been in place
for the year under review and up to the date of approval
of this Annual Report. It is regularly reviewed by the
Board and accords with the Financial Reporting
Council’s Guidance.
The Directors have delegated the investment
management of the Company’s assets to the Manager
within overall guidelines, and this embraces
implementation of the system of internal control, including
financial, operational and compliance controls and risk
management. Internal control systems are monitored and
supported by the Manager’s internal audit function which
undertakes periodic examination of business processes,
including compliance with the terms of the management
agreement, and ensures that recommendations to
improve controls are implemented.
The Board has reviewed, through management reports,
the effectiveness of the Company’s risk management and
internal control systems. In particular, it has reviewed and
updated the process for identifying and evaluating the
significant risks affecting the Company and policies by
which these risks are managed. The significant risks faced
by the Company are set on pages 14 to 16.
Risks are identified and documented through a risk
management framework by each function within the
Manager’s activities. Risk is considered in the context of the
Financial Reporting Council Guidance, and includes
financial, regulatory, market, operational and reputational
risk. This helps the internal audit risk assessment model
identify those functions for review. Any weaknesses
identified are reported to the Board, and timetables are
agreed for implementing improvements to systems. The
implementation of any remedial action required is
monitored and feedback provided to the Board.
In addition, the Board has adopted its own risk matrix
which identifies the key risks for the Company and covers
strategy, investment management, operations, regulatory
and financial obligations and third party service providers
(see pages 13 to 16). A monitoring system is undertaken
whereby the controls to mitigate these risks, and the
impact of the residual risks, are assessed on a regular
basis. The risk matrix is formally reviewed on at least a six
monthly basis in order to identify emerging risks which
may arise.
Report of the Audit Committee