AUDIT & RISK MANAGEMENT COMMITTEE
(Corporate Governance Recommendations 4.2 & 7.1)
CHARTER

The Board of Directors of Immuron, having previously resolved to establish a committee of directors to be known as the AUDIT COMMITTEE, now wish to rename it as the AUDIT & RISK MANAGEMENT COMMITTEE (Committee) and set out its objectives, authority, composition, term of office, and duties and responsibilities, as follows.

Purpose.

The Committee is dedicated to independently:

Verifying and safeguarding the integrity of the company’s reporting,
Identifying, assess and monitor managements applications of risk minimisation procedures, and
Inform the board of material changes to the company’s risk profile.
Objectives

The primary objective of the Committee is to assist the board of directors in fulfilling its oversight responsibilities and, in particular, its corporate governance commitments. The Committee will:

Determine the adequacy of the company’s administrative, operating and accounting controls, and policies including:
Systems of internal control and management of risk, and
The company’s process for monitoring compliance with laws and regulations and its own code of business conduct;
Oversee and appraise the quality of the audits conducted by the company’s external auditors;
Maintain, by scheduling regular meetings, open lines of communications among the board, management and the external advisors to exchange views and information, as well as confirm their respective authority and responsibilities; and
Serve as an objective party to review the financial and risk management information presented by management to the board, shareholders and other stakeholders.
Authority

The board authorises the Committee, within the scope of its responsibilities, to:

Seek any information it requires from any director, employee or external parties;
Obtain outside legal or other professional advice after agreement with the Chairman, and
Ensure the attendance of company officers at meetings as appropriate.
Composition

The board shall appoint or remove any member of the Committee, which will be comprised of a least three and not more than five non executive directors, a majority of who will be independent. Wherever practical, each member will be independent of senior management and operating executives of the company and free from any relationships which might, in the opinion of the board of directors, be construed as a conflict of interest. An independent member shall be appointed chairman of the Committee by the board of directors.

The Committee shall include at least one member who has financial expertise and one member who has an understanding of the industry in which the company operates.

Term of Membership

Members of the Committee shall be appointed for an initial term of three years after which they will be eligible for re-appointment by rotation. The terms of the members shall be staggered so that no more than one third of the members of the Committee shall stand for re-appointment in any given year. The chairman shall be re-appointed annually by the board of directors. The board of directors can remove a Committee member, without reason, at anytime.

Meetings

The Committee will meet at least quarterly and hold such additional meetings as the chairman shall decide in order to fulfill its duties.

In addition, the chairman is required to call a meeting of the Committee if requested to do so by any board member, the company’s chief executive, or the external auditors.

The company secretary will act as secretary of the Committee and shall be responsible, in conjunction with the chairman, for drawing up the agenda and circulating it, supported by explanatory documentation to Committee members prior to each meeting.

The secretary will also be responsible for keeping the minutes of meetings of the Committee, and circulating them to committee members and to the other members of the board of directors.

A quorum shall consist of a majority of the Committee members.

Duties and Responsibilities

The duties and responsibilities of the Committee are as follows: -

a) Auditors

Recommend to the board the appointment and removal of the external auditors;
Review the audit plan of the external auditors;
Evaluate the overall effectiveness of the external audit through regular meetings with the auditors; and
Determine that no unreasonable management restrictions are being placed upon the external auditors.
b) Evaluation/Review

Establish and regularly review the risk management systems set out in a risk profile which documents the material risks facing the Company. This profile should include both financial and non-financial risks.
Evaluate whether management is setting the appropriate ‘control culture’ by communicating the importance of internal control and the management of risk and ensuring that all employees have an understanding of their roles and responsibilities;
Consider how management implements and is held to account for the;
Security of computer systems and breakdown,
Risk management profile and systems, and
Internal and external regulatory compliance.
Evaluate the adequacy and effectiveness of the company’s administrative, operating, and internal compliance and control systems through active communication with operating management and the external auditors;
Evaluate the adequacy of the company’s accounting control system by reviewing written reports from the external auditors and monitor management’s responses and actions to correct any noted deficiencies;
Review any regulatory reports submitted to the company and monitor management’s response to them;
Review the annual financial statements with the chief executive officer and the external auditors and recommend acceptance to the board;
Focus on judgmental areas, for example those involving valuation of assets and liabilities; warranty, product or environmental liability, litigation reserves, and other commitments and contingencies;
Evaluate the company’s exposure to fraud or other illegal acts; and
Receive reports from the company’s lawyer on matters the lawyer believes should be drawn to the Committee’s attention;

c) Ethics

Take an active interest in ethical considerations regarding the company’s policies, and practices including the codes of conduct for directors/officers and to stakeholders; and
Monitor the standard of corporate conduct in areas such as arm’s-length dealings and likely conflicts of interest.
d) Policies

Gain an understanding of the current areas of greatest financial and operating risks and how management is managing these effectively;
Require reports from management and the external advisors on any significant proposed regulatory, accounting or reporting issue, to assess the potential impact upon the company’s financial reporting and operating process; and
Review and approve all significant accounting policy changes.
e) Other Matters

Identify and direct any special projects or investigations deemed necessary;
At least annually, review the adequacy of the Company’s insurance policies;
Review and update the charter and receive approval of changes from the board;
Evaluate the Committee’s own performance on a regular basis: and
Prepare a report to the board summarising the work performed by the Committee to fully discharge its duties during the year
Issued by the board of Anadis Limited 9 March 2004