Audit & Risk Committee

Purpose

The role of the Leigh Creek Energy Limited (“the Company”) Audit and Risk Committee is to ensure that controls are in place, to monitor all levels of management in the efficient and effective discharge of their responsibilities by the use of independent analysis, appraisals, advice and recommendations.

Functions

The Committee will be responsible for reviewing the integrity of the Company’s financial reporting, overseeing the independence of the external auditor and reporting to the Board on this.

The Committee will also review actions and progress taken against identified risks as developed and maintained by management based on a comprehensive assessment of inherent business and organisational risk factors.

The Committee will review and make decisions on reports and analysis provided by management on the systems and operations of the service. The function will enable the Chief Executive Officer of Leigh Creek Energy Limited to ensure that policies and procedures are appropriate and recognised, standards are maintained, resources are used efficiently and effectively, risks are analysed and quantified.

The functions of the Committee are as follows

• External Audit
• To review the financial information that will be provided to shareholders and the public and assess whether it is consistent with the committee member’s information and knowledge and is adequate for shareholders’ needs
• To review and recommend to the Board the external auditors to be proposed to shareholders, following a commercial tender, if deemed necessary and to recommend removal of any external auditor, if necessary
• To review the systems of internal controls that the Board and management have established
• To review the Company’s auditing, accounting and financial reporting processes
• To review the external audit plan to ensure it is consistent with the scope of the external audit engagement
• To review all external auditors’ findings and recommendations and management’s proposed response
• To oversee the Company’s relationship with the external auditor and to meet as needed with the external auditor. The committee shall meet the external auditor at least once a year to discuss the external auditors’ report and any issues arising from the audit
• To periodically review the performance of the external auditors and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements
• Review and approve the fees and other remuneration paid to the external auditors for audit and non audit services
• Review and approve the policy for the pre-approval of the engagement of the external auditors to provide non audit service, and the approval of other non audit services on a case by case basis
• Ensure that the external auditors submit a written statement outlining all of its professional relationships with the Company including the provision of non audit services that may affect their objectivity or independence. Review with the external auditors all significant relationships they have with the Company and verify their independence.

• Risk
• To ensure that controls are in place to assist management identify risk and develop risk mitigation and monitoring strategies as part of the risk management policy
• To review policies for risk management and evaluate the internal processes for determining and managing material risks
• To ensure that risks are managed in a strategic and systematic manner
• To promote an awareness of risk management and risk minimisation throughout the Company
• To provide guidance on business continuity ensuring recognised best practices are followed
• To evaluate the process in place for assessing and continuously improving internal controls, particularly those related to areas of material risk

• Compliance
• To review the compliance with policies, plans, procedures, laws, standards and regulations that apply to the operations, maintenance and associated activities of the Company
• To ensure that accounting and other internal control processes are appropriate for the level of risk and meets accepted standards and comply with legislative and reporting requirements
• To review and recommend the approval, where appropriate, of the statements to be included in the annual report concerning internal controls and risk management

• Fraud
• To review and discuss fraud prevention and monitoring strategies as developed and reported by management
• Receive reports on any detected fraudulent or corrupt activities, discuss findings and monitor agreed actions

• Other Matters
• To review/discuss outcomes and/or findings from any special projects and investigations as authorised by the CEO into any matter or activity affecting the interest and operating efficiency of the Company
• The Committee may also consider other matters referred to it by other committees of the Company and external audit, including but not limited to:
• Review of the Company’s insurance cover
• Review of the Company’s tax planning and compliance
• Review of the Company’s whistle blowing program

Conflict of Interest

Members will declare a conflict of interest whenever they feel that their participation or contribution could be viewed as influenced by another role they undertake either within or outside the Company

Meetings

The Committee shall meet not less than three times per year. The Company Principal Accounting Officer, other senior financial management and external auditors are able to attend all meetings as ex-officio members.

As part of is responsibility to foster open communication, the Committee should meet independently with management and the external auditors at least annually.

Reporting

The Committee reports and is accountable to the Board. Minutes of each meeting will be recorded, endorsed and signed by the Chair of the Committee. Minutes of the Committee meetings will be provided to the Board.

Committee Membership

The Committee shall comprise three or more directors, all of whom will be, where possible, non-executive directors. The Board has adopted a formal policy for the determination of the independence of directors.

All members of the Committee shall have a working knowledge of basic finance and accounting practices. At least one member of the Committee will have accounting or related financial management expertise, as determined by the Board.

The Audit and Risk Committee Chair is independent from the Chair of the Board of the company.

A quorum of the Committee will comprise any two Committee members.

Annual Review

The Committee shall review, and if appropriate, update this Charter at least annually.