HSBC 2009 Annual Report Download - page 314

HSBC HOLDINGS PLC
Report of the Directors: Governance (continued)
Board of Directors > Board committees / Internal control
312
including the Credit Risk Management Policy Group
III report and the report of the Institute of International
Finance committee on Market Best Practices.
The Committee has approved procedures for the
receipt, retention and handling of complaints
regarding accounting, internal accounting controls
and auditing matters. The Committee receives
regular reports regarding the nature, investigation
and resolution of material complaints and concerns
from the Head of Group Compliance.
The Committee is directly responsible on behalf
of the Board for the selection, oversight and
remuneration of the external auditor. The Committee
reviews and monitors the external auditor’s
independence and objectivity and the effectiveness
of the audit process, taking into consideration
relevant professional and regulatory requirements.
The Committee reviews the strategy and
approves the terms for the engagement of the
external auditor for the audit of the Annual Report
and Accounts. Regular reports on the progress of the
audit facilitate the Committee’s assessment of the
effectiveness of the audit.
The Committee receives reports from the
external auditor on its own policies and procedures
regarding independence and quality control and
oversees the appropriate rotation of audit partners
within the external auditor. The external auditor
provides the Committee with an annual confirmation
of its independence in accordance with industry
standards.
On the recommendation of the Committee the
Board has approved a policy for the employment by
HSBC of former employees of the external auditor
or its affiliates. The Committee monitors this policy
through the receipt of an annual report of those
former employees of the external auditor employed
by HSBC and the number of former employees of
the external auditor currently employed in senior
positions in HSBC. The reports enable the
Committee to consider whether there has been any
impairment, or appearance of impairment, of the
auditor’s judgement or independence in respect of
the audit.
The Group Audit Committee has established
policies for the pre-approval of specific services that
may be provided by the principal auditor, KPMG
Audit Plc and its affiliates (‘KPMG’). These policies
are kept under review and amended as necessary to
meet the dual objectives of ensuring that HSBC
benefits in a cost effective manner from the
cumulative knowledge and experience of its auditor,
while also ensuring that the auditor maintains the
necessary degree of independence and objectivity.
These pre-approval policies apply to all services
where HSBC Holdings or any of its subsidiaries pays
for the service, or is a beneficiary or addressee of the
service and has selected or influenced the choice of
KPMG. All services entered into with KPMG during
2009 were pre-approved by the Committee or were
entered into under pre-approval policies established
by the Committee. A quarterly update on non-audit
services provided by KPMG is presented to the
Committee by management.
The pre-approved services relate to regulatory
reviews, agreed-upon procedures reports, other types
of attestation reports, the provision of advice and
other non-audit services allowed under SEC
independence rules. They fall into the categories of
audit services, audit-related services, tax services
and other services.
An analysis of the remuneration paid in respect
of audit and non-audit services provided by KPMG
for each of the last three years is disclosed in Note 9
on the Financial Statements.
The Committee has recommended to the Board
that KPMG Audit Plc be reappointed auditor at the
forthcoming Annual General Meeting.
Remuneration Committee
The role of the Remuneration Committee and its
membership are set out in the Directors’
Remuneration Report on page 334.
Nomination Committee
The Nomination Committee is responsible for
leading the process for Board appointments and for
identifying and nominating, for approval by the
Board, candidates for appointment to the Board.
Before recommending an appointment to the Board,
the Committee evaluates the balance of skills,
knowledge and experience on the Board and, in the
light of this, identifies the role and capabilities
required for a particular appointment. Candidates are
considered on merit against these criteria. Care is
taken to ensure that appointees have enough time to
devote to HSBC. Prospective Directors are asked to
identify any significant other commitments and
confirm they have sufficient time to discharge what
is expected of them. In accordance with the Articles
of Association all Directors are subject to election
by shareholders at the Annual General Meeting
following their appointment by the Board and to
re-election at least every three years. The members
of the Nomination Committee throughout 2009 were
Sir Brian Williamson (Chairman), R A Fairhead,
S M Robertson and J W J Hughes-Hallett, all