RBS 2010 Annual Report Download - page 243

Work in 2010
During 2010, the work of the Audit Committee focused on a number of
key areas, including:
xaccounting, financial reporting and regulatory compliance;
ximpairments and fair values;
xstandards of internal control, including the work of the internal and
external auditors;
xprovisioning and credit exposures;
xgeneral insurance reserves; and
xthe work and role of Divisional Risk and Audit Committees in so far
as they relate to the work of the Committee.
The Audit Committee received regular updates on accounting issues and
developments from both the Group Chief Accountant and from the
external auditors, who presented for approval to the Committee their
audit plan, their audit fee proposal and engagement letter, as well as
confirmation of their independence and a comprehensive report of all
non-audit fees.
In addition the external auditors provided the Audit Committee with
reports summarising their main observations and conclusions arising
from their year end audit, their half year review and their work in
connection with the first and third quarters, inter alia,inclusive of their
comments on the issues set out below; and their recommendations for
enhancements to the Group’s reporting and controls.
The Audit Committee focused on a number of salient judgments and
reporting issues in the preparation of the 2010 accounts, including:
xvaluation methodologies and assumptions for financial instruments
carried at fair value including the Group's credit market exposures
and the disclosures provided;
xactuarial assumptions for the Group Pension Fund;
ximpairment losses in the Group's portfolio of loans and advances
and available-for-sale securities;
ximpairment of goodwill and other purchased intangible assets;
xthe Group’s tax position, including the treatment of deferred tax
assets; and
xcompliance with the requirements of the Sarbanes-Oxley Act 2002.
In its consideration of each of these issues, the aims of the Audit
Committee have been to:
xunderstand and challenge the valuation and other accounting
judgments made by management;
xreview the conclusions of the external auditors and, where
applicable, other experts and to understand how they came to their
conclusions; and
xsatisfy itself that the disclosures in the financial statements about
these estimates and valuations are transparent and appropriate.
The Audit Committee was regularly advised of whistleblowing events
which occurred within the Group; of complaints raised with members of
the Group’s executive team; of significant internal investigations
undertaken within the Group; and of internal regulatory reviews and
investigations.
Group Internal Audit’s role is to continuously assess how operating risks
are being managed and controlled throughout the Group and report
regularly to the Group Executive and Audit Committee on the results of
these assessments; and to influence the continuous development of the
risk management and control process through sharing best practice.
The Audit Committee oversees the work of Group Internal Audit, and
receives a quarterly report from the Head of Group Internal Audit. This
report rates the quality of the control environment of all the Group’s
divisions and of management’s level of awareness on these matters.
Group Internal Audit report to the Committee on areas where
improvements are required to the control environment. The Audit
Committee actively monitors these reports and ensures relevant matters
raised are dealt with in a timely and appropriate manner. These reports
offer the Audit Committee oversight of Group Internal Audit’s work, and
allow the Audit Committee to monitor the level of internal control within
the Group.
The Audit Committee oversees the Group’s compliance with the rules of
the APS, and reviews regular progress reports from RBS Risk
Management.
Relevant management also presented on a number of specific reporting,
compliance and internal control matters.
As far as it can determine, the Audit Committee received all the
information and material it required to allow it to meet its obligations in
respect of the 2010 financial statements.
241RBS Group 2010
Governance