AUDIT & RISK OVERSIGHT COMMITTEE CHARTER

AUDIT & RISK OVERSIGHT COMMITTEE CHARTER

CHAPTER 1

INTRODUCTION

Background

As a publicly listed company at the Indonesia Stock Exchange, PT Indo Tambangraya Megah Tbk, hereinafter ITM, is obliged to comply with the Law on Capital Market and all regulations derived from it. ITM considers such of compliance is essential to the attainment of its goal. It upholds the principles and rules of Good Corporate Governance (GCG), namely transparency, independency, accountability, responsibility and fairness and promotes best governance practices while managing its operation in the interest of shareholders and wider stakeholders. To do justice to its supervisory role vis-à-vis the Board of Directors (BOD) and to facilitate its works in fulfillment of its fiduciary duties, the Board of Commissioners (BOC) establishes a number of committees, including the Audit & Risk Oversight Committee.

Vision and Mission

Vision

The Audit & Risk Oversight Committee strives to become a competent, independent and professional and reliable instrument of supervision, aiming to perform its role responsibly and assisting the BOC in best way possible with information that the BOC needs in exercising its supervisory role.  

Mission

The Audit & Risk Oversight Committee assists the Board of Commissioners in executing its supervisory role, helping to ensure in particular that the Company is governed, managed and run properly in accordance with the principles and rules of good corporate governance, best-practice corporate social responsibility and management.

Objective

The Audit & Risk Oversight Committee Charter is stipulated by the BOC as a guideline for the Audit  & Risk Oversight Committee while performing its role and responsibility based on a transparent, accountable, competent and independent manner with the ultimate objective that the Company is governed, managed and run in compliance with prevailing laws and regulations.

CHAPTER 2

ESTABLISHMENT, ORGANIZATION, TERM OF OFFICE

Establishment

In establishing the Audit & Risk Oversight Committee, reference is made to the following stipulations:

• Limited Liability Law
• Relevant regulation of the Financial Services Authority and the Indonesia Stock Exchange
• The Company GCG Policy
• Other applicable regulation and reference related to Audit, internal control and risk   management
• The Approval letter no. 2194/L/ITM/CorSec/6/2014 on the new name of Audit & Risk Oversight Committee

In reference to the above stipulations, the appointment and termination of Audit Committee members of ITM is based on the decision of the BOC.

Organization

Membership Structure

The Audit & Risk Oversight Committee shall comprise of at least 3 members who are Independent Commissioners and other independent members from outside the Company.

The chairman of the Audit & Risk Oversight Committee is the independent   commissioner. In  case there are more than one Independent Commissioners who serve members of the Audit &Risk Oversight Committee, one of them      shall act as  Chairman of the Committee.

The appointment and the discharge of members of the Audit & Risk Oversight Committee is the legal right and responsibility of  the BOC and are to be reported in a timely manner to the General Meeting of Shareholders.

Membership Qualifications

Members of the Audit & Risk Oversight Committee should posses the following qualifications:

1. high integrity, competency, adequate knowledge and know-how and experience as reflected in educational and professional backgrounds and ability to communicate properly,
2. good knowledge and ability  in analyzing financial statement, sufficient know-how on the company’s industry and business, audit process and risk management,
3. at least one of the member  have  educational background and expertise  in the accounting
4. proper knowledge on laws and regulations governing a publicly listed company, notably the laws and regulations on the Capital Market, mining  and other matters related to company operations.

Membership Preconditions

Members of the Audit & Risk Oversight Committee should meet the following preconditions:

1. Not having family affiliations to members of the BOC, BOD  and/or major shareholders either horizontally or vertically (marriage relationship or ancestral descent up to second generation);
2. Not having a direct or indirect business relationship with ITM;
3. Not being an insider or employee of the Office of Public  Accountant, Office of Legal Counsels or other parties that provide assurance services or non-assurance services, appraisal services and or consultation services  to ITM within the last 6 (six) months before his/her appointment;
4. Not being a person who has the authority or responsibility to plan, lead, control or supervise ITM operation within the last 6 (six) months before his/her appointment;
5. Not being a person who hold directly or indirectly the shares of ITM. In the case the members of Audit &Risk Oversight Committee obtain the share through the legal channel, those shares should be transferred to other party within 6 (six) months following the possession of those shares;
6. Willing to increase his/her competency continuously either through formal education or training;
7. Willing to obey Code of Ethic of Audit & Risk Oversight Committee determined by the company.

Term of Office

The term of office of the Audit &Risk Oversight Committee shall not be  longer than the term of office of the BOC as regulated in the Company’s Articles of Associations

The term of office of Commissioner who is concurrently serving as a member of Audit & Risk Oversight Committee shall be equally treated as the term of office of the BOC  and might be re-elected for maximum of another term.

The term of office of members of Audit & Risk Oversight  Committee who are not serving as members of BOC shall be determined by the BOC and might be re-elected for maximum of another one term.

CHAPTER 3

DUTIES, RESPONSIBILITY AND AUTHORITY

The main responsibility of the Audit & Risk Oversight Committee among others are to review the Company’s financial statements, assess whether the Company’s internal control and risk management system are adequate, ensure that the Company has duly complied with relevant laws, rules and regulations, prepare reports and provide opinions to the BOC for approval or submission to the shareholder’s meeting as necessary.

In ensuring that the Audit & Risk Oversight Committee performs its role effectively and efficiently, the duties, responsibility and authority of Audit & Risk Oversight Committee are set out as follows:

Duties and Responsibility

1. To review the company’s financial reporting process to ensure that it is sound.
2. To review the company’s internal control system and internal audit system to ensure that they are sound. 
3. To review findings of the internal audit and supervise the follow up of those findings by BOD.
4. To review the company’s compliance with the law and regulations on the securities and exchange and the laws and regulations relating to the company’s business.
5. To review the Company’s financial statements, projections and any other financial information for accuracy and adequacy purpose prior to their publication.
6. To provide independent opinion whenever there is a discrepancy of opinion between the management and the external auditor on its services.
7. To recommend the appointment, reappointment and dismissal of the company’s external auditor based on its independence, scope, and fee to the company’s BOC  for AGMS approval.
8. To review the connected transactions, or the transactions that might lead to conflict of interest, to ensure that they are in compliance with the regulations on securities and exchange and are reasonable and for the best interest of the company.
9. To prepare and to disclose in the company’s annual report, an audit committee’s report which consists of at least the following information:
   • an opinion on the soundness of the financial reporting process;
   • an opinion on the adequacy of the company’s internal control system;
   • an opinion on the compliance with the law and regulations on securities and exchange and the laws and regulations relating to the company’s business;
   • an opinion on the transactions that may lead to conflict of interest;
   • number of audit committee meetings and the attendance of such meeting by each member;
10. other transactions of which according to audit committee’s opinion should be known by the shareholders and general investors subject to the scope of  duties and responsibilities assigned by company’s BOCto review and supervise the process of investigation of complaint received with regard to the accounting process and financial report;
11. to review and continue monitoring major risk management;
12. to keep the confidentiality of any Company’s documents, data and information.

Authority

The Audit & Risk Oversight Committee shall have full, free and unrestricted access to the Company’s records, information on the employee, fund, assets as well as any other Company’s resources in relations with the execution of its duties.

In executing its authority, Audit & Risk Oversight Committee shall cooperate with the Company’s Internal Audit on a functional rather than hierarchical basis.

The Audit & Risk Oversight Committee has the right to request the attendance of the Internal Audit in its meetings as and when it deems necessary.

The Audit & Risk Oversight Committee has the right to hire consultants and incur expenditures in accordance with company’s budgetary policy.

CHAPTER 4

MEETING, REPORTING AND BUDGETING

Meeting

Audit & Risk Oversight Committee shall convene regular meeting at least once in a quarter.

Decision of the Audit & Risk Oversight Committee shall be deliberated and made in a meeting, which is convened with prior notice and attended by at least 2/3 (two-thirds) of the  members.

A decision of the Audit & Risk Oversight Committee shall be deemed valid if it is approved by more than ½ (one-half) of the members of the Audit Committee who are present at the meeting.

Meeting of Audit & Risk Oversight Committee shall be chaired by the Chairman of the  Committee or by the most senior member if the Chairman is unable to attend.

If it deems necessary, the Audit & Risk Oversight Committee has the right to invite relevant outside experts to its meetings with a view to listening to their expert opinions on matters under deliberation.

The Audit & Risk Oversight Committee maintains a proper record of its meetings in form of minutes that are deposited properly.

Reporting

The Audit & Risk Oversight Committee shall report to the BOC the results of its assignment.

The Audit & Risk Oversight Committee reports on a regular basis to the BOC on its activities, problems encountered and its recommendations on follow up actions.

The Audit & Risk Oversight Committee through the BOC  shall submit each year reports on its works and achievements and other related information that need to be conveyed in the Annual Report of the Company.

Budgeting

Before the end of a respective fiscal year, the Audit & Risk Oversight Committee shall draft and submit to the BOC its work plan and budget commensurate with its role and responsibility.

The budget of the Audit & Risk Oversight Committee shall be part of the BOC’ annual budget.

Administration of Audit & Risk Oversight Committee is run for practical purposes by the Head of Company’s Internal Audit as far as auditing works are concerned.

Any assets that the Audit &Risk Oversight Committee deploys in its works are registered as the assets of the Company.

CHAPTER 5

WORK PROCESS

In dispatching its role and responsibility, Audit & Risk Oversight Committee is assisted by a secretary, while for  assurance aspect of the company’s operations, compliance to the rules and regulations, and sufficient internal control,  Audit Committee shall cooperate with the Company’s Internal Audit and Compliance & Risk Management functions.

And in attaining its work target, Audit & Risk Oversight Committee establishes its working matrix with those relevant functions as below:

Symbol:           A = Accountable          C = Contribute             I = Inform

                        P = Prepare                  AP = Approval

Notes:              ACS = Audit Committee Secretary                   IA = Internal Audit

                        CRM = Compliance & Risk Management        BOC = Board of Commissioners

                        BOD = Board of Directors

CHAPTER 6

PERFORMANCE EVALUATION

Performance Evaluation

Performance of Audit & Risk Oversight Committee shall be evaluated collectively every year based on the self-assessment principle and the result shall be reported to the BOC together with the Annual Report of the Audit & Risk Oversight Committee.  The assessment shall cover among others effectiveness of the following aspect:

1. composition and qualification  of the committee,
2. members activities,
3. meeting administration,
4. meetings with relevant parties,
5. performing the overseeing tasks in the following areas:

5.1 internal audit and control,

5.2 financial statements and reporting,

5.3 risk management,

5.4 legal compliance,

5.5  external audit,

5.6. conflict of interest transaction(s).

6. Summary.

CHAPTER 7

CLOSING

Validity

This Revised Audit & Risk Oversight Committee Charter shall take effect as of the date of its approval as stated in the last page of the Charter.

This Audit & Risk Oversight Committee Charter shall be reviewed for improvements from time to time to comply with the prevailing rules and regulations.

Approved by the Board of Commissioners on 29 June 2016