RBS 2008 Annual Report Download - page 158

157RBS Group Annual Report and Accounts 2008
Audit Committee Report
The current members of the Audit Committee are Archie Hunter
(Chairman), Colin Buchan and Joe MacHale. All served throughout 2008
as did former members of the committee, Bill Friedrich and Sir Steve
Robson, until their retirement as directors on 6 February 2009. All
members of the Audit Committee are independent non-executive
directors. The Audit Committee holds at least five scheduled meetings
each year, two of which are held immediately prior to submission of the
interim and annual financial statements to the Board. This core
programme is supplemented by additional meetings as required. A total
of ten meetings were held in 2008. Audit Committee meetings are
attended by relevant executive directors, the internal and external
auditors and finance and risk management executives. At least twice
per annum the Audit Committee meets privately with the external
auditors. Since 2000, the Audit Committee has undertaken an annual
programme of visits to the Group's business divisions and control
functions. The object of the programme is to allow the Audit Committee
to gain a better understanding of the Group and an invitation to attend
is extended to all non-executive directors. The programme of future
visits is considered annually and the norm is for two to three visits to be
undertaken each year. The Committee undertook three visits in 2008.
The Board is satisfied that all the Audit Committee members have recent
and relevant financial experience. Although the Board has determined
that each member of the Audit Committee is an ‘Audit Committee
Financial Expert’ and is independent, each as defined in the SEC rules
under the US Securities Exchange Act of 1934 and related guidance,
the members of the Audit Committee are selected with a view to the
expertise and experience of the Audit Committee as a whole, and the
Audit Committee reports to the Board as a single entity. The designation
of a director or directors as an ‘Audit Committee Financial Expert’ does
not impose on any such director, any duties, obligations or liability that
are greater than the duties, obligations and liability imposed on such
director as a member of the Audit Committee and Board in the absence
of such a designation. Nor does the designation of a director as an
‘Audit Committee Financial Expert’ affect the duties, obligations or
liability of any other member of the Board.
The Audit Committee is responsible for:
•assisting the Board in discharging its responsibilities and in making
all relevant disclosures in relation to the financial affairs of the Group;
•reviewing accounting and financial reporting and regulatory
compliance;
•reviewing the Group’s systems of internal control; and
•monitoring the Group’s processes for internal audit, risk management
and external audit.
The terms of reference of the Audit Committee are available at
www.rbs.com and these are considered annually by the Audit
Committee and approved by the Board.
The Audit Committee has adopted a policy on the engagement of the
external auditors to supply audit and non-audit services, which takes
into account relevant legislation regarding the provision of such
services by an external audit firm. The Audit Committee reviews the
policy annually and prospectively approves the provision of audit
services and certain non-audit services by the external auditors.
Annual audit services include all services detailed in the annual
engagement letter including the annual audit and interim reviews
(including US reporting requirements), periodic profit verifications and
reports to regulators including skilled persons reports commissioned by
the Financial Services Authority (e.g. Reporting Accountants Reports).
Annual audit services also include statutory or non-statutory audits
required by any Group companies that are not incorporated in the UK.
Terms of engagement for these audits are agreed separately with
management, and are consistent with those set out in the audit
engagement letter insofar as local regulations permit.
The prospectively approved non-audit services include the following
classes of service:
•capital raising, including consents, comfort letters and relevant
reviews of registration statements;
•provision of accounting opinions relating to the financial statements of
the Group;
•provision of reports that, according to law or regulation, must be
rendered by the external auditors;
•tax compliance services;
•corporate finance services relative to companies that will remain
outside the Group; and
•insolvency work relating to the Group’s customers.
For all other permitted non-audit services, Audit Committee approval
must be sought, on a case by case basis, before the provision of the
service commences. In addition, the Audit Committee reviews and
monitors the independence and objectivity of the external auditors
when it approves non-audit work to be carried out by them, taking into
consideration relevant legislation and ethical guidance. Information on
the audit and non-audit services carried out by the external auditors is
detailed in Note 5 to the Group’s accounts.