Audit Committee Mandate
PURPOSE AND AUTHORITY
The audit committee is established by and among the Nevsun Resources Ltd. board of directors for the primary purpose of assisting the board in
- overseeing the integrity of the company's financial statements;
- overseeing the company's compliance with legal and regulatory requirements;
- overseeing the independent auditor's qualifications and independence;
- overseeing the performance of the company's independent auditor and internal audit function; and
- overseeing the company's systems of disclosure controls and procedures, internal controls over financial reporting, and compliance with ethical standards adopted by the company.
The audit committee should encourage continuous improvement, and should foster adherence to the company's policies, procedures, and practices at all levels. The audit committee should also provide for open communication among the independent auditor, financial and senior management, the internal audit function and the board of directors.
The audit committee has the authority to conduct investigations into any matters within its scope of responsibility and obtain advice and assistance from outside legal, accounting or other advisers, as necessary to perform its duties and responsibilities.
In carrying out its duties and responsibilities, the audit committee also has the authority to meet with and seek any information it requires from employees, officers, directors or external parties.
The company will provide appropriate funding, as determined by the audit committee, for compensation to the independent auditor, to any advisers that the audit committee chooses to engage and for payment of ordinary administrative expenses of the audit committee that are necessary or appropriate in carrying out its duties.
COMPOSITION AND MEETINGS
The audit committee will comprise three or more independent directors as determined by the board. A majority of the committee members present at a meeting will constitute a quorum.
Committee members will be appointed by the board at the annual organizational meeting of the board to serve until their successors are elected. Unless a chair is elected by the full board, the members of the committee may designate a chair by majority vote.
Each audit committee member will meet the applicable standards of independence and the determination of independence will be made by the board and as defined by Toronto Stock Exchange listing requirements.
All members of the audit committee must comply with all financial literacy requirements of the Toronto and New York stock exchanges. To help meet these requirements, the audit committee will provide its members with annual continuing education opportunities in financial reporting and other areas relevant to the audit committee. At least one member will qualify as an "audit committee financial expert" as defined by the Security and Exchange Commission, as determined by the board and appropriate disclosure will be made.
The committee will meet at least quarterly, or more frequently as circumstances dictate. The committee chair will approve the agenda for the committee's meetings and any member may suggest items for consideration. Briefing materials will be provided to the committee as far in advance of meetings as practicable; generally, one week. Meetings will be minuted and approved at the following audit committee meeting. Copies of minutes will be provided to the external auditor whether or not they attended any meeting.
Each regularly scheduled meeting will include an in camera session of the audit committee separately with the internal audit manager and the independent auditor.
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the audit committee will engage in the following activities:
- Meet with management and the independent auditor to review and approve the company's quarterly financial statements and Management's Discussion and Analysis prior to the company's filings or release of earnings. Review other relevant reports or financial information submitted by the company to any governmental body or the public, including management certifications as required and relevant reports rendered by the independent auditor (or summaries thereof).
- Meet with management and the independent auditor to review and recommend to the board for approval the company's annual financial statements and Management's Discussion and Analysis prior to the company's filings or release of earnings. Review other relevant reports or financial information submitted by the company to any governmental body or the public, including management certifications as required and relevant reports rendered by the independent auditor (or summaries thereof).
- Review and discuss with management earnings press releases, including the type and presentation of information, paying particular attention to any forward-looking guidance, pro forma or non-IFRS measures. Such discussions may be in general terms (i.e., discussion of the type of information to be disclosed and the type of presentations to be made). The Committee shall approve the quarterly earnings release and recommend for approval to the board the annual earnings releases.
- Review and discuss with management all other public disclosure documents containing audited or unaudited financial information before release, including any prospectus, annual report, annual information form (AIF), Management Proxy Circular or SEC filings.
- Review and discuss with management financial information and earnings guidance provided to analysts and ratings agencies. Such discussions may be in general terms (i.e., discussion of the types of information to be disclosed and the type of presentations to be made).
- Review any internal reports to management (or summaries thereof) prepared by the internal audit function, as well as management's response.
- Review the company's compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of related material facts.
- Annually evaluate the independent auditor's qualifications, performance and independence. Recommend to the board the appointment or reappointment of the independent auditor at the annual general meeting of shareholders. As authorized by the shareholders, retain and set the compensation of the independent auditor. The independent auditor will report directly to the audit committee and the audit committee will oversee the resolution of disagreements between management and the independent auditor if they arise.
- Approve the annual audit plan and oversee the work performed by the independent auditor for the purpose of preparing or issuing an audit report or related work.
- Review and preapprove (which may be pursuant to preapproval policies and procedures) both audit and non-audit services to be provided by the independent auditor. The authority to grant preapprovals may be delegated to one or more designated members of the audit committee, whose decisions will be presented to the full audit committee at its next regularly scheduled meeting.
- Consider whether the auditor's provision of permissible non-audit services is compatible with the auditor's independence. Actively engage in dialogue with the independent auditor with respect to any disclosed relationships or services that may affect the independence and objectivity of the auditor and take appropriate actions to oversee the independence of the independent auditor.
- Review and discuss any other material written communication between the independent auditor and management and any other matters required to be communicated to the audit committee by the independent auditor under applicable rules and regulations.
- Hold timely discussions with the independent auditor regarding
- all critical accounting policies and practices;
- all alternative treatments of financial information within generally accepted accounting principles related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and
- other material written communications between the independent auditor and management, including, but not limited to, the management letter and schedule of unadjusted differences.
- the independent auditor's internal quality control procedures;
- any material issues raised by the most recent internal quality control review or peer review, or by any inquiry or investigation by governmental or professional authorities (including CPAB or PCAOB) within the preceding five years with respect to independent audits carried out by the independent auditor, and any steps taken to deal with such issues; and
- all relationships between the independent auditor and the company.
FINANCIAL REPORTING PROCESSES, ACCOUNTING POLICIES AND INTERNAL CONTROL STRUCTURE
- In consultation with the independent auditor and the internal audit function, review the integrity of the company's financial reporting processes (both internal and external).
- Review the independent auditor's report on the effectiveness of the company's internal control over financial reporting and discuss with the independent auditor the results of their audit.
- In connection with the CEO and CFO's certification of the company's quarterly and annual regulatory reports, review and discuss with management
- the company's processes, systems and control over financial reporting and management's annual assessment of the effectiveness of internal control over financial reporting;
- significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial data; and
- any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal controls.
- Review major issues regarding accounting principles and financial statement presentations, including any significant changes in the company's selection or application of accounting principles; major issues as to the adequacy of the company's internal controls; and any special audit steps adopted in light of material control deficiencies.
- Review analyses prepared by management and the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative IFRS methods on the financial statements.
- Review the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the company.
- Management will provide to the Audit Committee, immediately upon receipt, any correspondence from regulators or governmental authorities. The Audit Committee will oversee management's response to any such matters.
- Review with management disclosure of all related-party transactions. Discuss with the independent auditor its evaluation of the company's identification of, accounting for and disclosure of its relationships with related parties as set forth under IFRS.
- Establish and oversee procedures for the receipt, retention, investigation and resolution of complaints regarding accounting, internal accounting controls, or auditing matters, including procedures for confidential, anonymous submissions by company employees regarding questionable accounting or auditing matters.
- Review and advise on the selection and removal of the internal audit manager.
- Review the activities and organizational structure of the internal audit function, as well as the qualifications of its personnel.
- Annually, review and approve the internal audit mandate.
- Annually, review and approve the internal audit plan, budget and staffing.
- Periodically review, with the internal audit manager, any significant difficulties, disagreements with management, or scope restrictions encountered in the course of the function's work.
- Periodically review, with the independent auditor, the internal audit function's responsibility, budget, and staffing.
COMPLIANCE AND RISK MANAGEMENT
- Review with company's legal counsel, compliance with legal, financial, tax and other regulatory matters that could have a significant impact on the company's financial statements or legal compliance.
- Review and discuss with management the processes and procedures with respect to risk assessment and risk management, including appropriate guidelines and policies to govern the process, as well as the company's major financial risk exposures and the steps management has undertaken to control them.
- Report regularly to the board regarding the execution of the audit committee's duties, responsibilities and activities, as well as any issues encountered and related recommendations.
- Approve all quarterly financial regulatory reports be filed on SEDAR and EDGAR and recommend for approval to the board of directors that all annual financial regulatory reports be filed on SEDAR and EDGAR.
- Review, with management, the company's finance function, including its budget, organization and quality of personnel and succession planning.
- Review the appointment of senior financial positions (direct reports to CFO) including Chief Financial Officer.
- Conduct an annual performance assessment relative to the audit committee's purpose, duties and responsibilities outlined herein.
- Perform any other activities consistent with this mandate, the company's bylaws, and governing laws that the board or audit committee determines are necessary or appropriate.
- Review the annual renewal of insurance policies, including D&O insurance.
- Review this mandate at least annually and recommend to the board of directors any necessary amendments.
RESPONSIBILITIES OF THE COMMITTEE CHAIR
The Committee Chair is responsible for the management and effective performance of the Committee and provides leadership to the Committee in fulfilling its mandate and any other matters delegated to it by the Board. The Committee Chair's responsibilities include:
- working with the CEO and the Corporate Secretary to establish the frequency of Committee meetings and the agendas for meetings;
- presiding over Committee meetings;
- facilitating the flow of information to and from the Committee and fostering an environment in which Committee members may ask questions and express their viewpoints;
- reporting to the Board with respect to the significant activities of the Committee and any recommendations of the Committee; and
- taking such other steps as are reasonably required to ensure that the Committee carries out its mandate.
Approved and adopted by the Board of Directors on December 8, 2017.