Management & Governance

Audit committee

The Group is required by the Code, the NYSE, and the ASX to establish an Audit committee. Each of the Code, the NYSE and the ASX lay down rules and guidelines for the composition of the committee and the work to be undertaken by it. The Audit committee is governed by a Charter which the committee reviews and assesses each year for adequacy and is approved by the board. The Charter is available on the website and is summarised below.

The primary function of the Audit committee is to assist the board in fulfilling its responsibilities by reviewing:

• The financial information that will be provided to shareholders and the public;
• The systems of internal control that the board and management have established;
• The Group's auditing, accounting and financial reporting processes.

In carrying out its responsibilities the committee has full authority to investigate all matters that fall within its Charter. Accordingly, the committee may:

• Obtain independent professional advice in the satisfaction of its duties at the cost of the Group;
• Have such direct access to the resources of the Group as it may reasonably require including the external and internal auditors.

The Audit committee's main responsibilities include the review of accounting principles, policies and practices adopted in the preparation of public financial information, review with management of procedures relating to financial and capital expenditure controls, including internal audit plans and reports, review with external auditors of the scope and results of their audit, the nomination of auditors for appointment by shareholders, and the review of and recommendation to the board for approval of Rio Tinto's risk management policy. Its responsibilities also include the review of corporate governance practices of Group sponsored pension funds.

To ensure the committee discharges its responsibilities, it meets not less than four times per year and has a number of training sessions which may cover new legislation and other relevant information. The Group's finance director, other senior financial management, external auditors and internal auditor are available to attend all meetings.

The Audit committee is chaired by Andrew Gould who will be replaced by Sir David Clementi after the 2008 annual general meetings. The members of the committee are independent and free of any relationship that would interfere with impartiality in carrying out their responsibilities. They meet the requirements of the Code, the ASX Principles and the NYSE Code, as well as the composition, operation and responsibility requirements of the ASX.

Responsibilities of the directors

The directors are required to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Group as at the end of the financial period and of the profit or loss and cash flows for that period. This includes preparing financial statements in accordance with UK company law which give a true and fair view of the state of the Company's affairs, and preparing a Remuneration report which includes the information required by Part 3 of Schedule 7A to the UK Companies Act 1985, the Australian Corporations Act 2001 and Accounting Standard AASB 124 "Related Party Disclosures".

To ensure that these requirements are satisfied, the directors are responsible for establishing and maintaining adequate internal controls, including disclosure controls and procedures for financial reporting throughout the Group.

The directors consider that the 2007 Annual report and Full financial statements present a true and fair view and have been prepared in accordance with applicable accounting standards, using the most appropriate accounting policies for Rio Tinto's business and supported by reasonable and prudent judgements and estimates. The accounting policies have been consistently applied. The directors have received a written statement from the chief executive and the finance director to this effect. In accordance with ASX Principles Recommendation 7.3, this written statement relies on a sound system of risk management and internal compliance and controls which implements the policies adopted by the board and confirms that the Group's risk management and internal compliance and control systems are operating efficiently and effectively in all material respects.

The directors, senior executives, senior financial managers and other members of staff who are required to exercise judgement in the course of the preparation of the financial statements are required to conduct themselves with integrity and honesty and in accordance with the ethical standards of their profession and/or business.

The directors are responsible for maintaining proper accounting records, in accordance with the UK Companies Act 1985 and the Australian Corporations Act 2001. They have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors are also responsible for ensuring that appropriate systems are in place to maintain and preserve the integrity of the Group's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from current and future legislation in other jurisdictions. The work carried out by the auditors does not involve consideration of such developments and, accordingly, the auditors accept no responsibility for any changes, should any be made, to the financial statements after they are made available on the website.

Principal auditors

Rio Tinto has adopted policies designed to uphold the independence of the Group's principal auditors by prohibiting their engagement to provide a range of accounting and other professional services that might compromise their appointment as independent auditors. Details of these polices have been set out in the Directors' report.

The remuneration of the Group's principal auditors for audit services and other services, as well as remuneration payable to other accounting firms, has been set out in note 44 to the 2007 Full financial statements.

Corporate Assurance

The Corporate Assurance function provides independent and objective assurance on the adequacy and effectiveness of the Group's systems for risk management, internal control, and governance together with ideas and recommendations to improve those systems. The function has adopted international auditing standards set by the Institute of Internal Auditors Inc.

The function operates independently of management, under a mandate approved in March 2007 by the Audit committee and the C ommittee on social and environmental accountability (CSEA) and has full access to all functions, records, property and personnel of the Group.

This mandate expands the function's role from traditional financial based internal audit to cover all risk types. Progressively all assurance activities across the Group will be consolidated within Corporate Assurance.

The head of Corporate Assurance reports functionally to both the Audit Committee and CSEA, providing each committee with information relevant to their specific Charters.

A risk based approach is used to focus assurance activities on high risk areas and audit plans are presented annually to the Audit Committee and CSEA for approval.

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