Audit, Risk and Internal Control/Continued
The Audit and Risk Committee reviewed the report from the Chair of the Property Valuation Committee including the assumptions applied to the valuation and considered their appropriateness, as well as considering current market trends and conditions, and valuation movements compared to previous quarters. The Committee considered the valuation and agreed that this was appropriate for the financial statements. The Committee was satisfied that the 2023 Annual Report is fair, balanced and understandable and included the necessary information as set out above, and it has confirmed this to the Board. Risk Management Policy The Committee has considered and developed a comprehensive Risk Management Policy which has been adopted by the Group. The purpose of the Risk Management Policy is to strengthen the proper management of risks through proactive risk identification, measurement, management, mitigation and reporting in respect of all activities undertaken by the Group. The Risk Management Policy is intended to: ‒ Ensure that major risks are reported to the Board for review; ‒ Result in the management of those risks that may significantly affect the pursuit of the stated strategic goals and objectives; ‒ Embed a culture of risk awareness and evaluation and identify risks at multiple levels within the Group; and ‒ Meet legal and regulatory requirements. Internal control and internal audit The Board is responsible for the Company’s internal control system and for reviewing its effectiveness. It has therefore established a process designed to meet the particular needs of the Company in managing the risks to which it is exposed.
Terms of reference The Committee’s terms of reference include consideration of the following issues: ‒ Financial reporting, including significant accounting judgements and accounting policies; ‒ Development of a comprehensive Risk Management Policy for the adoption by the Group; ‒ Evaluation of the Group’s risk profile and risk appetite, and whether these are aligned with its investment objectives; ‒ Ensuring that key risks, including climate-related risks, are being effectively identified, measured, managed, mitigated and reported; ‒ Internal controls, controls testing and risk management systems; ‒ The Group’s relationship with the external auditor, including effectiveness and independence; ‒ Internal audit and assurance services, including review of any report and assessment of control weaknesses; and ‒ Reporting responsibilities.
Financial reporting and significant reporting matters The Committee considers all financial information published in the annual and half-year financial statements and considers accounting policies adopted by the Group, presentation and disclosure of the financial information and the key judgements made by management in preparing the financial statements. The Directors are responsible for preparing the Annual Report. At the request of the Board, the Committee considered whether the 2023 Annual Report was fair, balanced and understandable and whether it provided the necessary information for shareholders to assess the Group’s strategy, business model and performance. The key area of judgement that the Committee considered in reviewing the financial statements was the valuation of the Group’s investment properties. The valuation is conducted on a quarterly basis by external valuers and is subject to oversight by the Property Valuation Committee. It is a key component of the annual and half-year financial statements and is inherently subjective, requiring significant judgement. Members of the Property Valuation Committee, together with members of the Picton team, meet with the external valuer on a quarterly basis to review the valuations and underlying assumptions, including the year- end valuation process. The Chair of the Property Valuation Committee reported to the Audit and Risk Committee at its meeting on 2 May 2023 and confirmed that the following matters had been considered in discussions with the external valuers: ‒ Property market conditions; ‒ Yields on properties within the portfolio; ‒ Letting activity and vacant properties; ‒ Covenant strength and lease lengths; ‒ Estimated rental values; and ‒ Comparable market evidence.
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Activity The Audit and Risk Committee met five times during the year ended 31 March 2023 and considered the following matters: ‒ External audit strategy and plan; ‒ Audit and accounting issues of significance; ‒ The Annual and Interim Reports of the Group; ‒ Reports from the external auditor; ‒ The effectiveness of the audit process and the independence of KPMG Channel Islands Limited; ‒ Review of the Group’s Risk Management Policy and appetite; ‒ Review of the risk matrix and mitigating controls; ‒ Internal audit reports and programme; and ‒ Stock Exchange announcements.
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Picton Property Income Limited Annual Report 2023
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