RBS 2006 Annual Report Download - page 114
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113
RBS Group • Annual Report and Accounts 2006
Governance
The Audit Committee undertakes an annual evaluation to
assess the independence and objectivity of the external
auditors and the effectiveness of the audit process,
taking into consideration relevant professional and
regulatory requirements. The results of this evaluation are
reported to the Board.
The Audit Committee is responsible for making recommendations
to the Board, for it to put the Audit Committee’s
recommendations to shareholders for their approval at the
Annual General Meeting in relation to the appointment,
reappointment and removal of the external auditors. The Board
has endorsed the Audit Committee’s recommendation that
shareholders be requested to approve the reappointment of
Deloitte & Touche LLP as external auditors at the Annual
General Meeting in April 2007.
The Audit Committee also fixes the remuneration of the
external auditors as authorised by shareholders at the Annual
General Meeting.
The Audit Committee approves the terms of engagement of
the external auditors.
In 2004 KPMG conducted a review of the effectiveness of
Group Internal Audit. It is intended that there will be an
external review of the effectiveness of Group Internal Audit
every three to five years in line with best practice, with internal
reviews continuing in the intervening years. In 2006 the Audit
Committee conducted a review of Group Internal Audit that
involved cross Group participation and the external auditors
and concluded that the function operated effectively. The Board
also concluded, following the 2006 internal review, that the
Group Internal Audit function was effective. During 2005
PricewaterhouseCoopers conducted an external review of the
effectiveness of the Audit Committee, the results of which were
reported to the Board. It is intended that there will be an external
review of the effectiveness of the Audit Committee every three
years, with internal reviews by the Board continuing in the
intervening years. An internal review of the Audit Committee’s
performance was undertaken in 2006 and a separate report on
the outcome was considered and discussed by the Board.
In 2005 the Audit Committee reviewed the audit committee
structure throughout the Group and, as a result, proposed to
the Board a reorganisation and strengthening of the structure
to ensure that audit committees would cover each separate
Group business appropriately. That recommendation was
accepted by the Board, and, whilst still in its initial year, the
revised structure has bedded down well. The Audit Committee
has an appropriately close relationship with each of the
business audit committees.
Archie Hunter
Chairman of the Audit Committee
28 February 2007