RBS 2011 Annual Report Download - page 269

RBS Group 2011 267
During 2011, the Group Audit Committee approved changes to the Group’s non-audit services policy. Tax compliance services, permissible services to
companies that will remain outwith the Group and restructuring services will require ad hoc approval of the Group Audit Committee in 2012. In addition,
acompetitive tender process will be required for all proposed engagements where the fees are expected to exceed £100,000. Engagements below
£100,000 may be approved by the Chairman of the Group Audit Committee; as an additional governance control all engagements have to be approved
by the Group Chief Accountant and Group Sourcing and Vendor Management. Ad hoc approvals of non-audit services are ratified by the Group Audit
Committee each quarter. During 2011, the External Auditor was approved to undertake certain significant engagements which are categorised and
explained more fully below:
Summary of category of engagement Reason for selection of External Auditor
Provision of advice, best-practice options
and support to management on a number of
projects (four engagements)
The External Auditor was appointed in relation to these engagements because it was the market leader
in the subject matter or because the external audit team included personnel who were uniquely
positioned, experienced and qualified to provide the necessary advice.
Afull tender process was undertaken in relation to two engagements and the External Auditor was
appointed following presentation of a thorough proposal and a willingness to leverage existing
knowledge to ensure a competitive price proposition.
Assurance testing RBS, NatWest and Ulster
Bank customer charters and the Group’s
Corporate Governance Policy
(three engagements)
The External Auditors prior experience and ability to make use of previous work made them a
competitive choice for the assurance of the various customer charters.
Aselective tender was undertaken to provide support and advice to the Group Secretary for the
assurance of the Group Corporate Governance Policy. The External Auditor was judged to be both
financially competitive and provided the clearest, and most comprehensive approach to supporting the
Group Secretary in this assignment.
Agreed upon procedures (AUP) review for
Wealth Management
(one engagement)
The External Auditor was experienced in this field and had performed three previous AUP reviews.
Timing was also an issue for this request but a competitive tender process will be considered prior to
the next review.
Tax and accounting advice
(two engagements)
The External Auditor was appointed for one of the engagements following submission of a detailed
proposal document, formal presentation and lengthy discussion with RBS management. Given the
nature of the engagement it was determined that appointment of the External Auditor was appropriate.
Following a tender process in the other instance the External Auditor was judged to be the best firm to
employ and was agreed by the co-sponsors to the engagement.
Information on fees paid in respect of audit and non-audit services carried out by the External Auditors is detailed in Note 5 on the Group’s consolidated
accounts.
Group’s relationship with its regulators
The Group Audit Committee has a responsibility to monitor the Group’s
relationship with the Financial Services Authority (FSA) and other
regulatory bodies. During 2011, it received regular reports on the
Group’s relationship with all its regulators and significant developments or
changes to those interactions. It receives reports on regulatory actions
and investigations. Over the course of the year the chairmen of the
Group’s Senior Board Committees met with the FSA on an individual
basis and also participated in certain Regulatory College meetings with
the Group’s primary regulators. The non-executive directors also
collectively participated in meetings with the FSA on two occasions and
the FSA were invited to attend certain discussions of the Board.
The non-executive directors closely monitor the Group’s relationship with
its international regulators and during 2011 significant time has been
dedicated in particular to understanding the regulatory requirements in
the US and the implications on the Group’s US operations and structure.
The Group Board met with the Federal Reserve Bank of Boston
collectively in this regard during 2011. The Chairman of the Group Audit
Committee also met with the US regulator on an individual basis.
Performance evaluation
An external review evaluating the effectiveness of the Group Audit
Committee takes place every three to five years, with internal reviews by
the Board in intervening years. An internal review took place during 2011
covering the role of the Committee; its composition, meetings and
processes, performance and reporting, policy and procedures; induction
and continuing professional development; communication; and divisional
committees. Overall the review concluded that the Committee continued
to operate effectively.
Brendan Nelson,
Chairman of the Group Audit Committee
22 February 2012