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ARAWAK ENERGY LIMITED Terms of Reference Audit Committee of the Board of Directors of Arawak Energy Limited
(22436366.03)
ARAWAK ENERGY LIMITED
Terms of Reference
Audit Committee of the Board of Directors of
Arawak Energy Limited
Adopted on May 7, 2008
MANDATE
A.
Role and Objectives
The Audit Committee (the "Committee") is a committee of the board of directors (the "Board")
of Arawak Energy Limited ("Arawak") established for the purpose of overseeing the accounting
and financial reporting process of Arawak, the external audits of the consolidated financial
statements of Arawak and the relationship with the external auditor. In connection therewith, the
Committee assists the Board in fulfilling its oversight responsibilities in relation to Arawak's
internal accounting standards and practices, financial information, accounting systems and
procedures, risk management procedures, financial reporting and statements and the nature and
scope of the annual external audit. The Committee also recommends for Board approval
Arawak's audited annual and unaudited quarterly consolidated financial statements and other
mandatory financial disclosure.
Arawak's external auditor reports formally to the shareholders of Arawak. The external auditor
shall also present its more detailed audit findings (including any recommendations for
improvements to accounting systems, procedures and internal controls) directly to the Committee.
The Committee shall be directly responsible for overseeing the relationship with the external
auditor. The Committee shall have such access to the external auditor as it considers necessary or
desirable in order to perform its duties and responsibilities. The external auditor will be invited to
attend meetings of the Committee on a regular basis.
The objectives of the Committee are as follows:
1.
to be satisfied with the credibility and integrity of financial reports;
2.
to support the Board in meeting its oversight responsibilities in respect of the preparation
and disclosure of financial reporting, including the consolidated financial statements of
Arawak;
3.
to facilitate communication between the Board and the external auditor and, to receive on
behalf of the Board the reports of the external auditor concerning the detailed findings of
the external audit directly from the external auditor;
4.
to be satisfied with the external auditor's independence and objectivity; and
5.
to strengthen the role of independent directors by facilitating in-depth discussions
between members of the Committee, management and Arawak's external auditor. (22436366.03)
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B.
Composition
1.
The Committee shall comprise at least three directors. All members of the Committee
shall be independent non-executive Directors. The Chairman of the Board shall not be a
member of the Committee. Each Committee member shall satisfy the financial literacy
and experience requirements of applicable securities laws, any applicable stock exchange
requirements or guidelines and any other applicable regulatory rules or relevant rules
relating to corporate governance. In particular, each member of the Committee shall
have no direct or indirect material relationship with Arawak or any affiliate thereof which
could reasonably interfere with the exercise of the member's independent judgment.
Determinations as to whether a particular director satisfies the requirements for
membership on the Committee shall be made by the full Board.
2.
Members of the Committee shall be appointed by the Board, on the recommendation of
the Nominations Committee in consultation with the Chairman of the Audit Committee.
Each member shall serve until his successor is appointed, unless he shall resign or be
removed by the Board or he shall otherwise cease to be a director of Arawak. However,
appointments to the Committee shall be for a period of up to three years, which may be
extended for two further three year periods, provided the Director remains independent.
3.
The Chair of the Committee may be designated by the Board or, if it does not do so, the
members of the Committee may elect a Chair by vote of a majority of the full Committee
membership. The Committee Chair shall satisfy the financial literacy and experience
requirements (as described above).
4.
The Committee shall have access to such officers and employees of Arawak and its
subsidiaries and to such information respecting Arawak and its subsidiaries and
associates as it considers to be necessary or advisable in order to perform its duties and
responsibilities.
C.
Meetings
1.
At all meetings of the Committee, every question shall be decided by a majority of the
votes cast. In case of an equality of votes, the matter will be referred to the Board for
decision.
2.
A quorum for meetings of the Committee shall be a majority of its members.
3.
Meetings of the Committee shall be scheduled at least quarterly and at such other times
during each year as it deems appropriate. Minutes of all meetings of the Committee shall
be taken. Only members of the Committee have the right to attend Committee meetings.
However, other individuals such as the Chairman of the Board, Chief Executive, Finance
Director, other Directors, the heads of risk, compliance and internal control and
representatives from the finance function may be invited to attend all or part of any
meeting as and when appropriate.
4.
The Committee shall report the results of meetings and reviews undertaken and any
associated recommendations to the Board. The Committee shall compile a report to
shareholders on its activities to be included in the Companys Annual Report.
5.
The Committee shall meet regularly and periodically with Arawak's external auditor (in
connection with the preparation of the annual financial statements and otherwise as the (22436366.03)
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Committee may determine), part or all of each such meeting to be in the absence of
management.
6.
Meetings of the Committee shall be summoned by the secretary of the Committee (the
Secretary) at the request of any Director or at the request of the external auditor or
internal control function if they consider it necessary.
7.
Unless otherwise agreed, notice of each meeting confirming the venue, time and date
together with an agenda of items to be discussed shall be forwarded to each member of
the Committee, any other person required to attend and all other non-executive directors
no later than ten working days before the date of the meeting. Supporting papers shall be
sent to Committee members and to other attendees as appropriate, at the same time.
8.
The Secretary shall minute the proceedings and resolutions of all meetings of the
Committee, including recording the names of those present and in attendance.
D.
Annual General Meetings
1.
The Chairman of the Committee shall attend the Annual General Meeting prepared to
respond to any shareholder questions on the Committees activities.
E.
Other
1.
The Committee shall:
(a)
have access to sufficient resources in order to carry out its duties, including
access to the company secretary for assistance as required;
(b)
be provided with appropriate and timely training, both in the form of an induction
programme for new members and on an ongoing basis for all members;
(c)
give due consideration to all relevant laws and regulations, the provisions of the
Combined Code and the requirements of the TSX Rules and the UK Listing
Authoritys Listing Rules as appropriate;
(d)
oversee any investigation of activities which are within its terms of reference and
act as a court of the last resort; and
(e)
at least once a year, review its own performance, constitution and terms of
reference to ensure it is operating effectively and recommend any changes it
considers necessary to the Board for approval.
RESPONSIBILITIES
As discussed above, the Committee is established to assist the Board in fulfilling its oversight
responsibilities with respect to the accounting and financial reporting processes of Arawak and
external audits of Arawak's consolidated financial statements. In that regard, the Committee shall:
1.
Satisfy itself on behalf of the Board with respect to Arawak's internal control and risk
management systems including identifying, monitoring and mitigating business risks as
well as compliance with legal, ethical and regulatory requirements. If the company does
not have an internal audit function, the Committee should consider annually whether (22436366.03)
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there should be one and make recommendation to the board accordingly (and the absence
of such a function should be explained in the annual report). In particular the Committee
shall:
(a)
consider and approve the remit of the internal control function and ensure it has
adequate resources and appropriate access to information to enable it to perform
its function effectively and in accordance with the relevant professional
standards. The Committee shall also ensure the function has adequate standing
and is free from management or other restrictions;
(b)
review and assess the annual internal control plan;
(c)
review promptly all reports on the Company/group from the internal control
function;
(d)
review and monitor managements responsiveness to the findings and
recommendations of the internal control function; and
(e)
meet the head of the internal control function at least once a year without