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INTEGRATED RESULTS PRESENTATION
KING III APPLICATION
 
   



Report of the audit and risk committee

Report in terms of the Public Finance Management Act and Companies Act, section 94(7)(f)

The audit and risk committee reports that it has adopted appropriate formal terms of reference as its audit and risk committee charter, has regulated its affairs in compliance with this charter, and has discharged all of its responsibilities contained therein.

In the conduct of its duties, the audit and risk committee has, inter alia, reviewed the following:

Going concern assumption
- robustness of budgets and business results
- cash flow projections for the 15 months ending 30 June 2015
- regulatory clearing account mechanism (MYPD 2)
- cost saving opportunities to close the revenue shortfall
- capital projects, including the capacity expansion programme
- funding plan to finance the capacity expansion programme up to the Kusile project
Finance function
- the expertise, resources and experience of the finance function
Internal control, management of risks and compliance with legal and regulatory provisions
- the effectiveness of the internal control systems
- all factors and risks that may impact on the integrity of the integrated report and the supplementary and divisional report
- the effectiveness of the system and process of risk management including the following specific risks:
financial reporting
internal financial controls
fraud risks relating to financial reporting
information technology risks relating to financial reporting
the effectiveness of the entity’s compliance with legal and regulatory provisions
Financial and sustainability information provided
- the adequacy, reliability and accuracy of financial information provided by management
- the disclosure of sustainability issues in the integrated report and supplementary and divisional report to ensure that it is reliable and it does not conflict with the financial information
Internal and external audit
- the effectiveness of the assurance and forensic department (internal audit)
- the activities of the assurance and forensic department, including its annual work programme, coordination with the external auditors, the reports of significant investigations and the responses of management to specific recommendations
- the independence and objectivity of the external auditors
- accounting and auditing concerns identified as a result of internal and external audits, including reportable irregularities

Eskom is applying a combined assurance model to ensure coordinated assurance activities. The audit and risk committee oversees the assurance activities. The committee also oversees the establishment of effective systems of internal control to provide reasonable assurance that Eskom’s financial and non-financial objectives are achieved.

The audit and risk committee is of the opinion, based on the information and explanations given by management and the assurance and forensic department and discussions with the independent external auditors that:

the expertise, resources and experience of the finance function are adequate
the system and process of risk management and compliance processes are adequate
the internal accounting controls are adequate to ensure that the financial records may be relied upon for preparing the financial statements, and accountability for assets and liabilities is maintained
the information contained in the integrated report and the supplementary and divisional report on the Eskom website is reliable and does not contradict the financial information of the integrated report or the annual financial statements
the effectiveness of the assurance and forensic department is adequate and the internal audit charter was approved by the audit and risk committee
having considered the matters set out in section 94(8) of the Companies Act of South Africa and is satisfied with the independence and objectivity of the external auditors
Eskom and the group have access to adequate resources and facilities to be able to continue its operations for the foreseeable future, supporting the going-concern assumption

Nothing significant has come to the attention of the audit and risk committee to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.

The audit and risk committee has evaluated the financial statements of Eskom and the group for the year ended 31 March 2014 and based on the information provided to the audit and risk committee, considers that they comply, in all material respects, with the requirements of the Companies Act of South Africa, the Public Finance Management Act, and International Financial Reporting Standards. The audit and risk committee concurs with the board of directors and management that the adoption of the going-concern premise in the preparation of the financial statements is appropriate. The audit and risk committee has therefore, at their meeting held on 27 May 2014, recommended the adoption of the financial statements by the board of directors.

B Luthuli
Chairman
29 May 2014