RBS 2011 Annual Report Download - page 266

264 RBS Group 2011
Report of the Group Audit Committee
The role and responsibilities of the Group Audit Committee
The Group Audit Committee’s primary responsibilities, as set out in its
terms of reference, are to assist the Board in discharging its
responsibilities in respect of: financial reporting and policy; systems of
internal control; processes for Internal and External Audit and oversight of
the Group’s relationship with its regulators. The terms of reference of the
Group Audit Committee are reviewed annually by the Group Audit
Committee and approved by the Board. They are available on the
Group’s website www.rbs.com.
Meetings and visits
Atotal of seven meetings of the Group Audit Committee were held in
2011, including meetings held immediately before the submission of the
annual and interim financial statements and the quarterly Interim
Management Statements to the Board. Group Audit Committee meetings
are attended by relevant executive directors, the Internal and External
Auditors and Finance and Risk management executives. Other
executives, subject matter experts and external advisers are also invited
to attend the Group Audit Committee, as required, to present and advise
on reports commissioned by the Committee. At least twice per annum the
Group Audit Committee meets privately with the External Auditors. The
Committee also meets privately with the Internal Audit function.
The annual programme of joint visits by the Group Audit and Board Risk
Committees to the Group's business divisions and control functions
continued in 2011. The object of the programme is to promote the
Committees’ understanding of the Group; invitations to attend are
extended to all non-executive directors. The programme of visits is
considered annually. The Group Audit Committee and the Board Risk
Committee undertook four visits - to Group Internal Audit, RBS N.V.,
Restructuring and Risk and RBS Insurance - during 2011.
Membership of the Group Audit Committee
The Group Audit Committee comprises at least three independent non-
executive directors. The Chairman and members of the Committee,
together with their attendance at meetings, are shown below.
Attended/
scheduled
Brendan Nelson (chairman) Independent 7/7
Tony Di Iorio (1) Independent 2/2
Baroness Noakes (2) Independent 3/3
Philip Scott Independent 7/7
Former member
Colin Buchan (3) Independent 5/5
Notes:
(1) Joined the Committee on 1 September 2011.
(2) Joined the Committee on 1 August 2011.
(3) Retired from the Committee on 5 August 2011.
Brendan Nelson, Tony Di Iorio and Philip Scott are also members of the
Board Risk Committee facilitating the effective governance of finance and
risk issues and the alignment of agendas. The Group Audit and Board
Risk Committees also have strong links with the Group Remuneration
Committee ensuring that levels of compensation reflect relevant finance
and risk considerations.
The members of the Group Audit Committee are selected with a view to
the expertise and experience of the Group Audit Committee as a whole.
The Board is satisfied that all Group Audit Committee members have
recent and relevant financial experience, and that each member of the
Group 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 (“Exchange Act”) and related guidance. Full
biographical details are set out on pages 253 to 256.
Principal activity of the Group Audit Committee during 2011
Financial reporting
During 2011, the Group 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
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.
The Group Audit Committee focused on a number of salient judgments
and reporting issues in the preparation of the 2011 accounts, including:
xvaluation methodologies and assumptions for financial instruments
carried at fair value including the Group's credit market exposures;
xdisclosures, including those in relation to forbearance and sovereign
debt;
ximpairment losses in the Group's loans and advances and available-
for-sale securities; with particular emphasis on Eurozone issues,
sovereign debt exposures, Ulster Bank and UK Corporate
impairment;
xPPI provision;
xactuarial assumptions for the Group Pension Fund and the Group’s
general insurance claims reserves;
ximpairment of goodwill; and
xthe Group’s tax position, including the recognition of deferred tax
assets.
The Committee sought to understand and to challenge in a robust
manner management’s accounting judgments and estimates. It reviewed
the conclusions of the External Auditors and, where applicable, other
experts and satisfied itself that disclosures in the financial statements
about these judgements and estimates are transparent and appropriate.
Report of the Group Audit Committee continued