According to the company’s website press release on August 22, 2022,
The Committee presents its financial year 2022 Audit Committee report.
This report has been prepared for Sasol South Africa Limited (the Company), a subsidiary within the Sasol group, and is based on the requirements of the South African Companies Act, 71 of 2008 as amended (the Companies Act), the King IV Report on Corporate Governance for South Africa 2016 (King IV), applicable regulatory requirements and the terms of reference of the Sasol Group Audit Committee (the Committee).
Composition and meetings
The members are Mss GMB Kennealy, NNA Matyumza, KC Harper and Messrs S Westwell, S Subramoney. Ms GMB Kennealy has been appointed as chairman of the Audit Committee with effect from 1 September 2021 upon the retirement of Mr C Beggs on 31 August 2021.
All the members of the Audit Committee are independent non-executive directors. They are financially literate and most have extensive audit committee experience. We believe that the experience of the Committee members gives perspective and insight to the Committee’s considerations and decisions.
The Committee met five times during the financial year. All Committee members attended all meetings.
Statutory duties and functions
The Committee is constituted as a statutory committee of Sasol Limited in line with the Companies Act and accountable in this regard to both the Sasol Limited Board and Sasol’s shareholders. The Committee also acts as the Audit Committee for all South African companies within the Sasol group. Oversight of the following specific matters has been delegated to the Committee:
- quality and integrity of the Sasol group’s financial statements and public announcements in respect of the financial results;
- overseeing the appointment, remuneration, independence and performance of the external auditor and the integrity of the audit process as a whole, including the approval of non-audit services by the external auditor;
- effectiveness of the Sasol group’s internal controls, internal audit function and financial risk management;
- assessment of expertise, resources, succession plans and experience of the Sasol group’s finance function; and
- compliance with legal and regulatory requirements to the extent that might have an impact on financial statements.
The Committee fulfilled all its statutory duties as required by section 94(7) of the Companies Act.
The Committee reviewed all significant financial risks and associated risk appetite statements and metrics and assessed the adequacy of controls and the combined assurance provided over these identified risks. It monitored the effectiveness of the control environment through the review of reports from internal audit, management and the external auditor, and ensured the quality of financial reporting through review of the 2022 annual financial statements.
Adequate processes and structures have been implemented to assist the Audit Committee in providing oversight and ensuring the integrity of financial reporting, internal control and other governance matters relating to subsidiaries.
In satisfying its duties, the Committee in particular:
- Considered legal and regulatory compliance requirements to the extent that they might have an impact on financial statements and reviewed the internal control environment.
- The Committee is of the opinion that there were no material breakdowns in internal control during the 2022 financial year, except for the material weakness in the group and company’s internal control over financial reporting noted below. Regarding internal controls over financial reporting, management has determined that the Sasol group’s as well as the Sasol South Africa Limited (SSA) group and company’s internal control over financial reporting was ineffective due to remediation still being in progress to remediate a material weakness that was identified in FY20 in respect of the controls over the impairment assessment process of the Southern Africa value chain. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of financial statements will not be prevented or detected on a timely basis. While significant progress has been made to remediate the material weakness, as of 30 June 2022, management is still in the process of implementing some of the longer-term remediation controls and the Committee will continue to monitor the additional remedial actions to be implemented closely and believes that management’s actions will be effective in remediating the material weakness as they continue to devote significant time and attention to these efforts. The material weakness will not be considered remediated until the design and implementation of the longer-term remediation controls are embedded and operate for a sufficient period and management has concluded, through testing, that these controls are operating effectively. Notwithstanding the material weakness, the Committee believes that the Sasol South Africa Limited consolidated and separate annual financial statements present fairly, in all material respects, the group and company’s financial position, results of operations and cash flows as of and for the periods presented in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
- Considered the going concern assumption as the basis of preparation of the Annual Financial Statements. The Committee considered scenarios that might impact the group and company’s viability, stress testing the group and company’s business against pertinent factors including global oil and chemical price volatility, rand/US$ exchange rates, carbon tax, the impacts of the economic recovery following the COVID-19 pandemic and geopolitical tensions. After examining the evidence provided to support the conclusion, the Committee concluded that the group and company’s liquidity and capital position for the foreseeable future was adequate and that the going concern basis could be applied.
- Relied on management, the external auditor, internal audit as well as the Sasol group’s independent ethics reporting telephone line to highlight any concerns, complaints or allegations relating to internal financial controls, the content of the financial statements and potential violations of the law or questionable accounting or auditing practices. Separate meetings are also held with management, the external auditor and internal audit every quarter.
The Committee is satisfied with the reporting process and confirms that where matters were raised by stakeholders, management has responded promptly.
- Nominated for appointment PricewaterhouseCoopers Inc. (PwC) as auditor of Sasol Limited and the Sasol group for the financial year ended 30 June 2022 in line with the requirements of the Companies Act and any other legislation relating to the appointment of auditors. The Committee is satisfied that PwC and the designated auditor are qualified and independent of Sasol Limited and the Sasol group.
In June 2017, the Independent Regulatory Board for Auditors (IRBA) issued a rule prescribing that auditors of public interest entities in South Africa must comply with mandatory audit firm rotation with effect from 1 April 2023. The Sasol group’s current auditor will remain in function until the conclusion of the audit for the 2023 financial year. The tendering process will commence in the first half of the 2023 financial year under the leadership of the Audit Committee.
- Appropriate controls are in place to manage the provision of non-audit services by the external auditor and the Committee also determined, subject to the provisions of the Companies Act, the nature and extent of any non-audit services which PwC may provide and pre-approved all audit and permissible non-audit services that PwC provides.
- The quality of the external audit process was reviewed and the Committee concluded it to be satisfactory. It was confirmed that no unresolved issues of concern exist between the Sasol group and the external auditors.
- Reviewed the assurance services charter and approved the integrated internal audit plan. The Committee also evaluated the independence, effectiveness, skills and experience and performance of the internal audit function and compliance with its charter and found them to be satisfactory.
- Reviewed the Sasol group’s policies on risk assessment and management as they pertain to financial reporting and found them to be sound. The Committee also considered fraud risks and controls.
The Committee also considered the plans and outputs of the external and internal auditors and concluded that they were adequate to address all significant financial risks facing the business.
Conclusion
The Committee is satisfied that it has complied with all its statutory and other responsibilities. Having had regard to all material risks and factors that may impact on the integrity of the Company’s annual financial statements, the Committee recommends the annual financial statements of Sasol South Africa Limited for the year ended 30 June 2022 for approval to the Sasol South Africa Limited Board.
