RBS 2009 Annual Report Download - page 221

219RBS Group Annual Report and Accounts 2009
Governance
Audit Committee Report
The current members of the Group Audit Committee are Archie Hunter
(Chairman), Colin Buchan, Joe MacHale and Philip Scott. All served
throughout 2009 with the exception of Philip Scott who became a
member of the Committee with effect from 19 January 2010. All
members of the Group Audit Committee are independent non-executive
directors. Art Ryan has been a regular attendee since August 2009 and
has fully participated in the activity of the Committee.
The Audit Committee holds at least six scheduled meetings each year.
A meeting is held immediately prior to submission of the interim and
annual financial statements to the Board and the quarterly Interim
Management Statements. This core programme is supplemented by
additional meetings as required. A total of ten meetings were held in
2009. 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 Group Audit Committee undertook three visits in 2009.
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 and external
audit.
In addition the Committee had responsibility for the consideration of risk
issues throughout 2009.
Following publication of the Walker review initial recommendations in
July 2009, the Group Board approved the creation of a Board Risk
Committee. The Group Audit Committee will be informed of risk issues
through appropriate representation at the Board Risk Committee.
Revised terms of reference for the Group Audit Committee and terms of
reference for the Board Risk Committee were approved by the Board on
28 October 2009.
The terms of reference of the Audit Committee are available at
www.rbs.com and these are considered annually by the Group 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;
•restructuring services relating to the Group’s customers; and
•reports providing assurance to third parties over certain of the
Group’s internal controls prepared under US Statement of Auditing
Standards 70 or similar auditing standards in other jurisdictions.